In the late 15th century, John Morton, the Archbishop of Canterbury, served as a tax collector in England. He posited that a man who lives a modest lifestyle can save his money and thus can afford to pay taxes. If the man lives a lavish lifestyle, Morton said, he must be rich and thus can afford to pay taxes. This concept - two different lines of reasoning drawing the same conclusion - became known as "Morton's fork," which some 500 years later, could be applied to the American health care system.

In a little over a decade, the way health insurance in the United States is provided and paid for has undergone a seismic shift. Amid surging health care costs, employers in the early 2000s began to phase out more comprehensive (and costlier) HMO and PPO options. In their place rose consumer-driven or high-deductible health plans, which lower employer costs by asking employees to shoulder a greater financial burden through meeting higher deductibles - sometimes upwards of $5,000 per family - before insurance began covering costs at 100%.

To borrow from Morton, the reigning conventional wisdom in the current consumer-driven age is that the wealthy can afford the ever-rising costs of medical care, services and prescriptions and are thus able to meet higher deductibles in employer-sponsored plans or even purchase care on their own in the individual market or via emerging health insurance exchanges. Those less well-off, though, can take the money no longer being deducted from their paychecks to pay costly HMO or PPO premiums, and use the funds instead to meet higher deductibles in employer-sponsored plans or even purchase insurance on their own in the individual market or exchanges.

But is traversing Morton's fork truly possible for American employee-consumers when it comes to health care? And even if it's possible, is it preferred?

 

'Our whole system is an accident'

The shift from copays and coinsurance to cost-shifting and consumerism has happened in the blink of an eye, in benefits terms. It's historically an area where changes tend to be incremental and slow over several decades, generally through rulemaking from the IRS and Department of Labor. For such a large-scale sea change in health benefits to occur in just 10 years' time is pretty remarkable by itself, even more so when you add in the 2010 passage of health care reform.

However, perhaps the change was overdue, when one considers the employer-sponsored system's unintentional beginnings in the 1950s, when powerful labor unions fought for greater worker protections like health benefits, and such employer-sponsored plans gained tax-exempt status in 1954.

"Our whole health care [benefits] system is an accident; nothing about the way the system works was designed from the start," says Jennifer Benz, founder and chief strategist for San Francisco-based benefits communications firm Benz Communications. "Employer-sponsored health care is an accident of dealing with post-World War II employment issues. Managed care and everything since has just built layers and layers on top [of those accidental beginnings]," she points out. To rework or redesign the system now so that it functions most effectively for consumers to make good health care decisions, she says, "so many pieces have to become unraveled. It's still too premature to put [responsibility for] controlling costs in the hands of individual consumers. Everything about the system has to change."

However, the system has been changing all along - all toward the end goal of having consumers truly make sound health care decisions and purchases on their own, counters Paul Fronstin, senior research associate for the Employee Benefit Research Institute. "Even during managed care, we were trying to steer behavior through financial responsibility and we've been marching in that direction ever since," he says. "I think we're always moving in a direction of more consumerism. It's accelerating in a different way now because of the [insurance] exchanges. We're not just giving people money to buy health care services, we're giving them money to buy insurance. And that introduces a whole new level of decision-making."

 

The new normal

Whether its arrival was deliberate or not, the age of health care autonomy is indisputably entrenched in American culture. Statistics from the Kaiser Family Foundation and Health Research and Educational Trust show that among the 61% of U.S. employers that offer health benefits, 31% offer a high-deductible health plan, and 19% of workers currently are covered by an HDHP, compared to just 4% enrolled in 2006. Regardless of plan type, 34% of workers with single coverage have with an average deductible of $1,000 or more. Among HDHP enrollees though, 51% with single coverage have annual deductibles of $2,000 or higher, KFF/HRET finds, and 42% with family coverage must meet deductibles of $4,000+.

