Report Examines Consumer-Directed Health Plans

Report finds little uptake on new plan models nationally, less in California

Despite a shared interest among insurers and employers in exploring the potential of consumer-directed health plans, such coverage remains a rarity in California — a state that typically leads the nation in innovative health care models.

The report, Understanding Consumer-directed Health Care in California, was produced for the California HealthCare Foundation (CHCF) by Jon Gabel, vice president, Health Research and Education Trust and Thomas Rice, professor of health services, UCLA School of Public Health. It examines consumer-directed health plans, which link consumers’ health coverage choices to the financial consequences of those choices. If, for example, consumers choose a health plan that results in greater overall expenditures, they will have to pay more in premiums. Although these types of plans may offer some attractive features for consumers, the impetus for them has come from employers trying to contain health care costs.

This report gives consumers, employers, and other stakeholders an overview of consumer-directed health plans in California. Examined are: how the products work, the industry players behind them, and the factors likely to influence their growth.

The report focuses on three types of consumer-directed plans including:

  1. Health reimbursement arrangements (HRAs), in which an employer establishes an individual health reimbursement arrangement for a specified dollar amount for each enrolled employee. As the employee incurs qualified medical expenses, he or she can submit these expenses for reimbursement until the allotted amount is exhausted. If not exhausted, the balance rolls over to the following year. HRAs are generally offered in conjunction with a high-deductible (for example, $2,000 annually) insurance product. California lags the rest of the nation on HRA enrollment.
  2. Customized plans, whereby employers make a fixed contribution toward the employee’s premium, and the employee then chooses among an array of products with different prices. In this case, the premium would reflect the breadth of the network and richness of the benefit package. Nationally, and in California, customized plans have witnessed increased acceptance and enrollment.
  3. “Design your own” products, so far non-existent in California, let employees choose their own set of providers and benefit features — essentially designing their own provider network and specifying the services covered — with the employee’s premium contribution dependent on the choices made.The complete report is available online through the link below.

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About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.