Consumer-Driven Health Plans Get Mixed Reviews

By Joe Rojas-Burke, The Oregonian, Portland, Ore.

Dec. 9–A wave of “consumer-driven” health plans is supposed to control runaway medical costs by making patients act more like thrifty shoppers, and at this they succeed, according to one of the first national surveys examining the trend.

But the survey also shines light on the potential downsides for workers who have enrolled in such plans: They were much more likely to avoid or delay medical care when sick, and they shouldered a larger financial burden than those with more traditional insurance.

The findings, released Thursday at a health conference in Washington, D.C., come from a national survey of privately insured adults conducted by two nonprofit groups, the Employee Benefit Research Institute and the Commonwealth Fund.

The results aren’t likely to curb interest in the cost-saving health plans among employers and health insurers. But the results could help companies fine-tune plans to reduce unintended consequences for workers.

“We need to do a better job at thinking through the issues,” said Robert Crane, a senior vice president for California-based Kaiser Permanente. Crane made clear that health insurers aren’t about to give up on the concept. He said half of Kaiser Permanente’s growth in 2005 came from enrollment in consumer-driven health plans.

“We should be looking for a sweet spot,” Crane said, that encourages cost-conscious behavior but avoids going too far and discourages people from seeking necessary care.

The plans are usually built around bare-bones health insurance that won’t begin paying medical bills until they reach $1,000 or an even higher “deductible” level. Employers then supply each worker a fixed dollar amount each year to cover health care costs, generally an amount equal to the deductible. Workers who spend frugally can bank savings from year to year.

Critics insist that the plans contain an inherent unfairness: People who remain healthy can accrue savings; those who are seriously ill may never have that chance. For example, someone born with a serious illness requiring thousands of dollars in medical care every year would drain all contributions to a medical savings account or health reimbursement arrangement.

“It’s inequitable, and it’s based on a flawed notion of what drives the majority of health care costs,” said Lynn-Marie Crider, a Portland-based official with the Service Employees International Union.

Advocates of consumer-driven plans point out that by lowering costs, the plans could make coverage affordable for some people who are uninsured, or help employers to avoid dropping coverage or cutting benefits for their workers’ children and spouses.

The survey compared three general health benefit designs:

–Consumer-driven plans featuring a spending account that rolls over from year to year.

–Plans with a deductible of $1,000 or more.

–Traditional insurance with a deductible of less than $1,000.

People in consumer-driven and high-deductible plans wound up paying considerably more out of pocket. The share of people who spent more than 5 percent of their annual income on health costs was 42 percent in high-deductible plans, 31 percent in consumer-directed plans, and 12 percent in traditional plans.

More than a third of the people in consumer-driven plans said they skipped treatment or delayed seeking care when sick because of costs, compared with 17 percent of those in traditional plans. Consumer-directed plans did more to dissuade lower-wage workers: Nearly half of those earning less than $50,000 a year said they avoided care because of costs.

Whether the medical services people skipped were needed remains subject to debate. The survey did not address the consequences of avoiding treatments. Some experts said the fact that people thought twice about going to the doctor is a success.

“I don’t think that is necessarily unhealthy,” said Bart McMullan, president of Regence BlueCross BlueShield of Oregon. McMullan said studies suggest that 30 percent to 40 percent of all medical services are unnecessary or of questionable value to the patient.

With consumer-directed coverage, patients were more likely to ask their doctors about treatment options and costs, and they were more likely to ask for cheaper drug brands or generics, the survey found.

“Asking those questions will lead to better clinical care,” McMullan said. “The physician and patient will talk about what they are doing together.”

Jim Walton, employee benefits-manager for TOC Management Services in Tigard, said he is mindful of the downsides. “Like anything, you can take consumerism too far,” he said.

But Walton remains convinced of the value of carefully designed consumer-driven health plans. TOC Management Services oversees health benefits for about 250 small manufacturing and timber industry companies with about 10,000 total employees. Walton said he’s encouraged by the increasing availability of quality and cost information about competing hospitals.

“Given good information, consumers can help make better choices,” he said. “But they need some sort of incentive to do it.”

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