You Should Know:
- 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.
America’s health care system faces tremendous cost and coverage problems. Health care costs currently account for more than 15 percent of the nation’s gross domestic product, and health insurance premiums continue to grow at double-digit rates (11.2 percent in 2004).
Millions of Americans struggle to afford their share of health care costs, and today more than 45 million are uninsured. Escalating premiums are also forcing employers, which on average pay nearly 80 percent of employee premiums, to reduce benefits, shift more cost to employees or drop coverage entirely. Until recently, poor access to information and little control over individual health care spending made it difficult to be a responsible, informed and value-seeking consumer.
How Consumerism Works
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.
These new consumer-directed products have four critical attributes:
- 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.
- They increase consumer involvement and raise awareness about the real cost of health care, which research has shown to reduce total health care spending.
- Featuring lower monthly premiums, these products make it more affordable for employers to offer coverage and for individuals to purchase it.
- Finally, consumer-directed products encourage healthy behavior. Enrollees do not pay out of pocket for routine physicals, child immunizations, obesity weight-loss programs, routine prenatal care, etc.Q. Do consumers really want more control over their own health care?
A. Yes, there is ample evidence they do. Hewitt Associates, which administers benefits for more than 18 million employees and their families, found that 93 percent of 39,000 employees surveyed were comfortable taking on more responsibility for their health care decisions. Consumerism is catching on fast: More than 3.2 million Americans are now covered by a consumer-directed health plan. A 2004 Mercer Human Resources survey found that the majority of those enrolled in consumer-directed plans described their experience as either “strongly positive” or “more positive than negative.”Q. What about employers – do they like the concept of consumerism in health care?
A. They do. Employers are anxious to obtain savings associated with consumer-directed products. An April 2004 Mercer Human Resources survey found that 81 percent of large employers (20,000 or more employees) and 78 percent of small employers (10-49 employees) were “very” or “somewhat likely” to offer consumer-directed HDHPs by 2006. Some companies replacing their traditional health insurance with consumer-directed plans have seen health costs fall by more than 10 percent.Q. Is consumerism in health care just a way for employers to get individuals to pay a greater percentage of their health care costs – that is, cost-shifting?
A. Consumerism is not cost-shifting in disguise. Premiums in consumer-directed plans are more affordable than in most traditional plans, meaning more individuals can obtain coverage. Consumer-directed plan enrollees have demonstrated as much as a 23 percent increase in the use of preventive care, which both improves health and saves money. Consumerism gives individuals more control over their health care spending and informs them about the true cost of care, which makes them more cost conscious.Q. Are consumer-directed products really just for the young and healthy?
A. Absolutely not. Recently released data show that nearly half of those covered by HSA plans are over the age of 40. Aetna’s own 2005 employee enrollment demonstrates that consumer-directed plans are attractive to a wide range of employees. Among Aetna HealthFund members overall, the average age of members is 42 – the same as those who opted for a different type of plan.
Q. Does consumerism in health care really address the problem of the uninsured?
A. Consumerism in health care brings us closer to solving the problem of the uninsured. As some correctly point out, HSAs, HRAs and HDHPs alone will not make insurance affordable for everyone, but the lower premiums of these consumer-directed products make it significantly easier for uninsured individuals to purchase medical coverage. In fact, a May 2005 study by America’s Health Insurance Plans found that of the 438,000 people who purchased an HSA in 2004, 30 percent were previously uninsured. This is significant because the Institute of Medicine estimates that at least 18,000 Americans die prematurely each year solely because they lack health coverage.