Expert Commentary

Healthcare Debate at Benefits Selling Expo Proves Provocative

The third annual Benefits Selling Expo was held in Dallas, March 21-23, 2007. Highlights included over 400 attendees, 19 sessions, 80 exhibitors, and keynote speakers Sarano Kelly, Scott Halford, and Tony Dorsett.

Personal Lines Insurance
April 2007

Well-attended sessions covered topics such as health savings accounts (HSAs), long-term care insurance, retirement planning, disability insurance, voluntary benefits, sales techniques, selling points of self-funded health plans, limited medical plans, critical illness policies, and building a better website.

One of the most stimulating and entertaining sessions I attended was entitled "Industry Debate: Heavyweights Tackle Health Care." Participants included the referee, Dennis Storey, editor of Benefits Selling, along with debaters Sharon Alt of Alt Benefits Consultants, Inc., and Jim Christenson, of Emerson, Reid and Co. Each speaker made an opening statement, with the focus on the pros and cons as well as the future of consumer-driven health care (CDHC).

Consumer Driven Health Care

What exactly is CDHC? This acronym refers to health insurance plans that allow members to utilize personal HSAs, Health Reimbursement Arrangements (HRAs), or related medical payment products to pay medical expenses directly, while they benefit from the protection of a high-deductible health insurance policy. High-deductible policies cost less per month than low-deductible policies, but the user needs to pay more up-front monies for medical procedures. One report indicates that 3 to 6 million people participate in these plans, constituting approximately 3 percent of the commercial health insurance market.

Studies indicate that people who procure high deductible policies are typically either in their 20s or between the ages of 50 and 65. Young adults tend to purchase the coverage if they are unable to access health insurance through their job or they are self-employed. Older adults often buy high deductible plans to provide protection against major catastrophic illnesses, such as a heart attack or cancer. These adults are typically healthier and are more concerned with reducing their health insurance premiums.

Carol Alt is a strong supporter of CDHC, saying that the current system is not sustainable due to the rapidly rising cost of health insurance. She believes this system gives patients greater control over their health. In her mind, CDHC keeps premiums in check by engaging consumers in evaluation of the costs and benefits of health care services—particularly for lower-priced services. Without CDHC as an option, Ms. Alt believes that healthcare insurance will continue to skyrocket, increasing the chances that the federal government will intervene. As she states, "consumers must feel the pain with high deductible plans in order for changes to occur to the system." Her arguments were quite convincing, particularly concerning the current U.S. health insurance affordability crisis.

Jim Christenson, in contrast, is not a fan of CDHC. He believes that these plans will not ultimately reduce the costs of health care. Mr. Christenson contends that consumer shopping for health care is illusory, based in part on his own experience in shopping for cardiac care. "You can’t shop for price," he remarked, "because no one wants to divulge their prices. The doctors don’t divulge their costs, the hospitals don’t divulge their price, and the health insurance companies don’t divulge their financials. There is a major transparency problem concerning this issue."

Mr. Christenson related that the median U.S. family income is $46,000. With this figure as a yardstick, a "$1,000 deductible is much, much too painful." One of the big concerns is that with a high deductible, many people might delay in going to the doctor, delays that could ultimately result in a seemingly simple doctor visit turning into a hospital emergency room visit. In his opinion, high deductible plans are typically chosen to simply save on the employer’s costs, not to make healthcare coverage more affordable for the average American family.

Mr. Christenson argues that the representation that consumers are actually in control of their healthcare costs in CDHCs is deceptive. In many cases, consumers have little choice about emergency services and numerous chronic conditions. Most healthcare decisions are delegated to the providers and physicians. Another concern is that the plans are too expensive to administrate and too complex for consumers to understand. Unfortunately, he did not offer strong alternatives to these plans in the wake of rapidly increasing health insurance costs.

So how well do CDHCs actually work? A 2006 Rand Corporation study found that most employers save at least 10 percent on their health costs. A small percentage reported savings as much as 25 percent, although it can be argued that some of this "savings" may simply be a shift in expenses to the employees. The Rand study went on to state that employees enrolled in the plans appear to be cutting back on their health care. Studies indicate a 4-15 percent decrease in spending for those without an HSA in their plan and a 2-7 percent reduction for those employees with an HSA. The report concluded that some consumers, in fact, did not go to the emergency room for problems that did not require it. Conversely, some people were delaying the necessary care and thus potentially endangering their health.

The good-natured repartee between Ms. Alt and Mr. Christenson eventually came to a conclusion, with each continuing to make their arguments for and against CDHCs. The "Industry Debate: Heavyweights Tackle Health Care" session was certainly a hit with the attendees. Although neither contestant scored a decisive knockout, I would give Carol Alt the decision by a hair.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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