Bracing for the Wave of Health Care Consumerism
By Joe Rankin & Aaron Prince
Universal Advisor, 2005 Issue No. 2


The wave of health care consumerism is coming. It’s vital that employers with health care programs respond — one way or another — to this inevitable tide.

What’s Consumerism?

In its purest form, consumerism assumes an open exchange of freely accessible information so that participants can make decisions concerning their health care utilization. In a health care consumerism model, a participant can differentiate between providers, efficacy of treatment and, ultimately, cost.

However, as promoted by insurance agents and consultants, “consumerism” is shifting the responsibility of health care utilization to those employees who use an employer’s health care benefit. This trend is in response to a growing perception that many employees abuse their health care benefits.

The classic example of abusive utilization involves the parent who takes his child to the emergency room for a common cold, the flu, or a high temperature. Such potential abuse is curbed by an employer’s addition of a high deductible to its health care plan. In theory, the parent in the aforementioned example will think twice about taking his child to the emergency room for a cold, because he’ll have to pay for it.

Typically, the biggest selling point of a consumerism-based health care model — as promoted by insurance agents and consultants — is that the employers save money.

The Case for Consumerism

In many ways, “consumerism” is a response to the virtually nonexistent increase in deductibles over the last generation. The last two decades have consistently presented annual double-digit rates of health care inflation, yet the deductible of the average health care plan participant is the same deductible that his/her father had.

It’s legitimate for employers to update the structure of their health care plans to reflect economic reality. However, the impact on the culture of each unique employer must be weighed before such changes are implemented. While the end user shouldn’t be immune to health care cost increases, the timing and magnitude of such shifts of responsibility and costs must be balanced with the impact on wages, morale, and other variables.

In addition, communication regarding a program change is critical to its success. Coining a newfangled health care plan as a consumer-driven model without providing truly increased information and decision-making tools and support translates to an employer just looking to make money at the employee’s expense.

A Rational Response

Information is the key to a real, consumer-driven health care model. The ability to ascertain the differences between doctors, hospitals, drugs, treatments, and therapies — in terms of cost, quality, and convenience — is crucial. Without such information, consumerism doesn’t exist. The systems for providing health care consumerism are not currently available, in a cost-effective manner, except to the largest employers. It’s disingenuous for agents, consultants, and employers to pretend consumerism exists where it doesn’t.

High deductible health insurance and increased cost sharing of health care-related expenses, as opposed to the implementation of a supposedly consumer-driven health care model, should always be a consideration for employers reviewing their fixed costs. However, when cost containment associated with health care as a single-benefit program is the driving objective, other solutions may be more effective. Adding integrated wellness, disease management, and pharmacy programs can drive down health care costs over the long haul; nurse hotlines can help employees make better informed decisions.

Employers should also review other benefit programs for cost issues. Few employers realize that their time-off programs, which include vacation, sick time, disability time, workers’ compensation, etc., cost more than health care. Mitigating the cost of these programs should always be done in conjunction with reviewing and attempting to contain health care costs.

Don’t Forget the Basics

Employers should continue to pursue basic plan design changes that may save money for both the company and the employees:

• Offer multiple health care plan choices. Where practical, offer differing levels of deductibles, copayments, and pharmacy reimbursement.

• Self insure part of the benefits. Perform an analysis of adding higher deductibles, and consider reimbursing all or part of that higher deductible.

• Review the claims. Many times in the event of accidents (as opposed to illnesses), claims should be paid by insurance other than the employer’s health insurance, such as workers’ compensation or property and casualty insurance (i.e., car insurance or homeowner’s insurance).

• Provide financial incentives and access for employees to participate in wellness activities, such as annual physicals, smoking cessation, and prenatal care.

• Consider implementing and/or expanding tax-effective savings programs for employees, such as cafeteria plans (also known as Internal Revenue Code Section 125 plans) to help offset unreimbursed medical expenses. (See sidebar.)

Bracing for the Wave

Consumerism as promoted probably doesn’t exist for most employers today. However, elements of health care consumerism are a part of a thoughtful review of every employer’s health care program. For more information, contact Joe Rankin at 248.375.7361 or Aaron Prince at 248.375.7453.