Many of these HDHP members have a health savings account, which allows users to save money on a tax-free basis to spend on health care expenses. According to Minneapolis benefits brokerage firm Devenir, the average HSA balance in 2011 was $1,841. Employer contributions to HSAs, which tend to boost the accounts' use among employees, historically have varied in richness, but the recession caused more generous companies to pull back. EBRI data show that the number of employers contributing $1,000 or more to employees' HSAs with single coverage dropped from 37% in 2008 to 24% in 2011; for workers with family coverage, employers contributing $1,000 or more in annual HSA contributions held steady at 64%.

However, the 2012 KFF/HRET study shows that regardless of coverage type, 34% of employers contributed nothing to employee HSAs.

Reviews of high-deductible plans have been mixed. The 2011 Consumer Engagement in Health Care Survey, conducted by EBRI, finds that while satisfaction levels are rising among HDHP enrollees - and at the same time declining among those in traditional health plans - traditional-health plan enrollees remain more likely than HDHP enrollees to be extremely or very satisfied with their overall plan. Further, the survey reveals that individuals in HDHPs are less likely to recommend their health plan and also less likely to indicate a desire to stay with their current plan, if given an opportunity to switch.

Still, HDHPs have achieved the desired results: They cause members to make more prudent health care purchasing decisions and spend less, which benefits experts almost unanimously say is a good thing for employers and employees.

EBN contributor Andrew Sykes, chairman of actuarial firm Health at Work, says: "[HDHPs don't] force people to decide if they should get care, but where and when - waiting overnight to see your PCP in the morning rather than go to the emergency room, getting generics instead of name brand prescriptions. I'm confident that people have what it takes to make good decisions."

Fronstin warns, though, that HDHPs are just entry-level versions of the consumerism that insurance exchanges offer, calling high-deductible plans "consumerism-lite. We've given them the keys to the car door, but not the ignition. We're not really letting them drive."

Two major employers, Sears and Darden Restaurants, are ready to "let them drive." The companies made mainstream headlines this year after announcing they would give employees money to purchase insurance through private online exchanges.

In an interview with the Wall Street Journal, spokespeople from both companies declined to state the exact dollar amount employees would receive. A representative from Darden, which owns the Olive Garden and Red Lobster restaurant chains and employs some 45,000 workers nationwide, did disclose to WSJ that employees would pay the same out-of-pocket costs they do currently, that coverage levels will not decline and that the amount of money employees are given to shop with will rise along with overall health care costs.

Sears, while tight-lipped about its specific insurance strategy, told WSJ 90,000 of its full-time workforce is eligible for the exchange program.

Whether the exchange model - using platforms constructed by either by private entities or by states under mandate from federal health care reform law - is effective remains to be seen. But as costs continue to rise beyond what employers can financially bear, more companies seem inclined to give exchanges and defined contribution funding a try.

According to the 2012 Employer Health Plan Study by J.D. Power and Associates, 47% of employers say they "definitely will" or "probably will" switch to defined contribution health care. A July issue brief written by EBRI's Fronstin on exchanges states that "there are a number of potential advantages to both employers and workers in this structure. Employers could benefit from a higher degree of cost certainty, certainly if they were able to fix their costs at the level of their contributions. Workers could benefit from competition among insurance carriers, greater choice of health plans and portability."

Several benefits consulting firms and health insurance carriers are putting stock in those advantages powering the DC health model forward. Among consultancies, Aon Hewitt and Towers Watson have launched online exchanges, with insurer WellPoint entering the field as well. Exchanges powered by private firms also are popping up, ready to sign up buyers as early as January.

"Ultimately, whether and how the movement to DC health plans will occur is still subject to various influences and remains highly uncertain," Fronstin writes. "But the enactment of PPACA and employers' need to control the cost of health benefits indicate this is a field that is likely to grow."

 

'Everybody would love to go back'

While the jury is still out on DC health, most benefits experts can agree that consumers will have to be dragged toward fully financing their own health insurance.

