The Downside of Consumer Driven Health Insurance

In the ongoing debate about health insurance and healthcare reform in this country and how to get more of the 45 million Americans without health insurance covered, much has been said about so-called Consumer Driven Health Plans. Consumer Driven Health Plans provide choice. According to their advocates they stimulate competition and provide more affordable health insurance. The high deductible consumer driven health plans are to be coupled with Health Savings Accounts.

The High Deductible Consumer Driven health plans coupled with Health Savings Accounts are favored for reducing health insurance costs by the Bush Administration and by organizations representing Health Insurance Companies such as America’s Health Insurance Plans (AHIP). But some health and consumer organizations say there is a down side to the CDHP’s.

A report set before Congress by The Washington Based Consumers Union even objected to the name “consumer driven” for the low cost health insurance policies. They felt the name was a ploy by the administration and the insurance company lobbyists to make the idea more appealing to consumers, and have them believe such high deductible health insurance plans were consumer friendly. According to the report the Consumers Union feels that they are not. They feel a better name would be “Defined Contribution Health Insurance Plans.”

The Consumer Union Report went on to say the CDHPs actually shift more costs to sicker individuals. Much of the argument for the market driven CDHPs compares health insurance to other forms of insurance such as auto, were for the most part good drivers are not forced to pay for poor drivers, and poor drivers pay more. However the report states this is not a valid comparison because of the huge disparities in health across the nation. Medical insurance can only function where the risk is spread out broadly among healthy and sick people.  According to the report the current insurance market does not make comprehensive affordable medical insurance available to those with pre-existing conditions or the working poor. CDHPs will only increase this gap.

The report before the Joint Economic Committee also stated that Health Savings Accounts, part and parcel to the Consumer Driven Health Plans, only appeal to the “healthy and the wealthy”.   The report made the following conclusion. Significant economic analyses, including one done by the American Academy of Actuaries, have found that high deductible health insurance coverage as represented by the CDHPs will “fragment the risk pool, shift costs to the sick, and ultimately drive low-deductible coverage out of the market since it cannot exist side-by-side in the marketplace with high-deductible coverage because of the underlying nature of the health insurance market.”