Wednesday, August 18, 2004
Consumer-directed health plans growing in popularity
[Shari Roan, "More choice, at a cost," The Los Angeles Times, 16 August 2004.]
Greg Scandlen, the speaker at our upcoming luncheons in September, is featured prominently in this recent article on health care trends:
Learning what a treatment or procedure costs — then deciding whether to pay for it — is a new step for most Americans with health insurance. Even traditional fee-for-service plans, in which consumers pay 20% of a bill, don't prompt most people to analyze a procedure's cost or their actual need for it, experts say. But when consumers are held solely responsible for a medical bill, they tend to think twice.
Having patients assume responsibility for such costs is the centerpiece of this increasingly popular type of insurance, called consumer-directed healthcare. Now a small part of the insurance market, about 2%, consumer-directed plans are expected to become much more common in the next few years as a way to potentially curb employers' rising healthcare costs. The plans could account for 7% of health insurance by 2007 and one-quarter in about five years, according to Forrester Research, an independent technology research company.
Eventually, about 40% of consumers who now use preferred provider organizations or point-of-service plans will likely opt for consumer-directed plans, predicts Brad Holmes, vice president and research director of Forrester, who has studied the trend.
The strategy, which takes some of the control over spending away from employers and insurers, typically allows people to select their own physicians and hospitals, avoiding "gatekeepers" who might limit their care.
In turn, consumers pay more up front — such as the first $1,000 to $2,500 per year spent on healthcare — and bear the responsibility to spend those funds wisely. Consumers can then find themselves considering whether to have that ingrown toenail treated or whether to choose a generic heart medication over a more expensive brand-name product.
"I think there is hardly an employer in the country who isn't considering some version of this approach," says Greg Scandlen, director of the Center for Consumer Driven Healthcare at the Galen Institute, a nonprofit health policy research organization in Alexandria, Va. "The notion that consumers can take charge of their own healthcare is what puts the sizzle behind this."
The trend has both proponents and critics. Proponents say people will be more careful and cost-conscious if they have a stake in how far their money goes. Critics say such health plans simply foist a larger share of costs on consumers.
"Financial incentives are the key to these plans, whether they are spending accounts, tiered plans or plans with co-insurance," says Peter Lee, president and chief executive officer of the Pacific Business Group on Health, a healthcare purchasing coalition based in San Francisco. "Every one of those is a financial vehicle to help consumers understand that health care dollars are their dollars."
Interest in such plans got a jump-start last year with the creation of health savings accounts.
As with existing health-spending accounts, consumers can use the new accounts to set aside money annually, tax-free, for medical costs. Unlike spending accounts, however, the savings accounts earn interest and can be rolled over from year to year if the money goes unused.
According to a recent survey of 270 companies by Hewitt Associates, a national human resources consulting firm, 60% of large employers are likely to soon offer the new accounts. Aetna and Blue Shield of California announced last month that they will offer high-deductible plans with health-savings accounts. Many large employers are considering such plans, says Pam Kehaly, general manager of special accounts at Blue Cross of California.
A typical plan, for example, has an annual $2,000 deductible that must be met before insurance will kick in; the insurance company then pays 90% of costs, she says. Although the deductible is high, the consumer can use a health savings account to pay for those initial expenses.
"Plan designs in the past have insulated people from the cost of healthcare. The concept now is that maybe people will think about their choices and the impact of their choices," Kehaly says.
[Shari Roan, "More choice, at a cost," The Los Angeles Times, 16 August 2004.]
Greg Scandlen, the speaker at our upcoming luncheons in September, is featured prominently in this recent article on health care trends:
Learning what a treatment or procedure costs — then deciding whether to pay for it — is a new step for most Americans with health insurance. Even traditional fee-for-service plans, in which consumers pay 20% of a bill, don't prompt most people to analyze a procedure's cost or their actual need for it, experts say. But when consumers are held solely responsible for a medical bill, they tend to think twice.
Having patients assume responsibility for such costs is the centerpiece of this increasingly popular type of insurance, called consumer-directed healthcare. Now a small part of the insurance market, about 2%, consumer-directed plans are expected to become much more common in the next few years as a way to potentially curb employers' rising healthcare costs. The plans could account for 7% of health insurance by 2007 and one-quarter in about five years, according to Forrester Research, an independent technology research company.
Eventually, about 40% of consumers who now use preferred provider organizations or point-of-service plans will likely opt for consumer-directed plans, predicts Brad Holmes, vice president and research director of Forrester, who has studied the trend.
The strategy, which takes some of the control over spending away from employers and insurers, typically allows people to select their own physicians and hospitals, avoiding "gatekeepers" who might limit their care.
In turn, consumers pay more up front — such as the first $1,000 to $2,500 per year spent on healthcare — and bear the responsibility to spend those funds wisely. Consumers can then find themselves considering whether to have that ingrown toenail treated or whether to choose a generic heart medication over a more expensive brand-name product.
"I think there is hardly an employer in the country who isn't considering some version of this approach," says Greg Scandlen, director of the Center for Consumer Driven Healthcare at the Galen Institute, a nonprofit health policy research organization in Alexandria, Va. "The notion that consumers can take charge of their own healthcare is what puts the sizzle behind this."
The trend has both proponents and critics. Proponents say people will be more careful and cost-conscious if they have a stake in how far their money goes. Critics say such health plans simply foist a larger share of costs on consumers.
"Financial incentives are the key to these plans, whether they are spending accounts, tiered plans or plans with co-insurance," says Peter Lee, president and chief executive officer of the Pacific Business Group on Health, a healthcare purchasing coalition based in San Francisco. "Every one of those is a financial vehicle to help consumers understand that health care dollars are their dollars."
Interest in such plans got a jump-start last year with the creation of health savings accounts.
As with existing health-spending accounts, consumers can use the new accounts to set aside money annually, tax-free, for medical costs. Unlike spending accounts, however, the savings accounts earn interest and can be rolled over from year to year if the money goes unused.
According to a recent survey of 270 companies by Hewitt Associates, a national human resources consulting firm, 60% of large employers are likely to soon offer the new accounts. Aetna and Blue Shield of California announced last month that they will offer high-deductible plans with health-savings accounts. Many large employers are considering such plans, says Pam Kehaly, general manager of special accounts at Blue Cross of California.
A typical plan, for example, has an annual $2,000 deductible that must be met before insurance will kick in; the insurance company then pays 90% of costs, she says. Although the deductible is high, the consumer can use a health savings account to pay for those initial expenses.
"Plan designs in the past have insulated people from the cost of healthcare. The concept now is that maybe people will think about their choices and the impact of their choices," Kehaly says.
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