Health Care Cost and Consumer Accountability

Friday, November 11, 2011

For decades, the true cost of health care has been hidden by the inability of the consumer, a.k.a. the employee and their dependents, to see the total cost of services provided. Documents such as the Explanation of Benefits (EOB) are great resources, however they are delivered long after the care itself is provided. Medical providers are often ill prepared and ill equipped to provide complete costs upfront since they themselves do not know the expenses associated with many services not directly provided by their facility. Many consumers do not realize that they do have a degree control over when, where, and how many non-emergency services are provided. Consumer Directed Health Plans were thought to provide the incentive for health care consumers to “shop” for medical services, in the same way that they would shop for a car. The problem is that there is no “Kelly Blue Book” for health care procedures which is easily accessible to most employees and their families. The result is that consumers are often unknowledable about the total cost of a medical procedure, and thus lack the information to shop around for the lowest cost or for that matter, the highest quality provider.

While some form of high deductible and consumer directed health plans have been marketed by carriers since the later 1990’s, only in the last decade have Consumer Directed Health Plans begun to be offered through employers in significant numbers. An April 27, 2011 report in Plansponsor stated that Consumer-Directed Health Plan participation increased 22% between 2009 and 2010, to an enrollment of 28 million, according to analysis by Mercer’s National Survey of Employer Sponsored Health Plans commissioned by the American Association of Preferred Provider Organizations. While sounding impressive, CDHP’s have a long ways to go to match the estimated 69% take-up rate for PPO plans reported in the same survey. The survey went on to report that 51% of employers with 20,000 + employees offered employees a CDHP.

The increasing popularity of Consumer Directed Health Plans is a simple economic function, i.e., lower premium costs to both the employer and employee. Typical private insurance premium costs for CDHP’s can range from $40 to $230 per month less for individual and family coverage respectively than standard PPO’s.. Employer sponsored plan premiums for both fully and self-insured plans can be significantly lower with the combination of group pricing, employer contributions, HRA/HSA incentives, and pre-tax employee contributions.

But the question remains, has Consumer Directed Health Plans contributed to lowers overall costs, a better informed, educated, and knowledgeable health care consumer? In a recent 2011 survey commissioned by ACS , A Xerox Company and carried out by Buck Consultants, 56% of HSA participants reported that their qualified plan offers a reasonably priced health care option compared to other alternatives. The survey also concluded that "… employees are benefiting from more educated, responsible health and wellness decisions … ".

Survey participants with HSA’s report:

     54% - Saving more money to cover medical costs

     18% - Engaging in healthier lifestyle choices

     18% - Researching preventive care programs

     28% - Shopping for lower priced prescription drugs

     31% - Better health care planning throughout the year

Results such as the ACS - Buck survey are certainly encouraging and appear to point to an emerging trend in the consumption behavior of some health care consumers. However, we are still taking about less than one third of health care plan participants being enrolled in a Consumer Directed Health Plan. And while 28 million individuals is no small number, it does represent a minority and of greater concern, individuals who may be healthier participants and are thus less likely to need health care. Leavening a concentrated pool of less healthily individuals in the remainder of the population.