Consumers have long been able to do simple math and make smart choices when it comes to buying clothes, cars or appliances. Why not use the same smarts with health care? That simple-sounding idea is driving what is called the third wave in health insurance--consumer-driven health plans. If it sounds too good to be true, it just may be.
With the plans, consumers are expected to shop for health care with the same attention to price and quality they show in buying, say, a car. Employers hope that having better-informed employees will lead to big savings by eliminating unnecessary trips to emergency rooms, excessive visits to doctors’ offices and dollars wasted on expensive brand-name drugs as opposed to generics.
But studies show there is a substantial amount of skepticism about these plans on the part of both management and employees. Analysts question whether the plans offer real savings, or merely represent a cost shift from employers to employees. There are fears that if employees are given too many incentives to reduce health-care costs, they may forgo needed checkups to save money or begin self-diagnosis. Another problem is that although these plans depend on intelligent choices, the information available, while more plentiful than ever, is still limited.
First, here is what’s out there. Large insurance companies are making available to members online information services offered by companies such as Subimo or Select Quality Care that pull together what limited amount of statistical research is available. Health consumers now are a couple of clicks away from getting a rundown of local hospitals that, say, have the most experience performing heart surgeries or mastectomies or meet industry standards for staffing of intensive-care units. They can find out where their physicians went to medical school and, for a nominal fee, whether there are any medical-board disciplinary actions against them. There are drug formularies that allow for price shopping. Patients with specific health concerns such as diabetes can get a checklist of what they need during regular checkups.
For all that, accessing and interpreting the information can be tricky. The information is online, so a degree of computer literacy is required. All information comes with a warning that it is not a substitute for medical advice but is there, basically, to let consumers ask good questions, not play doctor. Drug prices are available, showing the differences between generic and brand-name drugs, but it’s far more difficult to determine if one is better than the other. Much of the information is incomplete. For example, in Subimo’s online information about hospital satisfaction rates, one hospital in Southern California showed an "average" rating, whereas others "did not participate" in the satisfaction survey, with no ready explanation for either notation.
Faced with these and other problems, employees have been reluctant to accept the new plans in a big way. A recent study by CIGNA Corp. shows that consumers put in far more time planning a vacation or making a big purchase than they do researching a health concern before seeing a doctor.
Employers have "significant reservations," Deloitte & Touche researchers say in another new study. Employers question whether consumer-driven health plans will have a serious impact on rising health-care costs, and express concern about the difficulty that employees may have in understanding the plans and whether the less healthy are the clear "losers."
The point about who stands to lose the most stems from a belief that savings accounts and up-front money may be far more attractive to younger workers--who are less likely to need health care--than to older workers, who may be more vulnerable and worry about high backloaded copayments. The fear is that as younger workers move to the new plans, older workers will be paying a lot more for their traditional plans.
Even so, while only 11 percent of the employers polled were using an alternative model for health-care delivery at the beginning of the year, Deloitte & Touche reports that 43 percent say they are planning to offer a plan or may offer one in the near future. Another 32 percent said they would consider a new delivery model if long-term savings and employee acceptability can be demonstrated.
Consider the experience of Definity Health, one of the big players in the new consumer-driven health field. The company grew from three clients in 2001, its first full year of operation, to 25, and then to 65 today. The Definity plan is similar to others. It offers a broad menu of choices, with financial incentives that allow workers to carry money saved from year to year.
Consumer-driven plans usually start with $1,000 to $2,000 of company money put into a special account, which employees can spend however they choose. For example, if they need a physical, they can shop around for the best price. Or they can fill drug prescriptions with the least-expensive generic drugs. Often, if the money is not spent, it can be carried from one year to the next. Once the employer’s money has been spent, the employee is then hit with relatively high copayments. Other features include round-the-clock "health coaches," such as nurses who lend their expertise to sick workers, and a Web site where members can compare doctors, hospitals and drugs, and even price shop on the comparative cost of office visits.
So far, Definity is experiencing an enrollment rate of about 13 percent of eligible workers, but spokesman Chris Delaney says acceptance is slowly building. "We tend to see a 50 percent growth in enrollment the second year we are with a company,’’ Delaney says.
Consumer groups are among the most vocal critics of consumer-driven plans. "We hate them," says Earl Lui, a senior attorney with Consumers Union, publisher of Consumer Reports. One danger, he says, is upsetting the risk pool by creating plans that are far more attractive to younger workers. "It might work well for younger people, but anyone over 45 will be paying a lot more," Lui says. "Health insurance works best when the risks are spread broadly, rather than each individual bearing their own risk."
A survey by Towers Perrin shows that employers face a "hard sell" convincing employees that the problem of fixing the cost of rising health care is theirs to share. "Employees don’t think cost is part of their responsibility," says Rich Ostuw, a Towers Perrin consultant. "Employees also think they are already operating as effective consumers."
Another Towers Perrin consultant, Ron Mason, says getting at the problem will require more than rolling out an attractive plan with a savings account. He says that an answer must be found for employees who face serious chronic diseases, like diabetes, heart disease, cancer or other health conditions that eat up the lion’s share of health dollars.
"We spend most of our money on a very few people," he says. "If I am a chronically ill person, the motivation to reach me cannot be a financial one." Mason believes it’s important to get employees hooked up to good information, using resources like Subimo or Select Quality Care. "There is a lot of information out there. It’s very important that we help people find it."
Workforce, July 2003, pp. 86-87 -- Subscribe Now!