'Consumer-Driven' Health Plans Join Insurance Mainstream, Become Essential To Big Insurers' Business Strategy

BETHESDA, Md.—With an estimated enrollment of 1.5 million, health plans that allow consumers to customize their benefits and provider networks have become central to major insurers' business plans and could comprise 15-50 percent of the market in five years, according to a new Health Affairs Web exclusive. But the article warns that such "consumer-driven" health plans need to be watched closely to see if the added choices and greater emphasis on consumer spending disincentives appeal broadly to employees and enrollment grows; or if, as some predict, consumer-driven health plans split up risk pools and shift costs to sicker enrollees. If this happens, enrollment would level off. Authors Jon Gabel, Anthony Lo Sasso, and Thomas Rice define consumer-driven plans as those in which enrollees can designate their benefit package and providers, either through a tier mechanism or a customized package, and pay any cost beyond a fixed contribution by their employers. Also falling under the "consumer-driven" definition are those plans that establish health spending accounts into which employers contribute pretax dollars to be used for health care purchases. While some have met them with enthusiasm and others with skepticism, consumer-driven plans enjoy an important supporter in Health and Human Services Secretary Tommy Thompson, who said in a recent interview that he'd like to see such plans available to more people. The findings of this Commonwealth Fund-supported research are based on interviews with 37 experts in the field, including benefit consultants, insurance brokers, health plan executives, financial analysts, large purchasers, policymakers, consumer and employee group leaders, and academic experts. The authors write that consumer-directed plans are joining the mainstream of the health insurance marketplace with the help of big insurers, who have responded to the competitive challenge of start-up firms such as Definity Health. Today, Blue Cross and Blue Shield plans, with more than 900,000 enrollees in consumer-directed health plans as of July 1, are the biggest players in the field. In addition to the risk-selection issue, the article raises questions about enrollees' ability to choose their networks on the basis of quality because good quality information isn't yet available, particularly for individual physicians. Moreover, many consumers are not prepared to make use of it on the Internet-the most prevalent source of health care choice information in the current plans. It also points out that a rapid increase in useful information would likely follow a larger growth in consumer-driven plan enrollment. Cost containment, while a goal of all health plans, is still a wild card with these plans. While enthusiasts argue that these plans may control costs by making consumers aware of actual health care costs and thus reducing their use of health services, others believe that the larger deductibles or health spending accounts can't serve as a disincentive for enrollees with chronic conditions or with expensive hospital stays. In addition, the wider networks and fragmented pools will reduce the purchasing power of consumer-drive plans when compared to tighter managed care arrangements and thus impair their cost-control potential. The authors, as well as those interviewed for this study, call for independent research in the next few years to determine the extent of risk selection, cost containment, and quality improvement. The article can be viewed at www.healthaffairs.org/WebExclusives/Gabel_Web_Excl_112002.htm.