What is Consumer Driven Healthcare? Why should you care?

Last week I wrote about the value of a health benefit plan for employees. Most people who responded to our survey voted that they would not trade their employer paid plan for $10,000 in cash. That implies that people value the “protection” part of their plan, above and beyond it just paying for their routine dental appointments.

Canadians have much to appreciate about our healthcare delivery system. Primary care in a hospital or a doctor’s office is generally covered by a provincial health plan. While you may need to wait to visit a specialist, you will not be presented with a bill at the end of your visit. In the US, the system is very different. Employers can pay upwards of $15,000 per employee for family coverage. Even then, the employee or patient may be faced with a large bill at the end of a hospital stay. That is all changing…

 In 2003, the US passed legislation allowing Americans to set money aside in a Health Savings Account (HSA) that is paired with insurance. The insurance was inexpensive relative to what was traditionally being offered and it also had a deductible. The user spends the deposits in the Health Savings Account (HSA) to satisfy the deductible and the insurance portion kicks in if you become very sick.

Coverage in sickness and in health!

Since you are spending your own dollars on health; you are motivated to stay healthy. This is changing behavior. People are spending money to maintain their health. They are also becoming more informed consumers. Comparison shopping and health outcomes are now being scrutinized by consumers; thus the handle Consumer Driven Healthcare. HSAs have been so successful in the US that they are now the fastest growing product in financial services industry; and that growth is continuing! In 2010, growth of these plans amongst firms with >1000 employees was 34%. In Canada, many large employers offer a traditional defined health benefit plan, using the HSA as a sweetener or add-on.

As the positive US experience spills up to Canada, more and more employers will start to offer the Health Spending Account as a standalone benefit plan because employees will request it.