Consumer-Driven Health Care: What Is It, and What Does It Mean for Employees and Employers?

BLS examines new option for employer based health plans

A recent article in Compensation and Working Conditions Online, published by the U.S. Bureau of Labor Statistics, examines consumer-driven health plans. With the rising costs to employers of providing health insurance to their employees, consumer-driven health plans are being considered by some employers. Because they generally have lower premiums, consumer-driven health plans might also be a popular choice for some employees. However, both employers and employees will need to carefully weigh the costs and benefits of consumer-driven health plans as compared with more traditional health insurance plans before deciding which type of plan to use.

Consumer-driven health plans combine a pretax payment account with a high-deductible health plan. They are often referred to as three-tier payment systems, which consists of a savings account, out-of-pocket payments, and an insurance plan. The article also includes sections on high-deductible health plans, health savings accounts, and then compares Archer medical savings accounts with health savings accounts, health reimbursement arrangements with health savings accounts, and flexible spending accounts with health reimbursement arrangements. Finally, an exhibit provides a comparison of various pretax savings accounts and their relationship to high-deductible health plans.

Interest in consumer-driven health plans has increased because the employers’ cost of providing health care to employees in private industry has nearly doubled in the decade from March 1999 to March 2009. In March 1999, the average cost of health care to employers was $1.03 per hour worked. Ten years later, in March 2009, health care costs had risen to $2.00 per hour worked. Not only did health care costs rise during this time, but they rose faster than the average costs of the other components of compensation. In March 1999, health care costs represented 5.4 percent of total compensation costs. In March 2009, they represented 7.3 percent of total compensation.

Increases in health care costs are not limited to employers. Employees have also seen increases in their health care costs. In particular, the average medical plan monthly flat-rate premium paid by private industry workers has risen. For single coverage, the costs went from $67.57 per month in 2004 to $92.43 per month in 2009. For family coverage the costs went from $264.59 per month in 2004 to $349.36 in 2009.

The article, written by Song G. Yi, an economist in the Bureau of Labor Statistics’ Office of Compensation and Working Conditions, is entitled: Consumer-Driven Health Care: What Is It, and What Does It Mean for Employees and Employers?

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