Los Angeles Times, Wall Street Journal Examine Alternatives to Traditional Health Care Coverage

The Los Angeles Times and the Wall Street Journal in recent days have examined consumer-driven health plans and small business health insurance pools, two options designed as alternatives to address the rising premiums associated with traditional health care coverage. The following are summaries of the articles:

• Consumer-driven plans, in which a high-deductible insurance policy is coupled with an employer-funded spending account, may make coverage more available and affordable but could "saddle some workers with sharply higher medical bills," the Los Angeles Times reports. As traditional insurance premiums continue to rise, many large employers in the United States are turning to CDPs to lower costs. Up to 29% of large employers will offer a CDP by next year, according to a recent survey by Mercer Human Resources Consulting. Under a CDP, a beneficiary can use funds from the spending account to pay for the insurance plan deductible for any qualifying medical cost. However, the spending account often does not cover the full deductible, leaving a "gap" that the beneficiary must cover, which could range from $100 to $1,000 or more. For beneficiaries with chronic ailments or "consistently high medical expenses," the out-of-pocket expenses may be prohibitively high. Furthermore, because CDPs are intended to give beneficiaries an "economic stake" in medical decisions to drive down costs, some experts are concerned that beneficiaries could become overly "cost-conscious" and avoid preventive care. Although proponents of CDPs recognize the plans may have "flaws," they say "experiments" like CDPs are needed to counter the rising premiums of traditional health coverage. "We know what doesn't work. We're still working on what does," Tony Kotin, director of knowledge and service delivery for Mercer Human Resources Consulting, said (Kristof, Los Angeles Times, 8/25).
  
• Association health plans, which are intended to lower insurance costs by allowing employees of small businesses to band together across state lines to form purchasing cooperatives, may do employers "more harm than good," the Wall Street Journal reports. Association health plans are permitted under federal law, but proponents of the plans say that the "full benefits" of such plans cannot be realized until the "50 conflicting sets of state mandates" are reconciled. To address the problem, a group of Republican legislators -- with the support of the Bush administration -- has proposed exempting association health plans from state regulation, appointing the Labor Department oversee the plans instead. Critics of the AHPs say that the federal government has already tried such tactics -- and failed -- with 1974's Employee Retirement Income Security Act, which preempted most state regulation of group insurance plans. In 1982, Congress was forced to reallocate some oversight to states after "widespread insurance fraud" occurred. Critics also say the AHPs would only help a small number of uninsured workers and that small businesses could be "victimized" by "mismanaged or fraudulent health plans." Over the last six months, more than 50,000 small business employees and their families have lost insurance coverage because of fraudulent or insolvent health plans, critics note, and the Labor Department is "ill-equipped" to oversee the small-group insurance market. Labor Department officials counter that the House-passed version of the proposal has "tough antifraud provisions" and add that a proposed $5,000 filing fee could fund more federal oversight. Proponents are currently looking for a bill to which the measure could be attached (Terhune, Wall Street Journal, 8/26).