Quiet Revolution from Consumers

The quiet revolution in the purchase of health care in the private sector has gone largely unheralded because of the deafening cacophony surrounding the implementation of ObamaCare. Nonetheless, the adoption of consumer and market driven health care reforms at the grassroots level are proving more powerful, effective and unstoppable than the mandates from Washington D.C.

The army of empowered consumers of health care grew to 11% of covered workers in 2010, up a full two points from 2009.  It has grown two points a year every year since 2005. The march seems inexorable. Employers are learning what my company, Serigraph Inc., learned when it became an early mover into a consumer-driven health plan (CDHP) in 2004, namely that costs drop dramatically when employees a spending out their own accounts. That’s true even if the accounts re provided by the employer.

Mercer, the big benefits consulting company, which reported the 11% number, also reported last week that HSA-based CDHP plans had an average cost of $6,759, an amazing 25% under the cost of an average standard plan in the country. (See full Mercer report at http.www.mercer.com/press-releases/1400235)

Why the one-quarter savings? It’s because people change their behaviors when they are spending their own dollars. They utilize more intelligently; they purchase more astutely; they take better care of themselves because they start to see their health as a financial asset; and they follow treatment regimens more closely if they have a chronic disease condition. Behaviors change; costs plummet.

Mercer’s findings on lower costs square with those of Cigna, the big insurer that has also tracked CDHP plans. Cigna reports that the savings from consumer-driven plans accumulate to 24% by the fourth year in those plans.

By the way, contrary to the mistaken criticisms from the left, health also markedly improves under consumer-driven plans. Improvements in health and health costs, not surprisingly, go hand-in-hand.

Leading the march toward creating millions of consumers are large corporations. More than half — 51% — offered a consumer-driven plan in 2010, up from 45% in 2009.

Also stimulating consumerism, average deductibles in standard PPO plans now stand at $1200 per person, compared to $379 in 2000.

President Obama promised to be pragmatic when he engendered the debate on access to health care two years ago. He proved anything but. He could rectify his very expensive foray into reform by working with the GOP adopt proven CDHP plans as a foundation for federal employee plans, Medicaid and Medicare. He asked the GOP for bipartisanship. This is his chance.

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