Shielded by minimal co-payments, employees have traditionally paid little attention to the actual cost of care or changed their behavior to consume health care services more efficiently. The consumer-directed model of health care is a way to encourage employees to become more economical consumers of health care.
Health care economics
The Eighth Annual Watson Wyatt/Washington Business Group on Health Survey found that nearly half of surveyed employers reported that their health care costs exceeded their budget in 2002.
Consumer-directed plans provide a longer-term strategy to engage employees by creating an opportunity for price to enter their decision-making process. These plans differ from traditional approaches to health coverage; while employers still choose how the health care plan is designed, employees assume a greater financial stake than with conventional managed care plans.
Consumer-directed plans generally feature a discretionary fund such as an individual health reimbursement account funded by employer contributions that participants can use to pay for routine medical expenses. These accounts are typically offered in conjunction with comprehensive, high-deductible health insurance.
In 2004, acceptance of and interest in consumer-directed health plans is expected to skyrocket. According to a Forrester Research study, these consumer-directed health plans will attract 2.7 million health plan participants in 2005.
As part of the Medicare reform legislation signed into law in 2003 by President Bush, consumers have new alternatives for paying for health care expenses. The legislation included the creation of tax-deductible health savings accounts (HSAs) that permit unused balances to be carried forward from year to year and to be rolled over if the consumer changes employment.
Another driving force behind the consumerism trend is the demand for more health care information that is simple and accessible. Consumers are finding it easier to become more informed and engaged in their health care benefits, partly because of widespread access to the Internet.
Well-designed consumer-driven plans provide employees access to a variety of tools and resources to help them understand, select and use their benefits more effectively. Online tools enable employees to check their health fund balances, research claims status, compare prices for medical procedures, select a doctor, e-mail customer service representatives and access health and wellness information libraries.
Consumer-directed plans respond to both employer and employee demands for a more flexible health benefits alternative. Over time, as employees become more cost-conscious, they will be more likely to help contain future costs.
However, they should be viewed in a larger context. When selecting a carrier with a consumer-driven product, employers should make sure the carrier's capabilities also include mature disease management, case management and disability programs that address chronic illness and other major cost drivers that account for most claim dollars.
Mark Hanrahan, vice president of sales and marketing for Aetna's north central region, is based in Chicago. Reach him at (312) 928-3104 or HanrahanM@aetna.com.