What 401(k)'s Can Teach Us About Consumer-Driven Health Plans
I've written in the past about how consumer-driven health plans haven't exactly caught fire with consumers. Turns out the high-deductible health plans often end up costing consumers more out-of-pocket than they can afford, especially if they actually, you know, get sick and need to use them. Plus, the plans are complicated: You've got your high-deductible plan, with its myriad coverage rules and limitations, and then you've got the tax-advantaged health savings account that goes along with it, which has its own raft of rules.
No wonder consumers to date haven't embraced these plans, no matter how much employers try to encourage their use. What we're experiencing with consumer-driven healthcare, benefits consultants say, is very similar to what happened 30-odd years ago when employers began to shift away from regular company pension plans and into 401(k) plans. Remember those days, when you not only had to start funding your own retirement but also learn the intricacies of asset allocation and rebalancing your portfolio? A similar shift is happening today with consumers and healthcare, these experts say.
Expanding on that idea, now the Employee Benefit Research Institute and Behavioral Research Associates have released a paper that examines the healthcare lessons that can be learned from the transition to 401(k)'s. It finds that it may be harder than many expect to make the shift to a healthcare system that requires you, the consumer, to play a starring role in directing and paying for your own care. Here are some of the lessons from 401(k)'s that these researchers report may be problematic in the transition to consumer-driven healthcare. Sound familiar? Chances are, even if your employer's plan isn't strictly consumer-driven, you may already be grappling with some of these issues:
- More choice is not always better. In one study, for every 10 funds added to a retirement plan, the likelihood that someone would participate in the plan dropped by 2 percent. Similarly, if people are trying to choose among different health plan deductible and copayment options, and then among providers and treatment options, "It could get really difficult to navigate," says Paul Fronstin, director of EBRI's health research and education program and coauthor of the study. "They're just going to shut down."
- When a complex decision needs to be made, people oversimplify it by reducing it to one key factor that they can get their heads around. In healthcare, that's often the monthly premium. But opting for a low monthly premium could mean that you pay much more out-of-pocket in the long run.
- Education doesn't necessarily lead to action. You may know what you should do, but that doesn't mean you'll do it. There's a lot of talk about the lack of informational tools to help people in consumer-driven health plans make smart choices based on quality or cost-effectiveness. But according to this paper, when workers at one company were given comprehensive educational tools explaining their retirement plan and how to invest, only a tiny fraction actually followed through on their intentions to enroll in the 401(k) or change the funds they invested in, among other things.
- Financial incentives like tax breaks don't necessarily motivate people to act in their best interests, either. We see this already with consumer-driven plans: Even though contributions to a health savings account are tax free, 42 percent of people who are covered by a health plan that qualifies them to open an HSA don't do so.
It's too soon to know whether consumerism, as it's called, will reshape the healthcare landscape. If it doesn't lead to lower healthcare spending, it may join tightly managed care on the scrapheap of ideas that didn't pan out as employers and others hoped, at least partly because they proved to be unpalatable to the consumers who were supposed to embrace them. What do you think? What would make a consumer-driven plan work for you?
Tags: health insurance | 401(k)
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What about the PRICE
I find it interesting that you talk about the difficulty with consumer driven healthcare, yet you never mention the a key factor that is involved in every consumer decision...the price. It is becoming widely known that your insurance company has negotiated different prices with the different providers in a geographic area for the SAME procedure. Yet that price variation amongst providers is not shared by the insurance companies with their customers....the ones paying the premiums that are reflected as top line revenue of insurance companies.
If this country is seriously interested in addressing the COST of healthcare in this country. Just have the insurance companies share with thier customers (also known as the consumer,employee, premium paying member, HSA owner,patient, and the person paying the bill)the prices the insurance company has already negotiated with the providers.
This little step will not only make employers more comfortable with converting to HDHP's supported by HSA's, it will reduce costs to insurance companies because their members will have "shopped" for healthcare, and I'll bet for the first time in a very long time you will see some reduction in healthcare costs. You don't to lose weight, stop smoking, or even take part in "wellcare"....just show the consumer the prices for procedures amongst the providers in their area.....I believe the American consumer will take care of the rest.
What 401(k)'s Can Teach Us About Consumer-Driven Health Plans
This is simply stating the commomnplace phenomenon of resistance to change and timidity which is covercome with education.
As with the initial resistance to adopt the 401(k), that prodcut is now commonplace and highly valued by all as it gives one a sense of control over their own money and coinfidence of futre cash resereves unavailable from governments. These attributes, as the article cites, apply to the HDHP/HSA concept. My family of 5 and I have had an HSA since 2004 and I would never go back to traditional high premium/co-pay structure. Every single person I have spoken to who has an HSA loves it and and would not go back to traditional high premiums and co-pays.
Here is an analogy you may understand. If your auto insurance has a $100 deductible the premium may be $2500 annually; increase the deductible to $1,000 and the premium drops to $1750 annually. Save (this is the KEY CONCEPT so you can fund the dedcutible when and if you need it!) the $750 and in one year you are ahead of big bad insurance companies you all hate for having conned you into a low deductible high premium product.
Open your minds and try an HSA for a year or two, you'll like, just like I am sure you like your 401(k) !
Education is everything!
Nice try. I am sure your Editor was pleased with this article as it did ruffle feathers, and cause debate and conversation. Despite it's one-sidedness and seemingly lack of research. Have you ever asked yourself how many Americans think of their health insurance as HealthCare? There is a significant misperception of what health insurance is supposed to do for us. It is not “The Womb”; like so many use it as a tool to reset our health. It is simply a tool to protect our savings/401k/”can of cash” in the back yard! Originally, we began with Fee-For-Service models where we accessed necessary medical services, paid for them as we received the care then were reimbursed by our Hospital or Medical expense plan. This was in the mid to late 20th century! It is no different than what the HSA/CDHC members are doing today. They aren’t afraid to help manage costs, they are more proactive about their preventative and routine care, and because they understand what the true cost of services are they end up being better consumers. As for the cost of Health Insurance today, each one of us should be better educated about the evolution in the last 20 years of what our plans looked liked then, versus what they pay for today. We have consumer groups as well as Corporate lobbyists pushing our Legislatures to tell the Insurance Carriers what they will cover versus what they will not. We are telling our Insurance Carriers they have to pay for what we need without asking what it costs and how we will be impacted through our premiums. We are all to blame for this, it is not anyone player. In anyone Employer Group, no matter the size it statistically only takes 3% of the enrolled population to tip the balance of a Groups claim experience. Look around you right now and see if you see 3 out of 10 people that aren’t overweight or have taken time off for a surgery or an injury in the last 12 months. How many of you have truly educated yourself about your last healthcare bill? Or gone to your Employer’s Annual Health Benefits meetings (when they aren’t mandatory) or asked your Doctor for a Generic equivalent or asked the Medical Office’s billing department of your provider the estimated cost of the services. Has anyone of us asked how these Pharmacy (national and local) can offer generics for $4 for a 30 day supply (with or with out insurance)? Education is everything, where would we be without education. CDHC/HSA require time, discipline, patience motivation and funding. Not unlike our educations that got us the job that provided our retirement savings plan and the coverage to protect what we try to save each month.
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