NCPA - National Center for Policy Analysis


April 13, 2005

After six years of double-digit rate increases, fewer companies are paying the full bill for insuring their employees as more consider consumer-driven plans that put patients in charge of their own medical spending.

Under consumer-driven plans, an employer generally deposits money into accounts employees can use to pay incidental expenses, deductibles and copays. Once that fund is depleted, when the employees have met their deductibles, the plans cover all expenses.

Other features:

  • About 15 percent of employers offered consumer-driven plans in 2004, but that figure is expected to double this year.
  • Consumer-driven plans have high deductibles -- often between $1,000 and $5,000 for an individual or up to $10,000 for a family.
  • They push employees to be economical in their medical decision-making, weighing the full cost of the service against their need for it.

"The whole idea is they give us the money and we decide what we want," said Devon Herrick, a health economist with the National Center for Policy Analysis. "It gives patients incentives to be wise consumers -- to decide what they really need, not just what they think they want."

With 85 percent of medical costs being paid by third parties under traditional health plans, Herrick says patients rarely have a reason not to be wasteful with their health benefits. "We buy a lot more because we're not paying the bill," he said. "We have an incentive to consume more than we would otherwise."

Herrick says that patients will make the right decisions when it comes to their own health needs because they won't waste health care.

Source: Meena Thiruvengadam, "Employers Probe Health Care Options," San Antonio Express-News, April 11, 2005.


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