Health Benefit Plans for Consumers: More Choices at Higher Cost

There’s little doubt that health insurance as we knew it -- or as some would like it to be again -- is irretrievably lost.  The cost of healthcare services and the declining health of Americans have precipitated a fundamental shift in how health benefits will be structured, financed, and delivered.  Events of the past week offer a critical insight into how these changes are taking place.

First, the National Center for Health Statistics reported that the percentage of employees enrolled in high-deductible healthcare plans (HDHP) has jumped significantly during the past four years.  During the first quarter of 2011, 20.3% of group health-care plan participants were enrolled in a high-deductible plan, up from 12.9% in 2007.  The center defines a high-deductible health plan as one with deductibles of $1,200 for self-only coverage and $2,400 for family coverage in 2011. This compares with a deductible of $1,150 for self-only coverage and $2,200 for family coverage in 2007.

During the same period, enrollment in consumer-driven, high-deductible plans nearly doubled, rising to 8.8% of plan enrollees during the first quarter of 2011 from just 4.5% in 2007. A CDHP is a high-deductible plan linked to a health savings account or health reimbursement arrangement.  Combined, HDHPs and CDHPs are now used by 3 in 10 group healthcare plan participants.  It’s likely that an even larger percentage of Americans who purchase health insurance directly choose either a HDHP or CDHP plan.

This upward trend should come as no surprise.  Employers will continue to adjust benefits and shift greater exposure to employees as long as healthcare costs exceed employee productivity gains.  Increasingly, employers want to limit their health benefit exposure, and are moving to defined- contribution financing models, similar to what occurred with retirement benefits.

The benefits industry is moving quickly to respond to this trend.  Last week, three Blue Cross Blue Shield Plans – Blue Cross Blue Shield of Michigan, Health Care Services Corporation and WellPoint – jointly purchased Bloom Health, an emerging leader in the development of private insurance exchange capabilities. 

Although the public attention has focused on the development of government-led health insurance exchanges, the private sector has been busy creating exchange models for employers who don’t participate in the public exchanges.  Private exchanges, marketed directly to employers, will facilitate the defined contribution model that employers are favoring.

All of which tells us that in the near future, look for most employers to offer employees a fixed amount to be spent on health care--and other benefits-- available through an exchange platform.  Employees will likely have more benefit choices to choose from, but the choices will more often involve HDHP and CDHP plans.

The era of the healthcare consumer is upon us.  A growing number of fully accountable purchasers are entering the market.  There’s still a lot not to like about American health care, such as the reimbursement mechanisms now in place. But the foundation for a consumer marketplace is well underway.