NCPA - National Center for Policy Analysis

"Consumer-Driven" Health Plans Gain in Popularity

January 8, 2002

New health-insurance plans that restore patients to a position of responsibility when it comes to medical spending are gaining acceptance and popularity, experts report. Known as "consumer-driven health plans," they encourage the individual patient to shop around for the best health care at the lowest possible price -- which experts hope will help hold down cost escalations.

The new plans fall into three basic categories:

  • One combines a high-deductible insurance policy paid by the employer with special health spending accounts -- which are used by workers to cover deductibles and other medical costs when they exceed the covered amount.
  • Under defined contribution plans, employers offer workers a selection of insurance options -- with workers paying the difference between what the employer pays and the actual cost of the plan they select.
  • After-tax savings accounts combine a traditional insurance plan for major medical expenses with a savings account that the employee uses to pay for routine care.

Experts predict the new plans will challenge managed care. Although the total number of enrollees is still low -- probably no more than 350,000 currently -- more employers are signing on. A survey by benefits firm William M. Mercer found that 19 percent of all employers -- and 29 percent of those with more than 20,000 workers -- said they were likely to offer such insurance.

The plans are attractive to employers because when insured workers are made responsible for their medical spending, they purchase only as much as they need. A study in the November issue of the American Journal of Public Health reported that when patients have to pay more of the cost, they reduce their use of medical care -- physicians' office visits dropped by nearly one-half. Patients did not report a decline in health as a result -- but more study is needed.

Source: Julie Appleby, "New Insurance Plans Turn Patients into Shoppers," USA Today, January 8, 2002. See also: Barbara Martinez, "Health Plan that Puts Employees in Charge of Spending Catches On," Wall Street Journal, January 8, 2002.


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