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Fatal Flaw May Doom Consumer-Driven Health Plans

January 21, 2008
Related Topics: Medical Benefits Law, Benefit Design and Communication, Workforce Planning, Latest News
Consumer-driven health plans were designed to help slow rising health care spending by corporations. But the schemes may fail if employers don’t provide employees with proper education, finds a study released Tuesday, January 15, by the not-for-profit Employee Benefit Research Institute.

“Since the vast majority of Americans who have health coverage obtain it through their (or a family member’s) employer, and with health benefits on track to become the single-largest expense of any employee benefit, the issue of education is important, both to the sponsors and the beneficiaries of health insurance coverage,” study authors Lois Vitt and Ray Werntz say in the report.

Consumer-driven plans, which EBRI notes have several million participants, typically are more expensive and place more responsibility on the user. Such plans combine a tax-preferred account (a health savings account or health reimbursement account) with a high deductible, and users are expected to pay health costs either out of pocket or from one of their two accounts.

Advocates of such plans say that because employees shoulder the bill, they are motivated to keep health care costs low.

But the study finds that there is no consensus among policymakers that this will happen. In fact, the plans rely on employees making informed decisions about their health care choices. Lacking that knowledge, consumer-driven health care plans may fall flat.

Employers have been down this path before. The perceived ineffectiveness of employee education for 401(k) plans resulted in legislation to add “defaults” to these plans so that they no longer relied upon positive employee action. In the health arena, the report states, the default approach is exactly what the consumer-driven health model seeks to move away from.

The upshot? “Should health education initiatives prove ineffective, the consumer-driven health movement could well be doomed, especially if it relies upon fully educated health consumers taking self-initiated actions,” Vitt and Werntz say.

Filed by Megan Johnston of Financial Week, a sister publication of Workforce Management. To comment, e-mail

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