Patients Give New Insurance Mixed Reviews
Consumer-Directed Health Plans Can Cut Costs, but Early Users Cite Problems Comparing Price
VANESSA FUHRMANS / Wall Street Journal 14jun2005
As the push toward consumer-directed health insurance steadily gains momentum, some of the early users of the plans are experiencing mixed results.
The early picture — based on the experience of companies that offer the plans, and research by consultants and plan providers — suggests that participants aren't skimping on health care as some critics had feared. They are, however, frustrated by having to be health-care consumers because medical price and quality information still is so hard to come by.
Consumer-driven health plans — arguably the biggest shift in health-care coverage since health maintenance organizations — typically combine a high-deductible insurance plan with some sort of savings account that participants can use to pay for care until they meet the deductible. The plans shift more of the decisions for health-care spending onto consumers, with the idea that people will be more careful about medical costs when it is their own money at stake. Because the premiums for the policies are typically lower than with traditional plans, employers and employees both can save on upfront costs.
One big concern has been that participants would scrimp on care if it wasn't covered by insurance. The latest research, and the experience of a range of companies, including Whirlpool Corp., Textron Inc. and Logan Aluminum Inc., has that shown people still will pay for care. Many large companies also have found that subsidizing and providing incentives for preventive services helps make the plans more workable for employees. At Textron, an aircraft and manufacturing company, which still covers preventive care upfront, use of services such as mammograms, prenatal care and physicals, has climbed 15% since the company began offering a consumer-directed health plan in 2002 and made the full switch in 2003.
A new survey by consultants McKinsey & Co. found that participants in consumer-directed health plans got annual check-ups, basic lab tests, prostate screenings and mammograms at an equal or higher rate than those in richer traditional benefits. The survey, of more than 2,500 people across several companies and being released this week, found that consumer-directed health plan members also were twice as likely to inquire about drug costs — even though their employers typically continued to cover prescription drugs with a traditional benefit separate from the high-deductible plans. (McKinsey, which sells consulting services to the health-care industry, including assistance in adjusting to consumer-directed health care.)
The McKinsey survey found, however, that only 44% of plan members were as satisfied as they had been with their previous, more generous benefits. Higher costs were one factor for some, but many said they were unhappy with how hard it was to get good information to make decisions about health care.
In a recent survey by employee-benefits consultants Towers Perrin of 1,400 employees in various health plans, including traditional insurance, 85% said they needed more information and tools to make good decisions about health care.
While some form of consumer-driven health care has been around since the 1990s, it is only in the past couple of years that the approach has really taken off. Nearly four million Americans have some form of them now, with most of that growth coming in the past year since tax-free Health Savings Accounts were introduced in late 2003 as an option for the personal account portion of these plans.
At Logan Aluminum, which switched to a consumer-driven plan two years ago, human relations chief Howard Leach says the Russellville, Ky., company's health-care spending declined 6% in the first year on the plan and another 1.5% the second. While emergency-room visits are down — largely because consumers are more likely to opt for a less expensive urgent-care clinic — doctor's office visits have increased slightly, he says. "To me, that says employees aren't skimping on necessary health care," Mr. Leach says.
Still, he adds, the pricing information available for consumers "isn't as complete as I'd like." Through Aetna Inc., Logan's consumer-health-plan provider, employees have access to approximate cost information for various medical procedures and some background information on providers on its Web site. But no source has detailed information comparing prices from provider to provider.
Logan employee Linda Foster says that since switching to the consumer-driven plan, she has been cost-conscious, being more consistent about using a less-expensive mail-order prescription service, for instance. When the 42-year-old mother recently called a couple of urgent-care centers to ask about the cost of a visit, none would tell her the price upfront. "That's where I see the limitations," Ms. Foster says. "You really have to do some digging to get the information you need."
Aetna, for its part, says it has found that consumer-directed plans can save employers money. Data from 13,500 plan participants in 2003 — the latest for which the company has done analysis — showed that employers who offered such plans as a voluntary option slowed their health-care spending growth to a rate of 3.7%, while those who made the switch completely saw costs fall 11%, mostly because of fewer visits to doctors and hospitals. At the same time, the use of treatments or tests for preventive care rose faster among those in consumer-driven plans, compared with a similar population in a traditional plan.
A big reason that participants in consumer-driven plans have kept up with preventive care is the way many large employers structure their plans. Rather than HSAs, most have continued to provide the earlier-generation Health Reimbursement Account, which give employers more flexibility in designing the plan. Many early adopters also have continued to provide at least some coverage for preventive care.
For instance, Whirlpool built enough financial incentives into its consumer-directed offering that 40% of its U.S. employees opted to join it when it first began in January 2004. The company covers physicals, immunizations and other preventive care upfront, then contributes a certain amount to the employee's personal care account before the deductible kicks in. By January of this year, the percentage of employees who joined the consumer-directed plan was 55%, says Janice Pushaw, director of Whirlpool's global benefits strategy. Logan also fully covers preventive care before patients begin to pay money out of their account.
Some insurance executives caution employers against switching their entire work forces to a consumer-directed plan. Howard Phanstiel, chief executive of managed-care company Pacificare Health Systems, cites the example of one large employer that moved its work force to a high-deductible plan, only to learn that some of its employees had trouble paying for the delivery of their babies. Pacificare offers a number of consumer-directed plans, but "they are not a panacea," he says.