Many consumers find themselves paying more of their
own medical care costs as corporations ditch traditional health
plans and move toward high-deductible health insurance plans coupled
with tax-advantaged health savings accounts.
Known as consumer-directed health care, these plans
seek to drive down health care costs by placing more of the responsibility
and cost burden on consumers.
If you have a greater financial stake in getting better
and cheaper health care, the logic goes, you'll invest more energy
into the process. And as more companies jump on the bandwagon, this
will increase competition in the health care industry, further curbing
"Consumer-directed health care doesn't refer
to a single product, but to a portfolio of products and services
that assist health insurance plan members in becoming informed health care
consumers and taking responsibility for their health care decisions,"
says Thomas W. Rubino, director of public affairs for Horizon Blue
Cross Blue Shield of New Jersey.
Since the premiums for high-deductible health care
plans -- $1,000 or more per family member -- are much less than
traditional health insurance plans, you're encouraged to invest
the difference in your pretax contribution to a health savings account,
which you can use for routine and out-of-pocket health care expenses.
But will it work?
While this sounds good in theory, the question remains:
How well it will work in practice?
Many consumers are responsible for their own retirement,
and the fact is many are woefully unprepared because they either
can't or won't save enough.
And, according to a survey conducted by the Commonwealth
Fund and the Employee Benefit Research Institute in late 2005, people
enrolled in consumer-directed health care plans are less satisfied
than consumers enrolled in more comprehensive, traditional health care
"These plans are promoted by policymakers and
employers who believe that they will make employees more sensitive
to health care costs, but the fact is that Americans are already
paying much more in out-of-pocket costs for their health care than
in other industrialized nations," says Sara Collins, assistant
vice president of the Commonwealth Fund, a private nonpartisan foundation
that supports research on health care.
"There has been very slow growth in wages in
the U.S., and people are already struggling to pay for their retirement,
their kids' college educations, and this is just another cost burden
on an already overburdened consumer," she says.
The ABCs of consumer-directed
According to a study by the federal General Accountability Office,
between 5 million and 6 million Americans were enrolled in such
plans as of January 2006. While these consumers represent a fraction
of Americans enrolled in private health insurance plans, this share
is growing quickly.
Not only are many employers adopting this model, but
many self-employed individuals are also going this route because
there are so few other affordable health-insurance options available.
Many large health insurance companies offer consumer-directed health plans to employers and individuals. Many plans offer different levels of deductibles, typically starting at or just above the health savings account minimum of $1,050 and going up to $5,000.
A health savings account, or HSA, is a flexible spending
account in which consumers and employers make tax-advantaged contributions
that the consumer uses to pay out-of-pocket health care expenses.