2012 Voluntary Benefits Special Report
Consumer driven health care: Is engagement necessary?
Lack of credible information remains the main stumbling block
By Michael J. Moody, MBA, ARM
Employer-sponsored health care programs have been the focal point
for most HR departments for the past 35 to 40 years. Today, employer-sponsored
health plans are the most common form of health insurance in the U.S. In 2009,
for example, about 60% of the U.S. population had benefits that were provided
by employer-sponsored plans. Unfortunately, there are significant problems
associated with these plans. By far the most pressing issue is the overall
From an expense standpoint, in the vast majority of the past 35
to 40 years, medical inflation has exceeded the overall rate of inflation,
sometimes by significant amounts. As a result, employers of all types and sizes
have struggled to find ways to control these escalating costs.
To this point, it has been a struggle that has not been won.
Hope for gaining control
Many efforts at both the federal and state levels have been tried
with little success. The latest of these attempts was the new federal
healthcare reform legislation that was signed into law by President Obama in
March 2010. The law, known as Patient Protection and Affordable Care Act
(PPACA), was not the first shot at controlling runaway health care inflation.
One of the earliest efforts goes back to 1978 when legislation was passed that
established Section 125 cafeteria plans and flexible spending accounts. The key
to the Section 125 approach, as it is with the current PPACA, is to encourage
consumers to become more involved with their own health decisions and plan
Additional efforts to control costs, including consumer driven
health care (CDHC) plans, began appearing in early 2001. These programs
initially started with a handful of employers offering CDHC and health
reimbursement arrangements (HRA). Typically, these plans were offered by larger,
self-funded employers and administered by a third-party service provider.
Interest in these types of plans was initially limited due to uncertainty
surrounding the tax treatment by the IRS. The IRS did finally clarify its
position in 2002 by providing favorable guidance.
The Employee Benefits Research Institute (EBRI) recently provided
significant insight into this issue in the form of an issue briefing titled
"Findings From the 2010 EBRI/MGA Consumer Engagement in Health Care Survey."
The briefing reported on the results of an online survey of over 4,500 insured
adults between the ages of 21 and 64 concerning the impact and growth of
consumer driven health care (CDHC) programs compared to other programs that do
not try to engage the consumer.
Participation in CDHC programs has continued to grow, and by 2010
the programs served about 5% of the population or 5.7 million adults in the
U.S. While this number remains small, it is up from the 4% participation that
was noted in 2009.
The perception from day one with regard to CDHC programs was that
they would attract consumers who exhibit more cost conscious behaviors. These
behaviors would typically include such things as checking to see what is
covered by various plans, requesting generic drugs instead of a brand name, and
discussing treatment options and related costs with their doctors.
Additionally, wellness was considered as a key ingredient in many CDHC
The EBRI study provides a good snapshot of consumers in CDHC
programs as well as the success that the programs have been able to establish
to date. Over time, the health care industry has been able to provide an
overview of the average CDHC enrollee, and this overview has remained intact;
however, it is changing in several critical ways. According to the survey,
traditionally, the CDHC group was better educated and had higher incomes. The
recent survey notes, "Most of the income differences were not present in 2010."
However, for the most part, the group continued to generally be "more highly
Time for corrective measures
A recent white paper— "Identifying the Triggers and
Barriers to Engaging Employees in their Health Benefits and Wellness Programs"
published by Midwest Business Group on Health examines the barriers to employee
understanding and participation in CDHC programs. The white paper is based on
the findings of a five-year research project and provides both the employees'
and employers' perspectives on health care. It notes that despite the fact that
employers have invested substantial resources in improving the health of their
workers, "many employers experience low program participation." It also found
"disappointing levels of employee understanding and engagement." In that
regard, the publisher offers several recommendations that are aimed at better
results and improved engagement:
• Take into account a company's culture when implementing
workplace health and benefit programs. Have strategies in place that build
trust—a big influence on employee participation.
• Include dependents and other family members in company
communication efforts so they can support health improvement and behavior
change efforts at home and in their daily lives.
• Offer "Benefits-at-a-Glance" resources that include information
such as cost comparisons among plans, etc.
• Use the results of clinical screening programs such as "Know
Your Numbers" as the trigger to get employees to consider making necessary
• Structure incentives as part of the benefit design to maximize
the employer's investment in these resources and to promote value to the employee.
• Provide information and resources on resiliency/stress
management to help employees handle the extremes of a hectic work and home
While all of the above noted recommendations represent various
aspects of employee engagement with regard to health care, there is one aspect
that appears to be missing. Unfortunately, it is a significant piece to the
The missing piece
While the concept of the Section125 and CDHC were correct, they
had one serious, fatal flaw. The flaw is the most damning and in many ways is
the real key problem with the health care sector—a sector that has been
described by many as a huge mix of players with no common goal. Many experts
believe that the wrong statutes and/or structures have been enacted, all of
which results in the wrong incentives for virtually everyone in the
process—providers, payers, and particularly patients.
The key, as anyone involved in the industry for more than a day
or two can tell you, is to "harness the power of the consumer." The reason why
things such as the Section 125 legislation and CDHC were introduced in the
first place was to allow individuals to become more engaged in their personal
health care choices. After all, just look at how successful consumers have been
at driving down the cost in other industry sectors-everything from new cars to
the cost of breakfast cereal.
However, the consumers within the healthcare segment have a major
disadvantage. In most other market segments, consumers can make informed
decisions. Decisions that are based on pricing and quality data that is readily
available. Unfortunately, such is not the case within health care where the
average buyer lacks immediate access to actionable information.
One of the biggest roadblocks to successfully reducing the
long-term cost of health care is the divergent interests of the parties
involved. Over the years, this has resulted in a general lack of meaningful,
credible data with which employees could make intelligent decisions. Employers
have tried a number of different approaches to encourage and engage employees
to reduce healthcare costs. One of the latest approaches, consumer-driven
health care, has met with some degree of success; however, for the most part,
it has not lived up to its promised results. And until some way is found to
provide adequate information for the consumer to make "good choices," CDHC or
any of the other cost reduction approach will not provide the results they are
capable of. The key is quality data that is received in a timely and useful
manner. Without it, we are still at square one.