A revolution in consumer health
new movement in health care is gaining traction in the marketplace. Called Consumer Directed Health Care (CDHC), the model is designed to give consumers more control over their health and well-being. Proponents of CDHC believe that, when consumers take greater ownership over their health care choices (and more of a burden in paying costs out of pocket), they will make wiser decisions.
One of the lynchpins that drives CDHC adoption are prepaid card programs. Evolution Benefits Inc. is a program manager and processor that supplies employee health care benefit account programs through about 220 third-party administrators (TPAs) that serve approximately 12,500 employers nationwide.
The three primary types of card programs that Evolution Benefits provides are for employee-funded flexible spending, employer-funded health reimbursement and employee- or employer-funded health savings accounts (HSAs).
HSAs have become popular because they come with high deductibles (making them more employer friendly); they are portable in case account holders change jobs; and they can serve as personal investment accounts like 401ks or individual retirement accounts (IRAs).
As enablers of the CDHC model, the three types of accounts are used to cover expenses that employees' primary health plans do not cover.
"You go into the pharmacy to get your prescription drug, the pharmacist is going to charge you something out of pocket," said Chris Byrd, co-founder and Executive Vice President of Evolution Benefits. "Maybe it's $20. Maybe it's $30. So it's not the full price of the drug. But it's the part that your insurance isn't covering.
"When you have one of these accounts, it's a way for you to be able to essentially put aside money in a savings vehicle for you to tap during the course of the year when you need it."
Health care at the POS
But the promise of CDHC involves much more than giving consumers additional options in paying for their health care needs. Another aspect of CDHC is how it forces consumers to change behavior.
"In the old HMO plans, a lot of times people could go into the doctor every time they had a little bit of a tickle in their throat, and they only had to pay $10," Byrd said. "So, the person who is consuming the health care – you – isn't the person paying for it. But the idea behind these consumer directed plans is, well, let's get the patient to act like a true consumer. Let's get them in the game economically."
If consumers realize the cost of doctor visits and other medical expenses come out of their pockets, they will be more discerning in their health care expenditures, Byrd added.
But CDHC may eventually revolutionize the health care system altogether, making doctors' offices and emergency rooms resemble retail environments. According to Byrd, consumers used to be barred from knowing the price negotiations that went on between insurers and health care providers for various services. But that practice is changing.
"Medicare has already posted the average costs for high cost procedures in markets across the country," Byrd said. "That's the first step. You're seeing some insurance companies in certain markets pilot the release of some of that information onto the Web. So I think you're starting to see it. But we're not there yet."
Byrd believes consumers will have bargaining power with providers when they become armed with the knowledge of what different types of services and procedures cost,. "It's going to be something else entirely when doctors start regularly having pricing discussions with their patients," he said. "And when patients walk into the doctors and say, 'Doc, I don't want to pay $125. I want to pay $100.'"
Armed with prepaid
CDHC is arising out of necessity. Health care has become an exceedingly expensive proposition for consumers, insurers and providers. Electronifying health care payments reduces the paperwork associated with insurance claims, which in turn lowers overhead costs for insurers and providers. But enabling health care payments at the POS can also expedite providers getting paid for services rendered.
For example, a consumer with a high deductible HSA account gets treated for a condition at a doctor's office early in the year, when the consumer has not yet reached the deductible level at which benefits kick in.
"Whatever it is that the doctor is going to collect for that encounter, he's going to collect from the patient," Byrd said. "He's not going to collect from the insurance company. The problem is that he doesn't necessarily have that ability to get that cash from the patient on the way out the door."
But if the patient has a payment card attached to the HSA plan, it's probably going to be easier for him to get the patient to make that payment on the spot, according to Byrd. "That's going to reduce the doctor's follow-up, reduce his bad debt expenses," he said.
However, Byrd sees consumers as being the biggest winners by using health benefit cards. "In the old days, I had to literally dig into my own pocket, pay money or use up my credit," he said. "And then I had to go through all of the hassle of putting in that claim form, mailing it off or faxing it off, and waiting who knows how long for that reimbursement to arrive.
"Now, it's like swipe the card, don't have to make any payments of funds on my own. It's coming right out of my account, and I'm done. And I'm like, wow, that's great."
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