Concepts of Consumerism and High Deductable Health Care Plans

Friday, November 19, 2010

Why should a High Deductible Health Care Plan alter the consumption behavior of an employee or their covered dependents? After all, businesses have employed various combinations of premiums, co-payments, deductible, co-insurance payments, and out-of-pocket expenses for decades. How can simply adding a larger deductible to the plan control health care cost, alter behavior, result in better medical care, improve wellness, and increase the medical knowledge level of the average worker? In and of itself, a higher deductible certainly cannot do all that. However, working in concert with a FSA, HSA or an HRA, appropriate education, and a high performance provider network, it is possible.

Consumer behavior is extremely complex, as is all human behavior and cannot be simplified in the 500-700 words of a single blog piece, not will I attempt to do so. However, consumers do react to economic pressures and the result can be changes in behavior relative to the direction of that pressure. Consider Behavioral Economics and health care, the manner in which incentives and dis-incentives are presented may have a greater impact than the absolute financial size of either incentives or dis-incentives.

Towers Watson, the HR consulting firm suggests that a $100 gift card may have more of an impact on behavior than the same $100 in a paycheck. Certainty vs. uncertainty associated with incentives or dis-incentives coupled with the delivery channel has the ability to direct behavior. Example: most consumers would prefer 10% off their purchase at the point of sale, rather than some future chance to receive 50% off another purchase.  I want it now!

Applying the concept of Behavioral Economics and a High Deductible Health Care Plan points to the delivery channel of the deductible; it is directly out of the pocket of the employee and with a high degree of certainly. Except for selected preventive and wellness medical procedures, the employee will be paying for a minimum of the first $1,200 to $2,400 of their health care expenses. The employee knows this, understands this, and with the aid of a FSA, HSA or HRA, has the ability to plan for that expense. With the noted exception of certain preventive and wellness procedures (PPACA), the employee may not file a claim against their health care plan during any specific year. Therefore, even if the employer funds some portion of the employee’s spending or savings account, this expense is far less than the employee’s minimum required $1,200 to $2,400 deductible amount.

In an article published in the July 2009 edition of Health Affairs titled, “High-Deductible Health Insurance Plans: Efforts To Sharpen A Blunt Instrument”, Mary Reed, Vicki Fung, Mary Price, Richard Brand, Nancy Benedetti, Stephen F. Derose, Joseph P. Newhouse, and John Hsu, the numerous authors point out that HDHP appear to have the ability to change behavior. To support this argument they cite:

     · Over half of the Kaiser Permanente California members
        knew they had a deductible.

     · Over one third knew the amount of the deductible.

     · Over 80% of members without a deductible knew
        there was no deductible.

     · Almost 40% of members reported some form of behavior
       change due to the deductible.

 

One concern expressed by the authors was that deductibles have the ability to create a barrier to health care and that health care consumers will need significant amounts of information so they can “differentiate when care is necessary, discretionary, or unnecessary.”