The Movement toward Consumerism will Continue

The momentum toward giving consumers more power and authority over their health care decisions and spending will continue, but will likely get less of a boost from the 110th Congress, which will focus more on the government's role in the health sector.

But the movement toward consumerism is a global phenomenon that will build with our without policy changes in Washington. There is a great deal of energy in the private sector to boost consumerism, with thousands of new companies investing in ideas and technologies to make the delivery of health care faster, better, and cheaper.

Consumers have a taste of their power in the marketplace, with dramatic price cuts on generic drugs and with new, consumer-focused clinics that are springing up in retail stores and malls across the country.

Consumers also are seeking information to help them make decisions about their health insurance coverage, treatment options, and costs of care. And information technologies will spur the drive toward creation of digital health information records, further empowering consumers to be more engaged in their health care decisions.

So what is the legislative outlook for policy changes impacting the health sector? While the elections were not a referendum on health care, the issue nonetheless is likely to take center stage in the Democrat-controlled Congress. There will be new leaders, different issues, and a new playbook.

New leaders:

Committee chairmen have a huge impact in deciding what issues to showcase, who to feature at committee hearings, and what legislation goes to the floor. Two stand out:

o Sen. Ted Kennedy is the new chair the Health, Education, Labor, and Pensions (HELP) Committee that has jurisdiction over a broad range of health care issues in the Senate. He is a supporter of expanding Medicare and other government health programs.

 

o Rep. Pete Stark of California is the new chair the Health Subcommittee of the House Ways and Means Committee. Mr. Stark is not a fan of Health Savings Accounts and also can be expected to focus on using policy changes to leverage a larger presence for government in the health sector.

 

Different issues:

o Health Insurance: The State Children's Health Insurance Program (SCHIP) expires in 2007 and must be reauthorized. This could be an opportunity to expand access to private insurance, including giving parents more help in adding their children to job-based policies, for example. The new leadership has signaled its intent, instead, to expand SCHIP to cover all children and some adults through a Medicaid model.

 

o The uninsured. An opportunity for a bi-partisan approach? Chairman Stark joined then Republican House Majority Leader Dick Armey in 1999 in offering bi-partisan consensus on help for the uninsured.

 

The two called for "refundable tax credits to enable all Americans to buy decent health coverage." They said that "such a credit could bring about near-universal coverage without new mandates or bureaucracy. It would eliminate barriers the uninsured face in today's system, enabling them to shop for basic coverage that suits their individual needs and is portable from job to job."

 

While the price tag for the credits would be a lot higher today than it was then, this certainly should be a starting place for a conversation with the chairman of this powerful committee over an opportunity to expand access to private health insurance.

 

o There also will continue to be aggressive moves in the states to reform their health care systems, with many looking to Massachusetts as a model, including enactment of an individual mandate for the purchase of health insurance. States would be better advised to begin to undo the damage they have caused to their health insurance markets through over-regulation and excessive coverage mandates that have driven the costs of health insurance beyond the means of millions of Americans.

 

o Health costs. Health costs are moderating, and a number of studies by health plans and companies show that medical costs are level and even falling for those with consumer-directed plans. CEOs will certainly be paying attention to studies that show that CDHC plans can reduce costs and, with proper employee education campaigns, keep their workforce satisfied.

 

Aetna's latest study, for example, shows dramatic savings for companies that have adopted consumer-directed plans. Companies that moved to Aetna's Health Reimbursement Arrangements for all of their employees in 2002 have seen premiums increase by a total of only 3% since then. Even those who offered HRAs as an option to their employees saw premium increases of only 6.7% over the last three years. Like many other studies, Aetna showed a greater use of preventive services for those with HSAs, and showed that people with chronic conditions in HSAs and HRAs plans maintained or improved their level of care compared to similar people with traditional coverage.

 

Several years of data from Assurant Health and Blue Cross/Blue Shield show that people age 45-54 are the most likely to purchase HSAs: They are old enough to know they need health care, are wiser about wanting control over their choices, and have enough time before retirement to accrue some real savings in their accounts.

The Senate Finance Committee held a hearing late last year on experience so far with Health Savings Accounts. One witness was Utah businessman Joseph Knight who said his small manufacturing company had been facing a 49% premium increase for its health plan in 2005. Dropping insurance wasn't an option because one employee had a wife with cancer and another had a child with a serious illness.

To keep the insurance and afford the premiums, he said his company switched to high deductible insurance and contributed to employees' HSA accounts.

Knight and other top executives worked hard to educate their 60 employees about the new plan, meeting with them in the evenings over pizza to answer questions. "Education is crucial," he told the Senate. The result: Employees are "very satisfied" with the new plan, and many already have significant HSA savings.

Senator Jay Rockefeller asked during the hearing if "lower-income workers would still be happy if they have a catastrophic illness." Knight said that he has a $7 per hour employee with high medical costs, and because all out-of-pocket costs count toward the deductible with HSAs, "even those with the lowest incomes come out ahead" over the previous plan (which also had a higher-than-traditional deductible).

