Awakening consumer stewardship of health benefits: prevalence and differentiation of new health plan models

Health Services Research, August, 2004 by Meredith Rosenthal, Arnold Milstein

Accelerating growth in health insurance premiums coupled with an economic downturn have generated a renewed focus on cost control in the U.S. health benefits sector. The prevailing vision for cost control in the current employer-sponsored health benefit market does not, however, call for increasingly restrictive managed care plans (Galvin and Milstein 2002). Desire for broad choice and rejection of explicit rationing is widespread, a phenomenon that was in part responsible for the managed care backlash. More than 40 percent of adults surveyed nationally do not support any restriction on choices of physicians, hospitals, or treatment options (Employee Benefit Research Institute 2003) even if such restrictions would result in lower health care costs.

A number of employers and health insurers have embraced new health benefit models with increased consumer incentives to select options that reduce health plan spending and possibly also to select higher-quality options, accompanied by more flexibility with regard to provider and treatment choices. Incentives may encourage more economical or higher-quality selections in all health care decisions or may target only a subset. The primary stimulus of this so-called consumer-directed health benefits movement has clearly been provided by the perceived need to reduce spending, but its stated goals also include enhancing quality or the ratio of health gain to health insurance spending (value). Sponsors of consumer-directed health benefits often suggest that enabling "consumerism" in health care is the primary objective of these new plans. Critics, however, worry that consumer-directed health plans merely shift more costs onto all consumers or to sicker consumers without conferring upon them the necessary tools to select higher value health care options.

Aside from financial incentives for consumers to select lower-cost and possibly higher-quality options, "consumerism" frequently incorporates two additional concepts: (1) informed choice and (2) active consumer participation in managing health and health care decision making (the consumer as "coproducer" of health as described in the literature) (Hibbard 2003). Informed choice of health plans on the basis of reported clinical quality and patient experience has been the primary emphasis of efforts to leverage consumer involvement to improve health care quality over the past several decades. Newer models more heavily emphasize informed selection of provider options. The typical assumption of consumer choice models is that consumers will not only select better (e.g., higher-quality) options resulting in better cost or quality outcomes in the short run but also that health plans, physicians, and hospitals will thereby be encouraged to compete on the basis of the performance measures that are reported. While health plan and provider report cards have met with relatively disappointing results to date (Scanlon et al. 1998; Schneider and Epstein 1998; Hibbard and Peters 2003), there have been improvements in both measurements and their communication to consumers.

Engagement of consumers in managing their own health risks and making informed decisions about treatment options (including not seeking treatment) builds on preexisting managed care methods; these include health risk assessments, information about self-care and management of chronic conditions, information and patient reminders about preventive health measures, nurse-staffed telephone help lines, and shared decision-making programs (Hibbard 2003). A growing literature documents the effectiveness of these methods, such as reminders and self-care education for improving health outcomes for individuals with diabetes, asthma, and depression (yon Korff et al. 1997; Clark 2003).

At the present, the extent of these changes in health benefit plans are unknown, despite the abundance of articles on their policy and business implications (Fronstin 2002; Robinson 2002). The only published empirical analysis of this emerging trend found that, while growing, consumer-directed health plan enrollment remained low in 2002. The study, which relied on key informant interviews, reported a high degree of variation around plan models and features among the class of plans considered to be consumer-directed. It also suggested that large national and regional health plans were beginning to view consumer-directed models as strategically important products, which might consequently lead to wider diffusion in 2003 and beyond (Gabel, LoSasso, and Rice 2002). In addition to assessing the current prevalence of new models, a key puzzle to unravel is whether consumer-directed health plans provide the necessary tools to engage consumers in choosing and participating in managing their own health.

We sought to update and broaden previous research through a national health plan survey in the first quarter of 2003. Our research examines two broad categories of consumer-directed health plans: (1) health reimbursement account models, and (2) tiered benefit models. Our principal goal was to measure the uptake of these consumer-directed products and examine the extent to which they actively support consumerism. For comparison, we also wanted to gauge the extent to which mainstream health plans are incorporating incentives to select more economical health care options and providing information to support those selections ("decision support"). To this end, we examined the prevalence of such incentives and decision-support strategies among mainstream health plans--specifically, health maintenance organization (HMO), point of service (POS), and preferred provider organization (PPO) plans.