If you were given just $1,500 to purchase groceries annually, you'd be a lot more careful about how you spend your money. You'd peruse the supermarket flyers, shop around for the best deals, and forgo the more expensive items, like lobster and steak. This is exactly the kind of "consumer-driven" behavior some employers in Dallas, Houston and all around Texas are hoping to spark in you and your co-workers by offering "consumer-driven" and defined-contribution health insurance plans.



You have to pay very close attention to understand the costs and consequences of your health care decisions. For example, with a $20 co-payment, you can get a cholesterol-lowering prescription drug that actually retails for $100 per month, compared to changing your diet or increasing the amount you exercise. But if you had to pay full price for your medical care and prescriptions, most everyone would think more carefully before shelling out their own money.

Even though the line is blurring between consumer-driven and defined-contribution health plans, there are differences. Under a defined contribution scenario, your employer pre-screens and pre-selects a variety of health plans and then gives you cash, or vouchers, to buy a policy. Your employer then bows out. If you choose a plan costing more than your employer's contribution, you must pay the difference.

With the consumer-driven approach, your employer still contracts with insurers for group health insurance and still retains some measure of control over your health insurance purchasing decisions. What these plans do is give you more choice in terms of benefit levels - you choose your own deductible - and you can see any doctor you want without a referral. However, the plans also increase your share of the costs and risks.

Plans such as these are still relatively new - many only a few years old - and there's no immediate way to judge their impact on health insurance costs or how popular they will be with employers. According to the Employee Benefit Research Institute (EBRI), less than one percent of all employer-sponsored health insurance is currently comprised of consumer-driven and defined contribution plans. But it's clear from the growing popularity of consumer-drive plans that employers are looking for relief from skyrocketing health insurance costs and are expressing increasing interest in this benefit design.

Depending on how your employer sets up your consumer-driven health plan, you may be able to choose your deductible and that choice will determine your portion of the plan's premium. A higher deductible generally means you'll pay less in premiums, a lower deductible generally means you'll pay more. But estimating how much medical care you will need in any given year can be tricky - particularly when you've always plunked down a small co-payment and you've never bothered to look at your doctor's itemized bill.

Let's say you're a young, single, healthy individual and you know you'll have one routine physical exam during the year. Even if you figure in the costs of treatment for an ear infection and add an unexpected minor injury such as a cut on your head that necessitates stitches, you figure you'll still be way under the $500 your employer puts into your personal health care account. You'll probably never have to spend a dime of the $1,000 deductible out of your own pocket, right?

Well, not necessarily. According to the Life and Health Insurance Foundation for Education, the average doctor's fee for stitches to close a minor cut on your head - not including anesthesia, hospital, or laboratory fees - is $334. Add a routine physical exam ($175) and a doctor's visit for an ear infection ($32) and your total is $541. And that's without paying for any laboratory tests or prescription medicines. Even if your health insurer has negotiated discounted fees with your provider, these charges can still quickly add up. So, if you can't afford to pay $1,000 out of your own pocket, you might be better off opting for a lower deductible, if there is that option, and paying a little more up front in monthly premiums.

Just as it would be difficult for you to plan your food budget for a year if none of the items in your supermarket carried price labels, it would likewise be hard for you to choose your consumer-driven health insurance plan and your deductible level if you're not sure up front how much your medical providers charge for certain procedures.

Some critics of health insurance plans also fear consumer-driven plans punish the sick because the sick visit their doctors more often and need more expensive treatments. But think again if you define "the sick" as only those who suffer from life-threatening illnesses. The sick also include the one in four Americans who have common chronic conditions such as asthma, diabetes, heart disease, high blood pressure, or mood disorder. According to the Yale School of Medicine, these five conditions cost Americans more than $62 billion a year in treatment costs alone. Critics are concerned that "consumerism" will cause employees to skip needed care, both necessary and preventive, in order to save money.

Another big question is trying to define just how well employees understand their new consumer-driven health plans. There is plenty of evidence that shows that many employees don't understand how health insurance works at all. According to D.S. Howard & Associates, in a June 2001 survey, 100 large employers - those with 500 or more employees - reported that 54 percent said that most or some of their employees think the rules about health insurance coverage are difficult to understand and 48 percent say most or some find health plans too complex and hard to understand.

Complicating matters further is that HMO plans are heavily structured; so most people don't really need to understand how they work in order to use them. Consumer-driven health plans have much less structure - requiring you to understand how they work, how much you pay and how you can reduce your out-of-pocket costs. Consumer-driven health insurance plans are often accompanied by Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs).