Consumer-driven plans on the rise

Although growing in popularity, consumer-directed health plans have some pros and cons, health insurance experts say.

Consumer-directed health plans require the insured person to pay for the first-dollar portions of their care out of their pocket before the insurance benefit kicks in, as opposed to a traditional health insurance plan where the first few dollars are paid by the plan. For instance, typical consumer-directed health plans carry deductibles ranging from $1,250 to $5,000. Once the insured pays the full deductible in year, the benefits kick in, typically for 100-percent coverage.

Consumer-directed health plans are gaining in popularity, the U.S. Government Accountability Office says. In 2005 more than 3 million people were enrolled in high-deductible health plans, and as of 2006 up to 6 million Americans chose this option for their medical care.

Kevin Sampson, president of Health Benefits Associates in Reno, says consumer-driven health plans have gained traction in northern Nevada due to the fact that they can save employers a great deal of money.

"They are much less expensive for the employer," Sampson says. "Many of our employers may be providing them at a reduced or at no cost to the employee. It really will favor the employer, but it also favors the employee because they many not be paying as much to be on that plan."

One of the primary benefits, says Valerie Clark of Clark and Associates, is that when consumers are spending their own money they will think twice about making doctor visits.

"If I have a sore throat and I have a $5 or $10 doctor visit co-pay, the easiest thing to do is go to my doctor and pay my co-pay, and he'll tell me to go home, drink lots of fluid and sleep.

"It's nice to have those doctor visit co-pays, and they aren't bad, it's just that your $10 co-pay does not cover the cost of that visit. Your doctor is going to bill the insurance company, and they are going to pay him or her for that time he spent with you. Nothing is wrong with that, except that utilization creates higher health care costs and premiums. If you don't mind paying lots and lots of money for insurance, that is a great way to go."

Health Associates' Sampson says consumer-driven plans are, "180 degrees from traditional co-pay plans."

"The main theme is for the consumer to start paying real attention to each one of the expenses they have

for medical care," Sampson says. "The consumer-driven theme that is implanted in the insured is that you are taking more responsibility about the cost of a procedure. It puts consumers much more in touch with the actual cost of heath care, rather than, 'How much is my co-pay?'"

The rising cost of health care coverage is the primary factor contributing to the growth in employers offering and individuals enrolling in consumer-directed health plans, the Government Accountability Office says. Since 2000, premiums in group health care have risen roughly five times faster than the overall rate of

inflation and the increase in worker compensation.

The main reason for the steep increase, Clark says, is utilization.

"Consumer-directed health pulls the person into the process of paying for the care they will receive in the beginning," she says. "With a consumer-directed health plan, that same sore throat, you will ask if you really need to go to the doctor or try some home remedies before paying full-cost for a doctor's or urgent care visit. I am going to be more careful about how I use my money to fill that deductible."

A study issued by the Kaiser Family Foundation found that in 2008 the average annual premium paid for employer-sponsored healthcare was $4,704 for individuals and $12,680 for families a rise of 119 percent since 1999. A consumer-directed health plan could be less expensive to both employer and employee depending on the deductible amount.

And oftentimes with a consumer-directed health plan, an employer can set up a Health Savings Account, a Health Reimbursement Account, or a Flexible Spending Account wherein pre-tax contributions can be rolled over from year to year. Health Reimbursement Accounts are owned by the employer, while Health

Savings Accounts are owned by the insured employee. With a Health Savings Account, the employer and employee can make contributions to the account, and the employee can take the account to a new employer.

Consumer-directed health plans have increased in popularity with employees who hardly ever access their health care, as well as for those who seek catastrophic care.

"That money just sits in an account and accrues (interest) year after year if you are not using it," Clark says. "It is a good thing for people who never use it, and for someone who seeks catastrophic care all the time it is also a good thing because what you will find is that your out-of-pocket costs are less than a traditional plan."

Moderate users who visit the doctor a few times a month but don't hit the deductible cap tend to dislike such plans, Clark says.

"Practically speaking, they don't appeal to everybody. Premium-wise they are great. They are popular in terms of costs and with people who understand how to use them.

"The challenges we face with these types of plans are that some people have a hard time understanding how to use them. If we don't have really good support for employer education and training, it becomes tedious and difficult for some people to use."