Nonetheless, the number of policy studies and hearings criticizing consumer-directed care is likely to accelerate. One recent study by the Commonwealth Fund claims that people with individual health insurance policies pay more, get less, have higher deductibles, and are less happy with their coverage than those with job-based plans. This certainly would seem to undermine confidence in consumer-directed policies, but the facts show serious problems with the study.

The Commonwealth study was based upon telephone interviews with only 137 people who have individual policies, out of 1,878 included in its survey.

o America's Health Insurance Plans countered that the Commonwealth findings are not consistent with AHIP's own survey of 1.9 million individual policies covering 3.2 million people. AHIP found that individual insurance policies were more affordable than Commonwealth reported and had richer benefits.

 

AHIP's data also shows that 9 in 10 people who completed the application process were offered coverage. Commonwealth said that 9 in 10 people who "explored" buying coverage in the individual market didn't succeed.

 

o A separate Blue Cross/Blue Shield study finds that overall satisfaction rates for patients with consumer-directed plans were higher than those enrolled in traditional coverage, 47% vs. 27%. Further, consumers purchasing their own health insurance are more likely to select high-deductible health insurance to save money on premiums.

The efforts to build congressional support for measures that would create Association Health Plans and allow cross-state purchasing of health insurance will likely stall in the new Congress, as will efforts to refine and enhance Health Savings Accounts. The Bush administration has been a strong supporter of HSAs and can be expected to defend them against changes that would undermine their success.

 

The focus will shift to the private sector. Employers will continue to explore consumer-directed options. A recent McKinsey survey shows that 96 percent of major employers said that use of consumer-directed health plans is important to sustain their health care benefit offerings over the long term.

 

Companies find that they must engage in a much more active employee education effort in order to make the new plans work, such as involving the CEO, customizing messages to suit their corporate culture; providing information in many different formats such as face-to-face meetings, videos, interactive programs, and print; and measuring employee engagement and satisfaction.

 

Employers also are finding that their efforts to promote preventive care, by integrating and providing new incentives for wellness activities, are paying off. Employers are finding that removing some barriers to care and treatment options and educating employees about self-care for chronic illnesses can save money in the long run.

 

The movement toward consumerism is a growing global force. Competition can work in the health sector, as it does in the rest of the economy. As people have more tools to become informed consumers in the health sector, they will begin to shape the health sector so that it provides more attractive and affordable treatment and coverage options.

Policy changes in Washington are unlikely to change this trend, but the debate nonetheless can be expected to shift toward a greater focus on government programs and government oversight in the health sector.

 

 

*********

 

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization that focuses on free-market ideas for health policy. She can be reached at galen@galen.org or at P.O. Box 19080, Alexandria, VA 22320.  

 

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The momentum toward giving consumers more power and authority over their health care decisions and spending will continue, but will likely get less of a boost from the 110th Congress, which will focus more on the government's role in the health sector.

But the movement toward consumerism is a global phenomenon that will build with our without policy changes in Washington. There is a great deal of energy in the private sector to boost consumerism, with thousands of new companies investing in ideas and technologies to make the delivery of health care faster, better, and cheaper.

Consumers have a taste of their power in the marketplace, with dramatic price cuts on generic drugs and with new, consumer-focused clinics that are springing up in retail stores and malls across the country.

Consumers also are seeking information to help them make decisions about their health insurance coverage, treatment options, and costs of care. And information technologies will spur the drive toward creation of digital health information records, further empowering consumers to be more engaged in their health care decisions.

So what is the legislative outlook for policy changes impacting the health sector? While the elections were not a referendum on health care, the issue nonetheless is likely to take center stage in the Democrat-controlled Congress. There will be new leaders, different issues, and a new playbook.

New leaders:

Committee chairmen have a huge impact in deciding what issues to showcase, who to feature at committee hearings, and what legislation goes to the floor. Two stand out:

o Sen. Ted Kennedy is the new chair the Health, Education, Labor, and Pensions (HELP) Committee that has jurisdiction over a broad range of health care issues in the Senate. He is a supporter of expanding Medicare and other government health programs.

 

o Rep. Pete Stark of California is the new chair the Health Subcommittee of the House Ways and Means Committee. Mr. Stark is not a fan of Health Savings Accounts and also can be expected to focus on using policy changes to leverage a larger presence for government in the health sector.

 

Different issues:

o Health Insurance: The State Children's Health Insurance Program (SCHIP) expires in 2007 and must be reauthorized. This could be an opportunity to expand access to private insurance, including giving parents more help in adding their children to job-based policies, for example. The new leadership has signaled its intent, instead, to expand SCHIP to cover all children and some adults through a Medicaid model.

 

o The uninsured. An opportunity for a bi-partisan approach? Chairman Stark joined then Republican House Majority Leader Dick Armey in 1999 in offering bi-partisan consensus on help for the uninsured.

 

The two called for "refundable tax credits to enable all Americans to buy decent health coverage." They said that "such a credit could bring about near-universal coverage without new mandates or bureaucracy. It would eliminate barriers the uninsured face in today's system, enabling them to shop for basic coverage that suits their individual needs and is portable from job to job."

 

While the price tag for the credits would be a lot higher today than it was then, this certainly should be a starting place for a conversation with the chairman of this powerful committee over an opportunity to expand access to private health insurance.