"Everybody would love to go back to the old financial model, when at a time there wasn't even a $20 copay. There was a time when people had no copay," says Helen Darling, president of the National Business Group on Health. Even though consumers railed against the choice constraints of HMOs, "now [that] we've moved to high-deductible health plans, people want to go back."

Benz agrees, noting the irony, given how highly Americans regard personal freedom, choice and accountability. "I think there is a contradiction in Americans' idea of freedom and choice," she says. "Americans say they want freedom and choice and to make their own decisions. But when it comes to their future financial security or when it comes to their health care, ultimately, everyone would really like that someone just takes care of it for them. We have to acknowledge that contradiction - not just in what people prefer, but in what people are capable of actually doing."

 

'You just pay it'

Indeed, assessing consumers' desire for full consumerism is one thing; assessing their readiness for it is a much larger - proposition.

"There's been this enormous shift in how all of the base [benefit] structures in our country work," Benz says. "And we've done a really bad job at teaching people how to be successful in this new system. When you consider all of it, you have to doubt whether it's really possible to teach people to manage it all themselves."

If it is possible, managing health care decisions will fall on consumers like teacher Melissa Ferry. Ferry is among those with a traditional health plan through her employer, a public school system in Virginia. She picked the most comprehensive plan the district offers. Ferry pays high premiums, but doesn't want to change plans. "I picked it because I can see any doctor I want, wherever," she says. "I have severe asthma [and] wanted something that allowed me access to care no matter what."

Ferry says she's thankful that, thanks to her rich benefit, she's never been in a situation where she felt like she needed care but couldn't afford it. Still, she doesn't exactly think very hard about what her care really costs beyond her copays - an awareness that is the cornerstone of DC health.

"Cost isn't too much of a factor because my insurance will cover pretty much everything, knock on wood," she says, adding that when she does make a choice about what doctor or what facility to visit for medical care, she leans on recommendations from those she trusts or simple proximity.

Karen Zuckerman, who along with her husband Jerry runs a successful interactive marketing agency in Rockville, Md., approaches health care decisions for the couple and their three children the exact same way - with no regard to cost. Acknowledging that Karen is the decider when it comes to selecting the family's doctors, she says that "almost 99.9% [of provider selections are based on] referrals from family, friends and other doctors," and adds that cost considerations never cross her mind.

"Jerry's probably not that happy about that, but we just go to who we think is the best doctor for the given thing. You want to go to the best person, so you just pay it," she says. "You find the specific doctor, and then you don't care if you have to pay because it's not worth it - for us - the time to sit around or go from place to place."

Some experts, like Benz and Darling, say it wouldn't necessarily matter if consumers like Ferry and the Zuckermans did make cost considerations in health care decision-making because there are few tools to fully support them in doing so.

"The [benefits] industry jumped into consumerism before the infrastructure was there to even support it," Benz says. "That's something that employers have to recognize. If you don't have those tools, you have to rely on [consumers] having the kinds of conversations that people just don't have with their doctor. When you had your baby, did you ask the doctor what it was going to cost? Employers have these really unrealistic expectations of what individuals are comfortable with and capable of doing."

Benz knows of what she speaks. She is a cancer survivor who still needs all the requisite follow ups, and also was involved in a car accident several years ago in which she sustained a serious neck injury. "Of all the health care I've received in the last 10 years, I can only give you a handful of times where I was able to make a decision based on cost."

Nor is it easy for consumers to compare providers and facilities based on quality, Darling says. "Even the most knowledgeable people can't do that; I've been in this industry my whole life and I couldn't do it if I had to bet my life on it," she asserts. "It's one thing to pick a doctor to see [on a preventive care basis], but another to literally put your life in one's hands, like for a surgery. We don't yet have the evidence that we need to be authoritative about these things. We have information on the outliers; you can get information about someone with multiple malpractice claims against them, but if it's not an egregious set of problems [against a particular provider or facility], it's very hard to tell who's the best."

