Business Resources
Saving money on health care- is it possible? And are you ready?
By Vincent Capozzi, Harvard Pilgrim Health Care
Every dollar counts, especially in difficult financial times. If you’re like most, you’re questioning what you really need to purchase, what you can afford, and where to find the best values. Becoming more careful, conscientious purchasers is exactly what consumer driven health plans are all about.
More and more, employers are offering consumer driven health plans. A Kaiser Family Foundation 2008 Employer Health Benefits Survey found that 13 percent of polled employers that provide health insurance options offered consumer driven health plans, a percentage that has nearly doubled since 2006. According to a nationwide Employee Benefits Research Institute study, 4.2 million adults with private health insurance were enrolled in consumer driven health plans in 2008.
Is a consumer-driven health plan the right fit for your organization? Read on to learn more about them, and find out if you’re ready.
Understanding consumer driven health
Also referred to as CDH, consumer driven health makes consumers – your employees and their families – more engaged and invested in their health care decisions. Consumer driven health doesn’t reduce the value of employee benefits, it just rearranges how dollars are spent.
Consumer driven health plans typically have five key characteristics:
- A deductible health plan that makes employees responsible for, say, the first $1,000 or more of their annual expenses. You can choose a plan and deductible amount that’s right for your employees and lets you and your employees save on premiums.
- A reimbursement account that lets employers and employees put aside some of those premium savings so employees can pay their deductible expenses with tax-free dollars. This helps their dollars go a lot further.
- Tools and information to help employees understand how to shop for health care, just like they choose other kinds of insurance or a cell phone plan.
- Wellness programs, because staying healthy is good for the body and the wallet. By staying healthy, employees can reduce their – and your – health care costs, be out of work less, be more productive and enjoy life more.
- And finally, incentives, because employees who help reduce your health care costs and keep themselves healthy deserve some rewards along the way.
These types of plans offer a great deal of control, creativity and flexibility, more than you may realize.
Who’s buying consumer driven health plans?
Small and large companies throughout our region are choosing these types of plans. Consumer driven health exists among most industries too—from biotech companies, machine shops, medical practices, colleges, roofing companies, auto dealerships and electronics manufacturers. In fact, consumer driven health plans cover most workers in other parts of the country.
Are you ready to transition to consumer driven health?
Making a change in health plans is not something to be taken lightly, and you shouldn’t jump into something you don’t fully understand. To know whether you’re ready, start by asking yourself this one important question: “Am I willing to offer a deductible health plan that will reduce everyone’s premium – the portion that I pay as an employer and my employees’ share – so that most of my employees will benefit but some will do a little worse financially?
Your answer guides your decision. Here’s why.
Let’s say you adopt a plan with a $1,000 individual deductible. The plan provides you and your employees with combined savings of $750 in premium. Based on Harvard Pilgrim’s experience, about 80% of your employees will end up with more money at the end of the year, but 20% will have out-of-pocket expenses greater than the $750 savings.
Are you okay with that? Some feel that when it comes to insurance, everyone should be treated the same. Many others think it’s okay to have people who use more health care pay a little more than those who don’t use as much, just as people who drive SUVs pay more in gas every year than those who drive compact cars.
There’s no right or wrong answer, but if you don’t think that approach is okay, then you’re probably not ready. If you’re not sure, consider a gradual transition to consumer driven health. And if you’re comfortable with it, you may be on your way to saving money on health care.
Next steps
Learn more about consumer driven health. Fortunately, there are many resources available—online as well as through brokers, consultants and health plans. You can visit Harvard Pilgrim’s new
