Strategies around how to handle America’s Health care system have been a major point of contention in the current election cycle.  As for myself, I don’t know if “Obama Care” is the best solution, but the status quo is certainly not sustainable long-term.  My premiums, deductibles, and co-pays have all been increasing steadily for the last decade, a trend that seems to be worsening.  To make things worse, in an effort to maintain profitability, insurance companies are questioning more and more claims, seemingly grasping for reasons to issue a denial.

The exponential increases in health care costs are tough on families, but they are perhaps even worse on companies that provide insurance to their employees.  To counter this, many companies have been attempting to lower their health care costs through the introduction of “Consumer Driven Health Plans.”  These plans are marketed as an alternative that “empowers” participants to play a more active role in their own health care.  But do they really represent a better option?

To investigate, let’s look at the two alternatives offered by my company:

Consumer Plan Details:

• The company funds a special “Health Reimbursement Account” (HRA) with $1800 yearly (for the whole family).  This account is used to pay for ALL (non prescription) medical claims. If you don’t use all $1800 in a year, the money in this account can rollover to the next year.
• On all doctor/specialist/hospital visits, there are no co-pays at all.  Instead, all bills are paid directly from your HRA.
• The deductible is $3800 p/family, p/year.
• Once the HSA money is used up, you are responsible for paying all medical costs until the deductable is paid (basically, the next $2000)
• Once the deductible is met (i.e. the HRA has been exhausted *and* you have paid 2k out of pocket), the plan will cover 80% of all additional expenses.
• The payroll deduction is $85 less monthly than that of the standard plan. ($1020 yearly)

Comparatively, in the standard plan is also offered by my employer:

• There is no HRA provided by the employer
• All non-preventative doctors visits require a copay, which varies from $25 for primary care, to $150 for emergency room visits.
• The deductible is $1200 p/family, p/year.
• Hospital Visits (non ER), surgeries, lab, and X-Ray are all covered 75% after the deductible.
• The payroll deduction is $85/month more than the consumer plan.

Judging from the internal marketing materials, it is clear that my company is trying to steer me towards the consumer-plan, as it must represent significant overall savings from their perspective. However, I must say that I feel grateful and fortunate that they continue to offer the standard plan as an option.  In weighing the pros and cons of both, I find that I have some serious concerns about the consumer plan.

What if Something Major Happens?

My main concern is that if the need for serious Medical attention arises, we will be forced into paying considerably more out of pocket.  Contrarily, if everyone stays healthy we will end up saving money.  As a family of five with small children in tow, there is a reasonable chance that one of us will get sick within the next year.  We do everything we can to live a healthy lifestyle and minimize risks, but I have come to expect the unexpected.  A few years ago, Michelle had some health issues that required considerable medical care, and more recently- our family welcomed a new baby.  Both of these experiences were certainly not cheap on our existing (standard plan), but estimates show that our costs would have been significantly higher if we had been on the consumer plan at the time.

Just How Far Will That Health Savings Account Go?

The big selling point to the consumer plan is the $1800 Health Reimbursement Account (HRA) that is offered from your employer to pay for medical costs.  My take on this is that $1800 really doesn’t go very far when it comes to medical procedures.  If you are looking at “true costs” of medical procedures, $1800 will buy you about 6 visits to your primary physician,  3 trips to see a specialist, or maybe 1 or 2 trips to the Emergency Room (certainly not all of these).  Is this enough to handle all of the medical costs for your family for the entire year?  For my family at least, it is not even close.  Which means that even if our family has no broken bones or other serious issues over the course of a year, we would certainly be paying the $2000 deductible and 20% of anything beyond that.

The Side Effect : Discouraging Healthcare?

Some in Washington would argue that the reason why health care costs are out of control in this country is because many people use health care even when they don’t need it.  Perhaps they are right, but I never want cost to be the major deciding factor on whether or not to take someone in my family in to the doctor.  When one of my kids is running a ridiculous fever, I would never forgive myself if I skipped out on a doctor visit because my HRA was running dangerously low, and then their condition worsened.  All of the wonderful doctors and medical technology that we have in this country doesn’t mean anything if people are scared to use it when they need it.  I have read studies that say families on Consumer Driven plans typically visit the doctor less than those on Standard Plans.  I can’t help but wonder if that is really a good thing.

Are Consumer Plans Good For Anyone?

If you are single and in your twenties or thirties, chances are decent that you don’t use your healthcare plan all that much.  For these employees, my company only offers a $1000 HRA (the $1800 is for families), but that is most likely more than enough.  You are still gambling that nothing major will happen over the course of the year, but at least the odds are on your side.  For someone in this boat, perhaps the consumer plan is a better option.  For my family, I am not so sure.

While I am leaning towards renewing my standard plan, I am open to the possibility of switching if there is perhaps some information that I don’t quite understand.  If you have any thoughts or information to share on consumer-driven plans, please share them in the comments below!