Even with the right tools, though, Ferry isn't certain that she'd be successful at purchasing her own insurance - or that she could afford to. Taking into account "all of the medical care I've received in the past year," paying for insurance herself likely would involve having to "sell my place to downgrade my monthly living expenses," she says. "Then I'd probably actually have to skip certain care or appointments. There would be almost no functional way to make it happen."

 

Failure to communicate

Helping consumers like Ferry navigate a DC health world, Benz says, falls largely on employers. The problem, though, is that "employers in a lot of ways aren't prepared to be the ones to do that much high-touch education all the time," she asserts. "It's not what a telecom company or a manufacturing company's core competence is. That's exactly why I have a job."

She adds that it isn't just the newer concepts associated with DC health that employees have trouble grasping. "So much of health care education has to be on a basic level. It never ceases to amaze us when we do focus groups with employees: You can talk to bilingual, minimum-wage workers or PhD-level executives and they have the same misunderstandings about how health care works. I've worked with PhD-level engineers who can't tell you the difference between a copay and coinsurance. This is the stuff that benefits people take for granted; we continue to communicate in all this jargon, then wonder why no one gets it."

Results from a Benz Communications survey of employers this summer show that 45.4% of companies arenít satisfied with their overall communications strategy, and an additional 28% are ambivalent about it. Further, more than half (54.6%) donít document their benefits communications strategy, and 41% say they aren't sure if their benefits communications efforts are helping them meet their goals, despite listing improving health program participation and use of health care tools among those goals.

Poor education about the health care system and a mediocre understanding of workplace benefits offerings likely is one factor contributing to Americans' flagging health care confidence. 2012 poll numbers from EBRI show that only about one-third of individuals (34%) say they are extremely or very confident that they are able to afford health care without financial hardship, compared 24% who are not at all confident.

Those are troubling statistics if one links health care confidence to DC health's potential for success - particularly if it correlates to the defined contribution model in retirement benefits. According to EBRI, Americans' retirement confidence is even lower than health care confidence, despite that the DC model - the 401(k) plan - has been the primary retirement savings vehicle for more than three decades. The organization's 2012 Retirement Confidence Survey shows Americans' confidence in their ability to afford a comfortable retirement is at record-low levels, "the lowest levels we've seen in the two decades we've conducted this survey," says EBRI research director Jack VanDerhei.

Just 14% of Americans are very confident they can afford to comfortably retire, and 30% have less than $1,000 in total savings, even though 74% have access to a retirement plan at work.

Although itís easy to see the shortcomings of the DC retirement system and believe consumers under a DC health system might suffer, Sykes says the exact opposite is true.

"I think the failure of consumer-driven retirement is the base predictor of success of consumer-driven health," he asserts. "The reasons why voluntary retirement saving is failing as an industry is because for retirement funding what you're asking people to do is give up pleasure in the present for security in the future. With [DC health], what you're doing is making decisions in the present to avoid costs later on - almost the reverse set of circumstances. So, people make financial decisions in health care that they wouldn't make in retirement funding."

 

Providing the right tools

To make those decisions well, consumers need abundant and accurate decision-support tools, experts agree, noting that they've largely been absent from the marketplace until recently.

"To some degree, we put the cart before the horse," Fronstin says. "We shifted people into these types of arrangements without preparing them and giving them the resources."

Benz agrees: "A missing piece on the idea of consumerism is actually being able to compare costs before you go to the doctor. In the last couple years, tools like [those from] Castlight, Clear Costs and ChangeHealthcare do let you do that and those companies are growing at crazy rates. But it's pretty far along in the consumerism race to finally have decent tools."

Darling praises the "companies [that] are in the business of helping with navigation and decision-making. We have more information now than we've ever had."

But for DC health to have a positive effect, "people [need to] have the right financial package that optimizes health and productivity, but also a system that doesn't drive people to overuse services that everybody agrees are either inappropriate or downright harmful," Darling says. "And right now that's the system we've got. So, turning people loose in it - no matter how we pay for it - is not a help to them or to the country."

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