Health Care and Savings

Over the past few years, Consumer Directed Health Care plans have been slow to take off in popularity. In early March, 2008, Financial Week online has reported that only 7% of American companies now offer a CDHP to their employees as consumers and employers seek ways to offset the rising cost of health care. This represents only a 1% increase since last year. According to the report, many companies are planning to offer them this year as the popularity of Consumer Directed plans increases on an ongoing basis.

Companies are always seeking any and every option to reduce costs, especially with health care expenses and insurance. Financial Week also said that 41% of large corporations--those with over 20,000 employees--now offer either an HRA or an HSA. The primary reason for the 4% increase since last year was to lower the cost of benefits. Mercer and the AAPPO have discovered that about 12.5 million people are covered by some version of a CDHP. That is about a 25% increase since 2006.

There is a lot of pressure also for increasing transparency, more user friendly consumer-based tools, greater technological capabilities, and cooperation with health carriers to participate. New initiatives to increase the capacity of customers using CDHPs has been discussed by the federal government, private business, the media, and employers. So far, the take rate, although positive, has been slow. Additionally, there has been some criticism from several groups including some consumer advocacy organizations, organized labor, and some health care providers. Those who don't favor this model fear that not enough information from results and experience has been made available to justify a wholesale movement toward consumer driven care.

Those who criticize CDHPs feel that the savings are not validated because only healthy employees sign up to use these plans. Additionally, those with chronic health issues will not seek medical attention because they must pay out of pocket for several thousand dollars before their plan kicks in. By that time, the minor health problem may manifest itself into a major medical issue. Lots of confusion still exists in the market place as information is lacking in some cases, and a gap exists for credible decision making when employers are analyzing various plans. There is a critical need for comparison data against traditional health plans.

Several solutions to making significant inroads with Consumer Driven Health have boiled to the surface over the past couple of years. One of those is to make sure that the plans deliver a real value, not just a perception of savings. Will a lower premium and a higher deductible make a difference? Secondly, customer satisfaction will need to be greater than what normally would be seen in a traditional health plan. Convenience and ease of plan design should also be considered as a third key to the success of CDHPs. Can the plan's members use a debit card to access their savings? Accountability for the plan management needs to be a highly important factor when considering various plan designs. What features are most important as modules of the plan? What does the IRS say about the plan structure? And finally, will the employees buy into the plan? How do they benefit from a consumer driven plan? Will they be satisfied with the structure, benefits, and cost?

One thing is for sure. The cost of insurance and health care continues to go up every year. Consumer Driven Health is a concept and a practice that should be promoted as a great option to help keep the price of staying healthy at a decent cost relative to traditional insurance. Those who support these plans know that smart consumers will shop for the best deal, not the cheapest alternative. Patients, when supplied with sufficient information, will make better choices for health care and be aggressive to find treatment that is cost effective. Competition breeds better results in price and plan design, and unnecessary procedures with related costs will be avoided.

Until next time. Let me know what you think.