Most of us remember the line from the 1994 film Forrest Gump when Forrest tells childhood friend, Jenny Curran, “My momma always said, ‘Life was like a box of chocolates. You never know what you’re gonna get.’” The analogy is a fairly simple one: like a box of chocolates, life is filled with many choices that can bring surprising results.
Unless you’ve seen me on the speaking circuit, most folks have not heard of the lesser known line, “Health care usage is like a wedding. You never know what you’re gonna get.” Like life and that box of chocolates, you never know what behavior you’re going to see at a wedding. Think about the behavior of friends and family at a wedding with an open bar, where the cost is completely funded by the family hosting the wedding. It’s generally a lot different than the behavior you see at a cash bar, where the wedding patrons have to pay for their drinks.
Let’s attach the entire analogy to health care usage. Traditional copayment plans are very much like the open bar wedding. Most of us are very comfortable paying a low copayment to a provider without truly knowing the cost of the service or prescription drug rendered, mainly because someone else, perhaps an insurance company or employer, is paying for the majority of the cost. Because the consumer is disconnected from the true cost of the service, there is no accountability to shop wisely or to behave differently. The result to the employer, more often than not, is surprisingly high claim costs and renewals.
On the other hand, Consumer Directed Health Plans (CDHP), a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA), are more similar to the cash bar wedding. Due to the high deductible and the personal account, individuals have a higher degree of engagement and accountability in the purchase decision. The true cost of the service or prescription drug is transparent. Therefore, individuals shop for health care services like they shop for other goods and services, evaluating cost and quality. Additionally, since individuals have more “skin in the game” with these plans they are more apt to engage in lifestyle behaviors that will impact their bottom line.
CDHPs are not a silver bullet for controlling health care costs; however, they are a useful tool to control costs over the long-term. Many industry studies show this to be the case. Additionally, CDHPs provide a great platform from which individuals can participate in health improvement programs and healthier lifestyles driven by the fact that a significant portion of health care spending will be payable by them. But like a wedding, a successful roll out of a CDHP requires time, thoughtful planning and communication.
If you have not yet considered or implemented a CDHP, it might be time to consider one. Whether it’s life, a wedding, or health care, no one really likes surprises, especially surprises that run up costs by 10%, 15%, 20%, or more each year!
George Papagelis, Managing Practice Leader