The Charlotte Business Journal has reported this month that participation in consumer-driven health plans is becoming an increasingly popular health insurance option. A survey released by employee-benefit advisory company United Benefit Advisors indicates that the total number of consumer-driven health plans has increased this year by 43% over 2007. They now account for nearly 13% of all plans offered by employers, and the plans cover about 4.4 million people. Consumer-driven health plans typically have lower premiums but higher deductibles and out-of-pocket costs for some medical procedures than other insurance plans. They typically include a health reimbursement account or health savings account to which employers contribute. The average employer contribution to a health savings account was $642 for a single employee and $1,053 for a family plan. AISHealth reports that according to a new study by George Mason University and the Urban Institute, total private health insurance expenditures are estimated in 2008 to be $829.9 billion.
For example, Aetna provides an overview of these plans for consumers. Consumerism in health care is based on the idea that individuals should have greater control over decisions affecting their health care. A number of innovative products and plans are advancing the consumerism trend. Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) are savings vehicles generally paired with High-Deductible Health Plans (HDHPs). Consumer-directed health care is a common-sense approach for addressing two of the most vexing challenges in our health care system: controlling costs and improving access to affordable, high-quality care.
According to Aetna, consumer-directed health plans typically consist of three major components: a health fund or health savings account, a high-deductible plan that includes preventive care not charged against the deductible, and access to information and tools that help consumers make better health care decisions. Monthly premiums are lower in these plans and, once the deductible is met, consumer-directed plans pay benefits like traditional health plans. Individuals typically use funds from an HSA or HRA to cover all or a portion of the plan's deductible. HSAs are personal savings vehicles - similar to IRAs or 401(k) plans - that allow individuals and, in some cases, their employers to invest tax-free dollars in an account to pay for routine health care or to save for future health care expenses. Funds put into an HSA belong to the consumer, regardless of changes in employment or insurance status, and they can be carried over year to year. HRAs are entirely employer-funded accounts that employees can draw upon to pay qualified medical expenses and they too can be rolled over year to year.
According to Aetna, these new consumer-directed products have four critical attributes:
1.) They give individuals better access to information and more control over their own health care, allowing them to make informed decisions about treatment and provider options.
2.) They increase consumer involvement and raise awareness about the real cost of health care, which research has shown to reduce total health care spending.
3.) Featuring lower monthly premiums, these products make it more affordable for employers to offer coverage and for individuals to purchase it.
4.) Finally, consumer-directed products encourage healthy behavior.
HealthAffairs.com shares insight on consumerism in health care for a second generation of consumer-driven health policies and products. The shortcomings of HMOs, capitation, IDSs, and the other components of managed competition have opened the way for alternative approaches to using market mechanisms for improving the health care system. Consumerism appeals to the widespread and legitimate desire for a more transparent, flexible, and personal system and provides a salutary counterbalance to the organizational hypertrophy and opaque administrative mechanisms of the managed care era. However, consumer-driven health care suffers from its own shortcomings. Blunt cost-sharing provisions, unadjusted for the patient’s income or health status, will penalize the poor and the sick while allowing their wealthier and healthier compatriots to retain higher balances in their HSAs. Nonselective network designs, the dismantling of utilization management, and a reversion to fee-for-service payment will encourage spending for high-cost services that fall above the insurance deductible. The emphasis on measurement, payment, and choice at the level of the individual practitioner rather than the provider organization will disvalue the information technology, managerial, and cultural infrastructure necessary to integrate care across comorbid conditions and codependent services.
After having tried every alternative, it is to be hoped that a market-oriented health care system will do the right thing and combine the best elements of the demand-side approach embodied in consumerism with the best elements of the supply-side approach embodied in managed competition. The combined approach could be termed managed consumerism.
A market-oriented approach must always put the consumer first before the provider as the locus of rights and responsibilities as indicated with critical research by Health Affairs. But the full potential of a consumer-driven system will be realized only when insurers create meaningfully distinct networks and providers create meaningfully distinct organizations among which informed and cost-conscious consumers can choose. Different consumer-centric benefit designs and provider-centric network designs will be appropriate for different health services, depending on whether utilization is strongly consumer preference–sensitive, provider supply–sensitive, both, or neither. Health plans are experimenting with various forms and levels of cost sharing and provider payment across services according to the sensitivity of demand and supply to financial considerations. Also, different forms of organization may offer the best combination of cost, quality, and convenience for different services depending on their clinical and technological characteristics. The health care landscape is blooming with minute clinics for low-acuity primary care, medical homes for chronic care management, centers of excellence for high-acuity surgical procedures, and focused factories for ambulatory surgery and oncology. Consumer choice needs to be combined with organizational management so that the pursuit of individual self-interest through market competition vicariously supports the social interest in an efficient, fair, and effective health care system.
Consumer Directed Health Care has been slow to take hold in the market place. Only in the past couple of years have employers and individuals seen how consumerism really helps to control costs and unnecessary treatment. As transparency and better methodologies become more available, the efficiency of consumerism in health care will demand that this model be more widely accepted every year. Taking control of your health is much more effective than government run health care. The market has changed in the past 5 years to make consumerism a very competitive option for health care. Explore options that save you money and keep you healthy, and learn to manage your health instead of reacting to it.
Until next time. Let me know what you think.