The Journal Editorial Report | April 8, 2005 | PBS
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briefing and opinion
April 8, 2005

21st Century Health Plan

As the country struggles to control the cost of employee health insurance, corporate leaders are looking at the kind of plan that is being tried in Kansas City, Missouri. A financial company called American Century Investments is cutting costs by offering a consumer-driven health care plan in which employees are expected to take more responsibility. Correspondent Celeste Ford has this report from Kansas City.

Melissa and Sean Stiles From the mail courier to mid-level managers, now employees have an incentive to investigate costs, avoid unnecessary medical expenses and shop for the best deals.

"It made me more aware of what monthly prescriptions cost, how much was really being paid out and how much the company was covering," says Melissa Stiles.

As an example, take a single employee. The company places $800 in a healthcare reimbursement account the employee uses to pay for medical expenses. But after the employee spends the money in the account he must cover the next $2,000 out of pocket. If the employee spends all that, for a total of $2800 the company covers 100 percent of all other costs. Employees who don't spend much, keep the company money in their account and roll it over to the next year. But this raises some concerns. Will consumers skip needed medical care to save dollars?

Delaney Definity Health is one of the largest provider of these plans. The former head of marketing at Definity, Chris Delaney, says the numbers suggest that employees don't skimp on needed care. "In the data, we don't see people forego care and that is absolutely not what we want to see."

Melissa and Sean Stiles, who are expecting their first child, are natural planners, and consumer-driven health care works for them. Plus they are rewarded for good health. Sean has saved more than $2000 in company money in his healthcare account -- a nest egg he'll need for his growing family. While it's often pointed out that this kind of plan rewards you for not going to the doctor, Sean says he does not forego medical care in order to save money. "I think it would give people incentive to take more responsibility for their health care, and even more responsibility on their lifestyle to become more healthy," says Stiles. "So I would like to see it become the next big thing in healthcare."

At American Century not everyone is on board. Not even Jon Zindel, a vice president, and a man who helped develop the plan. Zindel, a healthy, high income, father of four, did not enroll. His family is a big health care consumer and Zindel says he's more comfortable with a traditional plan, with higher payments but lower deductibles. "The hassle factor was definitely an element of it," says Zindel. "I took the time to run the numbers and once I got to that point, then I decided to stop and say, 'If I don't have to change, I'm not going to change.'"

Karen Davis Consumer -driven health care clearly has drawbacks for others as well. What's the profile of the person least suited for this type of plan? "Older, with chronic conditions, low wages, no savings," says economist Karen Davis. Davis is the president of the Commonwealth Fund and the health insurance expert who came up with one of the industry's most alarming statistics: 10 percent of Americans generate 69 percent of the medical costs. She says consumer-driven health care won't help this segment because the plans cater to the healthy and wealthy. Davis says the research suggests there are even more sick people who do not treat their illnesses because of the high deductible.

"They're more likely to report not filling prescriptions, more likely to report not getting lab tests done when a doctor tells them to have it done," says Davis. "They don't get preventative services. So there's national evidence that high deductibles are harmful to people."

Definity Health concedes that some employees struggle with the high deductible, so Definity is looking at repayment programs, including a line of credit for those who can't pay their medical bills.Step It Up

At American Century the cost of insuring the firms 1,800 employees is still going up but not as fast. A national survey of corporations found that last year they spent up to 21 percent less on consumer-driven health care compared to some traditional plans. Employees clearly found it in their interest to spend less money, so they did. Definity says next year a quarter of the largest companies in the country are likely to offer these plans.

Critics of this sort of plan argue that it is really shifting the cost from the employer to the employee. "It really isn't though," says Chris Delaney. "It's a different way of sharing costs and what employers are looking for today is something that is sustainable, that is long-term and that fundamentally changes how consumers take charge and interact with the healthcare system."

For the future one thing seems certain, consumer-driven health care plans are on the way. With these plans, the cost and responsibility for our long-term health shifts from our employers and our doctors to ourselves.