In an analysis that points to health insurance in the US becoming increasingly unaffordable, management consultancy Booz Allen Hamilton (BAH) projects that up to 60 percent of privately insured Americans – 120 million people – will be enrolled in some form of high-cost health insurance plan by 2020. This is about three times more than the number of people who are currently members of health insurance plans with high-cost features.
BAH warned that as high-cost plans become increasingly pervasive, more consumers will assume greater responsibility for the cost of their health care, sparking an emerging crisis in the middle class as many are forced to make trade-offs between medical care and other critical financial needs.
This warning comes at a time when the number of Americans with health insurance is declining. According to the US Census Bureau, the number of people without health insurance increased from 39.8 million (14.2 percent of the total population) in 2000 to 47 million in 2006 (15.8 percent of the total population). Of the 282 million people with health insurance cover in 2006, 201.7 million (71.5 percent) had private cover while the remainder were covered by government plans. Of those with private cover, 191.5 million were covered by a health insurance plan related to employment.
BAH stressed that its findings point to an urgent need for a radical restructuring of the US health care system, as the move towards increasing the cost responsibility borne by consumers is already far more widespread than consumer-driven health plan enrolment data shows. This distortion results from the increasing number of people enrolled in conventional health insurance plans with high-deductible features.
According to BAH, more than 15 percent of the privately insured (about 28 million people) are already enrolled in a high-deductible conventional health plan. Ten percent of people enrolled in conventional plans faced deductibles exceeding $1,000 in 2007, up from only 4 percent in 2002. In addition, more than 20 percent of the privately insured (about 38 million people) face out-of-pocket health care expenses (including premiums) that account for more than 10 percent of their after-tax incomes.
By 2020, BAH predicted, enrolment in conventional plans with high-deductibles features could reach 35 percent to 40 percent of people in the privately insured market. All projections must be viewed as directional, noted BAH.
Enrolment in consumer-driven health plans could reach 20 percent to 25 percent of privately insured people by 2020, up from BAH’s estimate of about 5 percent to 6 percent at present. In consumer-driven health plans – health savings accounts and health reimbursement accounts – members use money from their spending account to pay for medical care and prescription drugs. When the money in the account is depleted, members pay out of pocket for medical care, other than in catastrophic circumstances.
Proposing a solution to rising health insurance costs, BAH’s senior vice-president, Gary Ahlquist, said: “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 behaviours, along with new insurance and financial services products to help finance their care.”
Bleak future for insurers
Paralleling BAH’s analysis, a new report released by technology group IBM paints a bleak picture of the future for US health insurers that do not make radical changes in how they do business.
In its analysis, IBM predicts that as consumers take on more financial responsibility for their health care, they will demand more accountability from health insurers and providers, more flexible products, better customer service and greater transparency in costs and quality.
“In this emerging [health insurance] environment, consumers will quickly become more motivated to make better health and wealth decisions,” said IBM Global Healthcare & Life Sciences Industry unit’s general manager, Dan Pelino. “Such changing market dynamics will in turn create new opportunities and daunting pressures for health insurers. Health plans that recognise the retailisation of health care and then successfully transform to provide new delivery models and services will prosper, while those that fail to do so will face rapid marginalisation.”