Benefits November 1, 2007

Study: Crisis on the Horizon in Health Care Affordability

November 1, 2007 (PLANSPONSOR.com) - Up to 60% of those privately insured in the US - about 120 million people - will be enrolled in some form of high-cost health plan by 2020, a study has found.
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Because of that, a news release from management consultant Booz Allen Hamilton about its study said there could be an emerging crisis in the middle class as many are forced to make tradeoffs between medical care and other critical financial needs.

The announcementsaid the firm’s findings “point to the urgent need for a radical restructuring of the U.S. health care system as the move towards greater consumer cost responsibility – frequently touted as an integral part of the solution to rising health costs – is even today far more widespread than consumer-driven health plan enrollment data show”.

“Giving consumers more cost responsibility in a broken wholesale health care market will not work,” said Gary Ablquist, Booz Allen Senior Vice President, in the news release. “The supply side of health care needs to be restructured such that patients can shop by comparing value. Consumers will also need real options for health care delivery and incentives to adopt healthy behaviors, along with new insurance and financial services products to help finance their care.”

Study results also included:

  • Many consumers are being forced to spend more of their income on health care. Today, more than 20% of the privately insured, some 38 million people, face out-of-pocket health care expenses that account for more than 10% of their after-tax incomes.
  • More than 15% of the privately insured are already enrolled in a high-deductible health plan-including coverage acquired through an employer or individually. Ten percent of people enrolled in conventional plans such as a PPO faced deductibles exceeding $1,000 in 2007, up from only 4% in 2002. At the same time, enrollment in consumer-driven health plans paired with a tax-exempt Health Savings or Health Reimbursement Account is projected at 5% to 6% of the market in 2007.
  • Conventional plans with high deductibles and high out-of-pocket costs will continue to dominate. By 2020, Booz Allen predicted that enrollment in conventional plans with these high-cost features could reach 35% to 40% of the privately insured market, while enrollment in consumer-driven health plans paired with a tax-exempt Health Savings or Health Reimbursement Account could reach 20% to 25%.

The study resulted from interviews with executives from leading Blue Cross Blue Shield and national health plans, as well as data and insights from industry trade associations, policy groups and government agencies.

More information is here .

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