A California Perspective
It's 6 a.m. on another beautiful day in Southern California sometime in 2003. I get out my long board, strap it to my SUV and head off to Malibu. I should be able to hit a few waves and then get back to the office before 8 a.m. This way I can get back to all those 15 percent to 20 percent "trend" rate increase renewals for my group medical clients.
These past few years have been tough on my clients with an average annual increase of more than 10 percent. I wish I were getting that return on my investment ... If only there was a plan that could help my clients lower their premium costs, improve their quality of life and, hell, since I am asking for it, a plan that would save the health insurance industry itself.
Enter consumer-driven health care plans. Although California is usually at the forefront of new and innovative ideas, CDHC plans really sprung to life in the east and migrated west. As an employee benefits agent, I'm always excited when there is a paradigm shift in the industry, especially one that promises such a radical change.
Let's recap on the premise of CDHC plans. These plans -- whether a health reimbursement account or a simple health savings account -- were touted as altruistic vehicles that were going to lower rates and create a society of health care shoppers, thus improving that all-too-familiar foe, trend, and creating a healthier base of members. Members and employers would see such monetary savings and improved health that they would ask for even higher deductible plans for the following years. CDHC plans assume that because a portion of the financial responsibility falls onto the health insurance member, that member is going to shop around to find the best doctor at the lowest possible cost, just like shopping for light bulbs or a new car.
Reality check: In my view, the goal of CDHC plans and the reality of them are far different. Basically, CDHC plans are high-deductible, low-cost plans. Trend remains high, members still aren't being consumers and employers have just used it as a reset button; whereas they were paying $200 an employee for a co-pay PPO plan with prescription coverage, now they are only paying a $100 for a $3,000 HSA PPO plan with no drug coverage.
Further, carriers were not and still are not prepared for employers to self-insure the deductibles at 100 percent. There are some carriers in California that will penalize an agent if their client uses their HDHP as a wrap. They do this as a way to try to curb the swell of over-utilization. When employers fund 100 percent of the deductible, there is no reason for an employee to be a consumer. In fact, it does the opposite and encourages the employee to use the 100 percent coverage for every little thing.
Until we get better transparency and we truly make the members responsible for being consumers, these plans won't change the industry.
