How Consumer-Directed Health Care Is Revolutionizing the Industry
Turner, Grace-Marie, The World and I
We could talk today about how to change our approach to the taxation of health insurance in order to open up the marketplace for health insurance rather than confining it to the workplace. We could talk about transforming public programs like Medicare and Medicaid through an injection of market competition and choice. But with your permission, I would like to focus on consumer-directed health care, an emerging issue that could have a transformative impact on both private and public health programs.
Consumerism is working to our advantage in the health sector, despite the fears and criticisms of those who have a vision of a government-controlled health care system. A number of studies are showing, for example, that companies and individuals who move to consumer-directed health care experience lower costs while maintaining access to needed health care.
Health Savings Accounts
Health Savings Accounts (HSAs) are the newest entrants in the field of consumer-directed health care. HSAs were created as part of the Medicare Modernization Act and became available January 1, 2004. They allow individuals, employers, or employees to invest tax-free dollars in health accounts to pay for routine health care. The accounts are accompanied by insurance policies to cover larger medical bills.
America's Health Insurance Plans (AHIP), which represents the country's major insurers and health plans, surveyed its members in early 2006 and found more than a million people were enrolled in HSAs as of March 2005. The study also found thirty-seven percent of those purchasing individual policies were previously uninsured.
While critics claim HSAs will be attractive only to the young and healthy, studies have shown that forty percent of HSA purchasers make less than $50,000 a year, a majority of purchasers are families with children, and about half are over age forty. HSAs have broad appeal. Blue Cross/Blue Shield has found those selecting consumer-directed health plans have similar health problems to those with traditional insurance.
The facts show consumer-directed plans defy the critics because they not only attract the young, the healthy, and the wealthy, but they also have broad appeal, and are thus helping to provide new options to people who have been uninsured.
HSAs are only one example of a constellation of offerings that give consumers more power and control over health care decisions. Other consumer-directed products, such as Health Reimbursement Arrangements (HRAs), are also helping companies to lower their health costs while providing incentives for employees to be more engaged in managing costs and care.
HRAs, which were enabled by a Treasury Department ruling in 2002, are sister accounts of HSAs but are available only through employers. Some companies that have replaced their traditional health insurance with HRAs have seen their health costs fall by more than ten percent, even as the use of preventive services by workers increased by as much as twenty-three percent.
Success of consumer-directed products
Companies in the health field have produced a number of studies reporting on experience with consumer-directed health care products. In addition, others have conducted surveys and produced studies analyzing the advantages and challenges of consumer-directed health care.
eHealthInsurance, the largest online health insurance broker in the United States, representing more than 140 major health insurance companies, conducted a survey of people who had purchased health insurance from among the 6,500 products it offered in the first six months of 2005. It reported:
--Nearly two-thirds of HSA purchasers paid $100 a month or less for their plans.
--Premiums for HSA-eligible insurance dropped fifteen percent between 2004 and the first half of 2005.
--HSA plans are comprehensive, with most covering one hundred percent of the costs of hospitalization, lab tests, emergency room visits, prescription drugs, and doctors' visits after the deductible is met. …