As of late, the seemingly ever-increasing rate of spending for health care in this country is slowing down a bit. For example, the Kaiser Family Foundation and the Health Research & Educational Trust recently surveyed 2,832 employers to learn about their health care expenditures, and found that health insurance premiums for this group have risen “just” 5 percent this year. Some in the industry have suggested that the boost in consumer directed health care is the main reason for this slow down. I say we need to take a “wait and see” stance; if this trend continues we will then start looking for reasons.
Don’t get me wrong. I believe in consumer directed accounts. I support the idea that these accounts have played a role in helping to keep our health care spending from spiking even further. Flexible Spending Accounts (FSAs), employer-funded medical reimbursement plans—like Health Reimbursement Arrangements (HRAs)—and Health Spending Accounts (HSAs) have all done their part in slowing the upward spiral in costs.
Meanwhile, I believe there’s far more behind the survey numbers. Increased deductibles are becoming the norm. According to the survey, in 2008 about 18 percent of all covered workers have been paying deductibles of at least $1,000, up from 12 percent last year. For workers in small businesses this shift has been even more pronounced: a good share of these covered workers (21 percent in 2007, 35 percent in 2008) have been paying at least $1,000 out-of-pocket before their health plan kicks-in to pay a share of their medical bills.
So sure, spending for health care seems to be slowing. But that’s a simplistic view. We have merely reduced the amount of our health insurance premiums by switching to a higher deductible. At first that reduced premium looks like an overall reduction in health care spending. But what happens when employees face a medical situation and have to cover their high deductibles? It’s simple: they increase their health care spending. And when they do just that we end up with a clearer picture of the affect consumer directed accounts have on health care spending.
Make no mistake; I hold firm that employee involvement is absolutely vital in regards to the care and costs surrounding their health care. Further, I am troubled about the individual who delays treatment now to save money, but then pays more in the long run because of that delay. Simply put: the concept of insurance and pooled risk for the unaffordable expenses begins to disappear, if the burden becomes too great.
I think a better balance is necessary, and I have some ideas about how to get there. We need a deeper degree of premium sharing between employer and employee. We need to couple that with a reasonable formula for covering the costs of benefits. This form of consumerism helps distribute the costs of health care in a more fairly-shared and proactive way.
TASC CEO Blog 