What's driving consumer driven health plans (CDHP)?

While the bargaining groups and politicians debate a single payer system for health care, employers and their insurance companies have started offering another option; "consumer directed" or "consumer driven" products. But the question is "why?" What's driving this need to restructure the way we provide health care? A quick look at our ailing health care system shows that a new model is indeed necessary. In the U.S., health care costs continue to rise at a rate that is five times the overall inflation rate, and health care cost spending will soon comprise 15% of the U.S. Gross Domestic Product. We spend more on health care than most other countries in the world. Despite that Americans are less healthy than citizens of most other industrialized nations, with a higher infant mortality rate and a shorter life expectancy.

Employers can no longer afford the ever-increasing cost to maintain the premium benefit level to which employees have become accustomed. "CDHPs are an integral component of the logical evolution of the health care system toward a supply-and-demand driven marketplace," says Robin Mancuso of Gallagher Benefit Services, an employee benefit consulting firm. "Free market forces successfully drive price and quality in just about every important segment of our economy, so why not health care?" Although managed care put a dent in the rising cost of heath care, this supply side economic tool is nearly exhausted and health care costs continue to rise. Hospital consolidation, proliferation of better but costlier treatment options, over-utilization of diagnostic services by physicians, expensive prescription drugs made popular by direct-to-consumer advertising and employee expectations of generous benefits are all causes for this growing health care issue. Additionally, there is no educated and engaged consumer demand driving the marketplace toward a pricing and quality equilibrium.

The early results reported from some CDHP plans have shown that adoption causes both a one-time decrease in overall health care costs and a single-digit inflation rate. However, it is still too early to hail consumer driven health plans as the antidote to a broken health care marketplace. The early results are encouraging, but the oldest such plans have only generated about three years' worth of results, and most plans are only in their second year of operation. While analysis indicates that these plans are not generally benefiting from the experience of a "better than average" population base, more and more employers are using them as full replacements for their benefit programs, which will lead to further validation of the initially encouraging results.

So how do you know if a consumer directed health plan is right for you? Mancuso says: "We have found that there are four key areas that each employer must address when investigating these types of plans."

* Do you believe that employees, in consultation with their doctors, can make better decisions about their health care needs than the employer can?

* Will your organization get support for this type of plan from the top levels of senior management?

* Does your organization have an ongoing pledge to employee communication?

* Does your organization have a firm commitment to encourage self-service within your health plan?

Mancuso states that while most organizations will not quickly adopt a full-blown consumer driven approach, there are many things the organization can do to promote consumerism within their organization. Regardless of how an organization communicates with its employees, there are volumes of good information about being a better health care consumer that can be placed into employees hands.

In addition, for those employers to create an interesting and interactive experience for their employees there are several good turnkey health awareness and benefits communication platforms on the employer's intranet or on the web. "Simply by increasing employees' understanding of the problem, getting them to acknowledge that the employer can't solve the problem all by itself, and by referring them to a few simple tools, you can begin to help employees understand how important it is that they get involved in transforming the marketplace, and in living healthier lives." Mancuso said. "Thus, these employees will be informed and educated when they join the national debate about how much we really want to spend of our national resources on health care related activities."

GALLAGHER BENEFIT SERVICES

A subsidiary of Arthur J. Gallagher & Company

248-528-6630 * www.gbsmi.com