In the health care reform battle, the president has thrown insurance companies under the bus, claiming that they're making record profits and need some competition from the government to "keep them honest." But why is insurance so expensive? Is it because insurance companies are greedy? The evidence suggests otherwise.
Like Vegas casinos, insurance carriers are in the business of managing risk. They make every effort to ensure that they're making a profit with appropriately priced products, but they certainly don't make an unreasonable amount of money - in fact, their margins are somewhere around 3 percent. If carriers are making record profits, it's because they're covering a lot of people and making a little bit on each, not because they're charging too much.
So who really is to blame? The providers? Maybe. The third-party payment system in this country isolates consumers from the cost of health care and allows some providers to milk the system, charging two or three times as much as the facility down the street.
But maybe we should go easy on the docs. They're capitalizing on an opportunity - don't hate the player, hate the game.
Truth is the patient has a lot more power than he may realize, and by taking the wheel, he could save a lot of money and end up with better results. But how, exactly, can we convince members to take control? Consumer-driven health care.
The whole idea behind consumerism is to get members more involved in their health care decisions. This starts with removing the co-payments they've grown to rely on. Co-payments typically cover more frequent, lower-cost items like doctor visits and prescriptions. These expenses are somewhat predictable and aren't catastrophic in nature. By definition, they shouldn't be covered by insurance - instead, they should be budgeted for. And, at least for now, the government allows people to pay for these services with tax-free dollars by setting up a health savings account or a health reimbursement arrangement.
But does consumerism really work? Yes. Consumer-directed health care makes people healthy, wealthy and wise: Let's take a look at each in reverse order.
Wise: Consumer-directed plans encourage people to shop wisely for their health care. According to a 2008 Blue Cross Blue Shield Association member survey report, HSA-eligible enrollees "say that they would utilize health care more carefully if they were able to share in the savings of using lower cost providers." These members are "more likely to exhibit cost conscious behavior" and are "more likely to track and plan for future health care expenses."
Wealthy: How much can consumers save? A lot, says Scott Schoenvogel, CEO of Dallas-based Compass Professional Health Services: "The health care market is very inefficient - there are huge pricing disparities between providers, which creates an opportunity for an informed consumer to save a lot of money, often with better outcomes. For example, the cost to deliver a baby at Dallas' two largest health care systems varies by up to $3,000. Both have excellent quality scores but the lower cost system has the region's best Neonatal ICU." So participants in consumer-directed plans have the opportunity to pay a lower premium, save on the cost of services, and pay for out-of-pocket expenses with pre-tax dollars.
Healthy: A common concern about CDHC is that, without first-dollar co-pays, people will forego needed medical care. This doesn't seem to be the case. The BCBSA report says that there is "no observed disparity" in the utilization of health care services, "including outpatient and inpatient procedures, diagnostic imaging services or ER visits." On the contrary, HSA-eligible consumers are more likely to seek preventive care and regular checkups and are much more likely to participate in and benefit from a wellness program.
Given the premium savings, tax advantages, and evidence of better outcomes, it seems that everyone would be scrambling to buy a consumer-directed plan. But clients don't scramble to buy anything - brokers aren't order-takers, we're salespeople. What are you selling?
Eric Johnson can be reached at 817-366-7536 or eric.johnson@agentallies.com.
