If you were given just $1,500 to purchase groceries annually, you’d be a lot more careful about how you spend your money. You’d peruse the supermarket flyers, shop around for the best deals, and forgo the more expensive items, like lobster and steak. This is exactly the kind of “consumer-driven” behavior some employers in Dallas, Houston and all around Texas are hoping to spark in you and your co-workers by offering “consumer-driven” and defined-contribution health insurance plans.
You have to pay very close attention to understand the costs and consequences of your health care decisions. For example, with a $20 co-payment, you can get a cholesterol-lowering prescription drug that actually retails for $100 per month, compared to changing your diet or increasing the amount you exercise. But if you had to pay full price for your medical care and prescriptions, most everyone would think more carefully before shelling out their own money.
Even though the line is blurring between consumer-driven and defined-contribution health plans, there are differences. Under a defined contribution scenario, your employer pre-screens and pre-selects a variety of health plans and then gives you cash, or vouchers, to buy a policy. Your employer then bows out. If you choose a plan costing more than your employer’s contribution, you must pay the difference.
With the consumer-driven approach, your employer still contracts with insurers for group health insurance and still retains some measure of control over your health insurance purchasing decisions. What these plans do is give you more choice in terms of benefit levels — you choose your own deductible — and you can see any doctor you want without a referral. However, the plans also increase your share of the costs and risks.
Plans such as these are still relatively new — many only a few years old — and there’s no immediate way to judge their impact on health insurance costs or how popular they will be with employers. According to the Employee Benefit Research Institute (EBRI), less than one percent of all employer-sponsored health insurance is currently comprised of consumer-driven and defined contribution plans. But it’s clear from the growing popularity of consumer-drive plans that employers are looking for relief from skyrocketing health insurance costs and are expressing increasing interest in this benefit design.