America's Best Health Plans
Deciding on health coverage isn't getting easier-or cheaper
When Betty Noel was diagnosed with endometrial cancer last year, her husband, Larry, figured most of the costs would be paid by healthcare coverage from his job managing the garden shop at a Kmart in Lynchburg, Va. But when he got a $13,270 bill for the first month of Betty's radiation therapy, he found out differently. K Care Value Plan, his health insurer, informed him that the maximum coverage for outpatient services was $1,200 a year. Larry and Betty would be responsible for coming up with the rest. "We were shocked," says Larry, 59, who was paying about $300 a month for coverage. "I pay more than that just in premiums every year."
The Noels' experience is hardly unique. As healthcare costs have continued to climb-premiums rose 7.7 percent this year-employers have been shifting more of them onto workers' shoulders. The $5 copay has gone the way of the nickel candy bar. These days you can expect to shell out $20 or more every time you visit the doctor and pony up 20 to 30 percent coinsurance for some drugs and services. Annual deductibles of $1,000 or more are becoming more common.
At the same time, benefits are shrinking. "Definitely, we are seeing a trend toward lower benefits across the board," says Beth Darnley, chief program officer for the Patient Advocate Foundation, a nonprofit based in Newport News, Va., that helps people resolve health coverage problems. In the Noels' case, the foundation contacted Kmart. Within a few months the company revised its insurance to cover up to $500,000 annually for inpatient and outpatient care combined. (Kmart declined to comment.)
Out of pocket. That was good news, but it didn't solve all of the Noels'problems. Larry still had to withdraw $5,000 from his 401(k) retirement plan and take $4,000 out of their savings to cover the 20 percent coinsurance they owed for Betty's cancer care. He says, "Sometimes I wonder-what if I get to the point where I can't afford this anymore?"
It's a question many people are asking themselves. Healthcare ranked as the No. 1 concern, outpolling war and terrorism, among those responding to the annual health confidence survey released last week by the Employee Benefit Research Institute. Six in 10 respondents rated the American health system "fair" or "poor," and more than half said they are not satisfied with the cost of healthcare. In studies, people consistently give the healthcare system high marks for quality, and the rankings assembled here and on the Web by U.S.News in partnership with the National Committee for Quality Assurance, managed care's primary accrediting body, showcase the top performers in this important area. But people are worried about expenses, and as healthcare costs continue to shift to individuals, anxiety and dissatisfaction mount.
The buzzword for this cost-shifting is "consumerism." The latest hot concept to capture the imagination of health plans, employers, politicians, and policy wonks, consumerism hands the healthcare reins to individuals, giving them more responsibility for making decisions about their medical care-and a bigger financial stake in paying for it. The most high-profile way that consumerism has entered the mainstream is through health savings accounts (HSAs)-tax-advantaged financial accounts, attached to high-deductible health plans, that people can use to cover their medical bills and save for future medical costs. In addition, health plans are offering members a growing array of "consumer driven" tools that aim to help those in any kind of health plan evaluate healthcare prices, pick doctors and hospitals that are both cost effective and high in quality, get appropriate screenings and tests, and otherwise manage their health. Employers, meanwhile, are steering workers toward cheaper drugs, medical services, and providers by offering lower copayments and other incentives for certain choices.
Putting consumers in the saddle is a smart idea that gives them a stake in spending healthcare dollars wisely-or it is a thinly disguised ploy to offload these costs onto individuals, many of whom, as demonstrated by the 46.6 million (and counting) uninsured, can ill afford to pay them. How this trend is read depends on the reader.
Some experts suggest that the new focus on consumers is unsurprising. Health plans, employers, and providers have all tried-and largely failed-to control costs. "The last constituent standing in this mix is the consumer," says Mark Bertolini, executive vice president and head of regional businesses for the insurer Aetna.
It's too soon to know whether consumerism will actually help reduce overall healthcare costs, but chances are you're going to be hearing about it when you shop for health insurance. Here's what to look for.
Healthcare consumerism is thick with acronyms, nowhere more than around pairings of high-deductible health plans (HDHPs), also called consumer-driven health plans (CDHPs), with HSAs or a similar financial account called a health reimbursement arrangement (HRA). President Bush has made HSAs a key element of his healthcare policy, and Forrester Research predicts that nearly 1 in 4 consumers will be in some kind of consumer-driven plan by 2010.
Federal law requires a qualified HSA plan to have a deductible of at least $1,050 for individuals and $2,100 for families in 2006. The amounts are indexed to rise every year. Participants are responsible for virtually all medical costs up to that amount. Individuals can set aside money tax free in an interest-earning HSA linked to the plan to cover their medical bills until they reach the deductible. Employers can contribute money to the account as well, and about two thirds that offer HSAs do.
Once the deductible is met, a health plan with catastrophic coverage kicks in. This is often a preferred-provider organization (PPO) plan with copayments or coinsurance for doctor visits, drugs, and the like.
Ho-hum. But consumer-driven plans have been slow to catch on. Only about 4 percent of covered workers are enrolled in a high-deductible plan with a linked savings account, according to the Kaiser Family Foundation's annual employer health benefits survey released in September.
