American Way

Planning for the Future of Your Health

To battle the rising cost of health care in the U.S., new consumer-driven health plans are slowly being offered by companies across the country. But are they right for you? (2007)

 

By Charlotte Huff

For Kara Parker, the health savings account she opened nearly two years ago provides some peace of mind. To date, she’s accumulated nearly $2,300 in the fledgling account, a portable health nest egg — similar to a 401K — that she plans to build and transport from job to job in the years ahead.

“It feels as if I’m getting a resource,” says Parker, 32, of Lafayette, Colorado. “If I spend it all and have a bad (health) year, then that’s what it’s there for. If I don’t, I’m keeping the money and not the insurance company.”

Health savings accounts, created by a 2003 law, are part of a two-tiered health insurance approach that proponents believe is the best antidote to rising U.S. health care costs. The plans, called consumer-driven or consumer-directed, typically pair a savings account with a high-deductible insurance policy. In exchange for often lower premiums up front, users may have to fork over some hard-earned cash for medical care before the deductible kicks in.

Proponents say this may lead consumers to be more cautious about their spending: fewer prescriptions, fewer doctor visits for the sniffles, fewer costly imaging tests. That’s the theory, at least. And it may actually work. According to a recent Kaiser Family Foundation survey, 71 percent of consumer-driven plan users say they are more price conscious compared with just 49 percent of those who have other types of insurance coverage.

By January 2006, based on information gathered by America’s Health Insurance Plans, which represents the nation’s health insurers, nearly 3.2 million Americans were enrolled in health savings accounts — compared with just one million in March 2005.

Some big U.S. companies have bought in as well. UnitedHealth Group, which provides coverage to nearly two million enrollees in consumer-driven plans, lists American Financial Group, Monster.com, and Wendy’s among the employers it serves. Recently, Wal-Mart started offering a health savings plan as one of its insurance options. “It’s our opinion that as the consumer knows more about the true cost of their health care, that that’s going to start putting downward pressure on the prices of delivering health care,” spokesman Dan Fogleman says.

Critics, for their part, scoff at the plans’ consumer-friendly moniker, calling it an ingenious — and misleading — marketing ploy. While the approach might pay off for the healthy and wealthy, they argue that it can become potent quicksand for those lower on the income scale, or those who suffer a run of bad luck. “We never know when we’re going to get sick,” says Lisa McGiffert, senior health policy analyst at Consumers Union’s Southwest Office in Austin.

There’s also the fear that these plans might incite users not to seek preventive — or even necessary — treatment because of the higher cost of medical care. A survey conducted by the Commonwealth Fund and the Employee Benefit Research Institute found that of those enrolled in consumer-driven plans, 38 percent reported delaying or avoiding care because of cost concerns, compared with 19 percent in comprehensive health plans.

If company leaders have their druthers, though, more employees will have the option to see for themselves. Within the next two years, one out of five employers plans to introduce a consumer-driven health plan, according to a Deloitte Center for Health Solutions survey. Whether the approach makes financial sense for you will likely depend upon a number of factors: your savings account, your health, and your tolerance for risk.

 

Cost & Quality

Kara Parker didn’t have any other options the first year she signed up.  That’s not uncommon. More than a third of employees in 2006 weren’t given any insurance alternative, according to a recent analysis by the Center for Studying Health System Change, a nonpartisan research organization.

At Buffalo Supply, a medical supplies distributor and where Parker works as manager of accounting and finance, the premiums would have increased 21 percent in 2005 if the company had remained with its existing managed care plan. Instead, the 22-employee company switched to a high-deductible plan in which individuals are responsible for $2,000 out of pocket and families are responsible for $4,000. At the same time, the company made hefty contributions to the newly launched health savings accounts — $2,000 for individuals and $3,000 for families.

Under Buffalo’s new insurance approach, Parker uses her health savings account to pay for medical expenses, including doctor visits and prescriptions, until she reaches her family’s annual deductible (services during this time are also offered at a lower rate). Then her high-deductible insurance policy kicks in.

The new type of coverage, she says, hasn’t discouraged her from seeking treatment for her three-year-old son’s asthma or from getting other vital care, such as a strep test. But her husband, she says, does take a more cautious approach to his nagging back. “He’ll say, `Do I need to be actively going to the chiropractor right now?’ ”

In a three-year analysis involving more than 50,000 people, UnitedHealth Group found that there were 22 percent fewer hospital admissions and 14 percent fewer emergency room visits annually among enrollees in consumer-driven plans than among those in a more traditional managed-care plan. Meanwhile, preventive care didn’t suffer, increasing as much as five percent during the three-year span.

But Jon Gabel, a vice president at the Center for Studying Health System Change, worries about what kind of health care people are putting on the back burner. “We know for sure that if you have more cost sharing, people will use fewer [health] services,” he says. “We don’t have evidence that they cut out the unnecessary services and use the good services. That’s the kind of research we need. Do these plans truly make people better consumers?”

 

Making a Choice

Moving to consumer-driven plans does raise a new set of ethical questions, says Mark Hall, a Wake Forest University law professor who has conducted a pilot study into patient experiences with the plans. “Are we expecting doctors and patients to have to negotiate over their fees?” he asks. “And what does that do to the doctor-patient relationship?”

People should reconsider enrolling, Hall says, if they don’t feel comfortable enough with their family doctor to debate the relative cost and quality of medical treatment. Among other points to consider, according to Hall and others interviewed:

  • Evaluate how much you already pay for health care, including insurance co-pays and premiums. Parker was stunned to discover that she had spent $2,600 in co-pays for doctor visits, medications, and other treatment under her managed-care plan. Under the new approach, she has paid between $1,000 and $2,200 each year out of pocket, depending upon the gap between her insurance plan’s deductible and her employer’s health savings account contribution, both of which vary from year to year.
  • Research whether any preventive services are covered, or will all medical tests and treatment count toward your deductible — meaning money out of your pocket.
  • Determine what type of information is available, from your insurance provider and elsewhere, about the cost and quality of doctors and hospitals. Honestly assess your time and tolerance for tracking such detail. Are you the type who picks your own stocks, or do you prefer mutual funds because someone else makes the investment decisions?
  • Consider your personal risk tolerance. Hall points out that he’s more willing to pick and choose now, where his own medical care is concerned, than he was when his children were young.

Above all, scrutinize your personal bottom line, starting with your savings account. Could you get yourself financially upside down? Not all company contributions are as generous as Buffalo Supply’s. According to the 2006 Employee Benefit Research Institute/Commonwealth survey, 43 percent of employers contribute more than $1,000 to their employees’ health savings accounts.

Parker acknowledges that she ran through her deductible the first year. In order to avoid wiping out her newly created account, she covered about $1,000 of those medical bills with other savings. Thus, she was able to start building up her health savings account. Not everyone, though, is so financially well situated.