Consumer-directed health care is a national trend that is being studied by employers of all sizes. As part of his emphasis on an ownership society, President Bush has endorsed the consumer-directed health care concept through his efforts to promote health savings accounts as a way to control spiraling health care costs and to help people take more personal responsibility for their health care purchases.
According to Phyllis Marino, senior vice president of marketing and public relations for Akron General Health System, high-deductible health plans and Health Savings Accounts were created by the Medicare Modernization Act of 2003 through changes in the tax code, but their popularity is just beginning to soar.
“Moving toward a consumer-directed health care model helps to take some of the burden off employers who provide health benefits,” she says. “Under this scenario, employees are empowered to take more financial responsibility for their own health care, and studies show that, in turn, this helps reduce the overall utilization rate and associated costs.”
Smart Business spoke with Marino about how the growing popularity of consumer-driven health care affects employees.
What is consumer-directed health care?
The whole premise behind consumer-directed or consumer-driven health care is that, in the future, consumers will have more responsibility and control over how their health care gets paid for. The hope is that they will then have more interest and input into the selection of providers, how the care is given and, ultimately, how their health care dollars are spent.
The term is most often used in reference to high-deductible health plans and Health Savings Accounts.
Why has consumer-directed health care become such a hot topic?
As employers understand, health care costs continue to rise and so does utilization of health care services. As a result, many employers have started requiring employees to pay more of the cost for health care themselves. The premise is that this will encourage providers to provide better information to consumers so that they can make the best decisions possible.
With advances in technology, there are more health care options today than ever before. But these advances often bring a steep cost as treatment becomes more expensive. When consumers are provided with all the information they need to make informed choices and have a greater financial stake in the costs associated with those choices, they are then more confident in making their own health care decisions.
What are Health Savings Accounts?
They are tax-advantaged savings plans used to pay for current and future medical expenses. Money can be deposited into a special savings account by either a consumer or an employer. The money can be used tax-free for medical expenses.
The account is similar to an IRA in that money in the account can be invested and grown tax-free and can be withdrawn without penalty at age 65. One of the most important features of these Health Savings Accounts is that they can be rolled over and either built over time or spent.
A typical Health Savings Account today might include funding at a set level, a deductible, a co-pay and a maximum out-of-pocket limit. A Health Savings Account in combination with a high-deductible health plan can protect a consumer against major financial loss because of a significant medical condition.
A high-deductible health plan is a plan with at least a $1,000 annual deductible for self-only coverage and a $2,000 deductible for family coverage.
What do employers need to know about Health Savings Accounts?
Employers have many health options today, and Health Savings Accounts could provide them with significant cost savings. It is best for employers to be aware of all their options and review them to determine how each best affects the company and employees. As Health Savings Accounts become more popular, more research and information on the topic will be available to employers.
What do consumers need to know about HSAs?
Health Savings Accounts and high-deductible health plans can offer many positive benefits to consumers, not the least of which is the ability to take a more proactive role in their own health care decisions. We encourage people to be aware of the specific options that are included in their health coverage.
More important, consumers should shop around when they select a health care provider. A great deal of quality information is available for consumers today, and it pays to be aware of the level of quality that your hospital or physician is providing.
PHYLLIS B. MARINO is senior vice president of marketing and public relations for Akron General Health System. Reach her at (330) 344-6161 or [email protected].
