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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 cost.

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 usage.

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 programs.

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 educated."

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 lifestyle changes.

• 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 life.

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 puzzle.

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.


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