Employers aren't especially enthusiastic-about 8 percent of companies that offer other insurance say they're very likely to include a consumer-driven plan next year. One reason, says Gary Claxton, vice president of the Kaiser Family Foundation and the study's coauthor, is that once company contributions to HSAs are factored in, "it's not clear how much employers actually save with these plans."
Nor have employees been particularly gung-ho. Fewer than a third of those enrolled in HSA-compatible plans said they understood and were satisfied with them, according to a survey of more than 18,000 employees released in September by human resources consultant Hewitt Associates. Nearly half said they wouldn't pick the plan again if they had a choice. People selected this option primarily for its lower premium, the study found, instead of seeing it as a vehicle to save for healthcare costs in retirement-which was cited by advocates as one of the major reasons for establishing HSA plans. As of July, the average balance in these accounts, including employer contributions, was just $1,260, according to Inside Consumer-Driven Care, a Washington, D.C.-based newsletter.
Lower premiums were a big draw for Al Meginniss. When his employer, Lutheran Social Services in Elgin, Ill., switched from a standard PPO to a high-deductible HSA-compatible plan through UnitedHealthcare 18 months ago, the premium deducted from Meginniss's paycheck every two weeks for family coverage immediately dropped from $294 to $174. The nonprofit covers half of his $2,200 deductible, leaving him with $1,100 to handle on his own-only $100 more than before. Between Meginniss, who has diabetes, gastroesophageal reflux disease, and arthritis, and his son, an athlete with frequent chiropractor bills, their HSA has been getting a workout. Meginniss has been able to accumulate just $500 in his account. But he figures he's doing OK. The key, he says, is Lutheran Social Services' contribution of half of his deductible. "If my employer wasn't making a contribution," he says, "it would be a very hard thing to deal with, and the benefit might not be worth it."
Unwise skimping. Meginniss's use of his health plan and HSA may be the exception. A recent study published in the journal Health Affairs by researchers at Rand found that people in consumer-driven health plans tended to seek less care but did so indiscriminately, forgoing necessary as well as unnecessary medical services.
In hopes of at least reining in cost increases, health plans are cranking out consumer-friendly tools that give members information to help them make educated decisions about their care. Much of the focus is on price and provider quality, and sometimes the two are combined into an "efficiency" rating, with a ranking system that awards stars or dollar signs to providers that offer the best care for the money. Doctors and hospitals that are considered most efficient are increasingly grouped into "high-performance networks," which employers try to entice workers to use by offering incentives like lower copayments.
Many healthcare experts applaud the idea of high-performance networks and believe they could play an important role in bringing down medical costs in the long term. But at this point, most high-performance network measurements are pretty rudimentary-keeping blood sugar and blood pressure on target for someone with diabetes, for example. "We're years and years away from meaningful quality assessments of physicians," says Paul Ginsburg, president of the Center for Studying Health System Change, a health policy research organization. "We're a lot closer on hospitals."
Pricing is another area where health plans have put a lot of energy into making information available to plan members. Aetna, for example, now makes specialists' fees for the 30 most common services available to members in 15 markets. Experts agree, however, that unless prices are routinely combined with quality information, they're not very useful for consumers except for simple purchases like MRI services or diabetic supplies, where quality differences are minimal.
When Matt Podhradsky needed to schedule his 16-month-old son to have ear tubes inserted, he checked with his doctor and local hospitals to try to get an idea of how much he and his wife should expect to pay out of pocket to cover the 20 percent coinsurance they would owe. His doctor said he had no idea how much the procedure would cost, and hospitals in the area said they couldn't give him specifics either. So Podhradsky checked the HealthPartners website, which administers the PPO plan that he has through his employer, the city of Chaska, Minn. The website informed him that inserting ear tubes, including office visit, surgery, and hospital fees, typically costs between $1,400 and $3,240. Armed with that information, Matt and his wife set aside $400 for the operation. Their final bill: $420.
As useful as price and quality data may prove to be, health plans need to actively reach out to people about their specific health issues if they're going to dent spending, say experts. It's starting to happen. Humana has a telephone robot named Eliza that calls members to tell them about cheaper drug alternatives. In 18 months it has saved members $11 million, says Beth Bierbower, Humana's vice president of product innovation. In addition to periodic chats with a UnitedHealthcare nurse to discuss his diabetes, Al Meginniss now gets monthly statements that not only track which providers he sees but give him diabetic-specific reminders to get an annual eye exam, among other things.
"We need a healthcare Jiminy Cricket," says Arnold Milstein, chief physician at human resources consultant Mercer Health & Benefits and medical director of the Pacific Business Group on Health. Like the insect that whispered advice into Pinocchio's ear, says Milstein, "we need something that will tap you on your shoulder by phone or E-mail and say, 'Arnie, given your family history, age, and health background, you're a top candidate for developing a relationship with a cardiologist, and here are several doctors who are tops in quality, customer service, and resource use to choose from.'"
A worthy goal, but one we're at least a half-dozen years away from, says Milstein. "When you wish upon a star" may have worked for Jiminy Cricket. In the real world, workable healthcare solutions are harder to come by.
This story appears in the November 6, 2006 print edition of U.S. News & World Report.