Consumer Protection in a Reformed Health Care & Insurance System

Implementation is critical to the success of translating universal coverage into access to appropriate health care for all.  Sound follow-through demands the design and execution of well-tailored consumer protection regulations. The first step is a prohibition of underwriting or rating decisions based on preexisting illness.  Insurers have agreed to this reform, as a quid pro quo for the millions of new customers they’ll get from coverage mandates.  Universal coverage and this prohibition of discrimination go together.  Insurers are right that it doesn’t make business sense to ignore preexisting illnesses if consumers can wait for illness to appear before contributing to the insurance pool.  They seem to agree that coverage mandates can adequately do the work of preexisting illness exclusions, rendering them superfluous.

Insurers’ position on non-discrimination would clearly change if folks like Rep. Tom Price (R. Ga.) have their way.  Price objects to mandates because they would allow the government to define “insurance” thereby disadvantaging some forms of currently-marketed coverage, such as bare-bones and HSA-linked consumer-driven products.  But underinsurance has been devastating the American middle class for years; real reform must establish basic levels of fiscal security, as well as medical coverage.  Representative Price’s attack on standards is, then, merely a back door attack on universal coverage.  It is a necessary package deal: either we have universal coverage with an end to preexisting illness exclusions, or markets will continue slicing and dicing “insurance,” leaving huge gaps in coverage. Read more

More Employers Are Adopting Consumer-Directed Health Plans

Photo by liewcf via Flickr

As the cost of health care increases and employers continue to struggle in the bleak economy, many employers are said to be faced with a decision: whether to opt-out of their existing health plans, either by eliminating health benefits for their employees or finding a more cost-friendly alternative. CNN reports that more employers are offering consumer-directed health plans as what is considered a cost-friendly alternative.

CNN states:

More than 51% of U.S. employers now offer a consumer-directed health plan (CDHP), up from 47% last year, according to the latest survey of 489 large U.S. employers from Watson Wyatt, a consulting firm that specializes in employee benefits.

A CDHP is a way of lowering health plan costs of employers by shifting the costs of medical care to individual employees.  The article reports:

Consumer-directed health plans (CDHPs) are typically lower premium but higher deductible health plans. They feature a kind of savings or spending account that helps employees pay their out-of-pocket expenses for covered services, or services that are not covered by a traditional plan.

One form of popular CDHP is Catastrophic Health Insurance– in these plans, often taken out in conjunction  with a tax exempt Health Savings Account (HSA). Under IRS rules, according to Insurance.com “the total out-of-pocket maximum (which includes the deductible and co-payments) for these HSA-linked catastrophic health plans is $5,600 for singles, and $11,200 for families.” In addition, Insurance.com states

Certain pre-existing conditions, such as diabetes and mental health disorders, might mean you can’t qualify for an individual catastrophic health plan without prior qualifying group coverage, or at least that you can’t get coverage for those pre-existing conditions.

Finally, many CDHPs have “lifetime caps” of somewhere between 1 and 5 million dollars. When medical bills surpass these amounts the insurance company is no longer liable.

As the cost of health benefits and health care continues to increase, alternatives to the traditional cost-sharing relationship between the employer and employee are being examined– and understandably so. As for the relative merit of CDHPs and their “catastrophic” brethren, perhaps it depends upon which lens one looks through.

Proponents of CDHPs often cite the increased value in cost conscious “out of pocket” consumer health care choices and the positive affect this “true market” driven approach may have on the cost and quality of care; but the reality of the basis for consumer choice, as Frank Pasquale noted on this blog, is that “brand power has a lot more to do with choices here than objective assessment of outcomes.” In addition, as Professor Pasquale points out, Partners Health in Massachusetts was able to use its power, (market, brand, and sundry), in order to demand “reimbursements up to 30% over what other hospitals receive for identical procedures. Their market share has steadily increased as well, allowing them to stockpile the resources necessary to enter into new markets and threaten the viability of cheaper community hospitals.”

If CDHPs are viewed through the “better than nothing” lens, they obviously have some appeal (But See immediately above); if viewed through the “universal coverage” lens they obviously leave something to be desired. Having said all that, CDHPs may not be a best alternative, but they are becoming– in a woefully ironic twist of the word– a more “popular” alternative.