 

o There also will continue to be aggressive moves in the states to reform their health care systems, with many looking to Massachusetts as a model, including enactment of an individual mandate for the purchase of health insurance. States would be better advised to begin to undo the damage they have caused to their health insurance markets through over-regulation and excessive coverage mandates that have driven the costs of health insurance beyond the means of millions of Americans.

 

o Health costs. Health costs are moderating, and a number of studies by health plans and companies show that medical costs are level and even falling for those with consumer-directed plans. CEOs will certainly be paying attention to studies that show that CDHC plans can reduce costs and, with proper employee education campaigns, keep their workforce satisfied.

 

Aetna's latest study, for example, shows dramatic savings for companies that have adopted consumer-directed plans. Companies that moved to Aetna's Health Reimbursement Arrangements for all of their employees in 2002 have seen premiums increase by a total of only 3% since then. Even those who offered HRAs as an option to their employees saw premium increases of only 6.7% over the last three years. Like many other studies, Aetna showed a greater use of preventive services for those with HSAs, and showed that people with chronic conditions in HSAs and HRAs plans maintained or improved their level of care compared to similar people with traditional coverage.

 

Several years of data from Assurant Health and Blue Cross/Blue Shield show that people age 45-54 are the most likely to purchase HSAs: They are old enough to know they need health care, are wiser about wanting control over their choices, and have enough time before retirement to accrue some real savings in their accounts.

The Senate Finance Committee held a hearing late last year on experience so far with Health Savings Accounts. One witness was Utah businessman Joseph Knight who said his small manufacturing company had been facing a 49% premium increase for its health plan in 2005. Dropping insurance wasn't an option because one employee had a wife with cancer and another had a child with a serious illness.

To keep the insurance and afford the premiums, he said his company switched to high deductible insurance and contributed to employees' HSA accounts.

Knight and other top executives worked hard to educate their 60 employees about the new plan, meeting with them in the evenings over pizza to answer questions. "Education is crucial," he told the Senate. The result: Employees are "very satisfied" with the new plan, and many already have significant HSA savings.

Senator Jay Rockefeller asked during the hearing if "lower-income workers would still be happy if they have a catastrophic illness." Knight said that he has a $7 per hour employee with high medical costs, and because all out-of-pocket costs count toward the deductible with HSAs, "even those with the lowest incomes come out ahead" over the previous plan (which also had a higher-than-traditional deductible).

Nonetheless, the number of policy studies and hearings criticizing consumer-directed care is likely to accelerate. One recent study by the Commonwealth Fund claims that people with individual health insurance policies pay more, get less, have higher deductibles, and are less happy with their coverage than those with job-based plans. This certainly would seem to undermine confidence in consumer-directed policies, but the facts show serious problems with the study.

The Commonwealth study was based upon telephone interviews with only 137 people who have individual policies, out of 1,878 included in its survey.

o America's Health Insurance Plans countered that the Commonwealth findings are not consistent with AHIP's own survey of 1.9 million individual policies covering 3.2 million people. AHIP found that individual insurance policies were more affordable than Commonwealth reported and had richer benefits.

 

AHIP's data also shows that 9 in 10 people who completed the application process were offered coverage. Commonwealth said that 9 in 10 people who "explored" buying coverage in the individual market didn't succeed.

 

o A separate Blue Cross/Blue Shield study finds that overall satisfaction rates for patients with consumer-directed plans were higher than those enrolled in traditional coverage, 47% vs. 27%. Further, consumers purchasing their own health insurance are more likely to select high-deductible health insurance to save money on premiums.

The efforts to build congressional support for measures that would create Association Health Plans and allow cross-state purchasing of health insurance will likely stall in the new Congress, as will efforts to refine and enhance Health Savings Accounts. The Bush administration has been a strong supporter of HSAs and can be expected to defend them against changes that would undermine their success.

 

The focus will shift to the private sector. Employers will continue to explore consumer-directed options. A recent McKinsey survey shows that 96 percent of major employers said that use of consumer-directed health plans is important to sustain their health care benefit offerings over the long term.

 

Companies find that they must engage in a much more active employee education effort in order to make the new plans work, such as involving the CEO, customizing messages to suit their corporate culture; providing information in many different formats such as face-to-face meetings, videos, interactive programs, and print; and measuring employee engagement and satisfaction.

 

Employers also are finding that their efforts to promote preventive care, by integrating and providing new incentives for wellness activities, are paying off. Employers are finding that removing some barriers to care and treatment options and educating employees about self-care for chronic illnesses can save money in the long run.

 

The movement toward consumerism is a growing global force. Competition can work in the health sector, as it does in the rest of the economy. As people have more tools to become informed consumers in the health sector, they will begin to shape the health sector so that it provides more attractive and affordable treatment and coverage options.

Policy changes in Washington are unlikely to change this trend, but the debate nonetheless can be expected to shift toward a greater focus on government programs and government oversight in the health sector.

 

 

*********

 

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization that focuses on free-market ideas for health policy. She can be reached at galen@galen.org or at P.O. Box 19080, Alexandria, VA 22320.  

 

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About the author