1. With
a new generation of health plans introduced into the marketplace,
business owners and individuals have the ability to purchase
comparable health insurance plans which are 25% to 30% less
costly than traditional "old generation" HMO and/or
PPO plans for the same or better quality, benefits and provider
networks. Further, this savings should have a compounding effect
in subsequent years. In short, these new generation health plans
appear to be a more efficient way to deliver health care to
individuals and employer groups.
2. Some
types of "Consumer Driven Plans" ( CDP's), which comprise
some of these new generation health plans, allow individuals/employees
or employers to roll over any unused dollars each year on a
tax-favored basis. These monies are withdrawn tax-free for qualified
health care expenses. Employers, employees and individuals receive
a tax deduction for purchasing such plans.
3. Consumer
Driven Plans allow employees, individuals and employers to view
health care as an account which they own and which they can
manage themselves. This "ownership" approach to health
care means there is no longer an incentive to over utilize their
health plan. With old generation health plans, someone other
than the consumer ( insurance company, the government, etc.)
paid five out of every six dollars of health care expenses,
while the consumer picked up one out of every six dollars. The
new generation health plans remind consumers that they are spending
their own money for health care services. As a result, consumers
are now going through a more careful buying process before selecting
health care services.
4. Because
of the above innovations in health care plans, the average employee's
utilization of health care services in new generation health
plans has dropped noticeably as compared with old generation
health plans. The difference in utilization rates should result
in an even greater differentiation in pricing between old generation
and new generation health plans as we move into 2005 and beyond.
5. At the
beginning of 2004, new generation health plans were meeting
significant resistance from the insurance industry. Today, this
resistance has disappeared. Insurance companies have now embraced
these plans and are marketing them aggressively, as well as
offering new plans much more frequently to keep pace with consumer
demand. Health insurance brokers and agents are starting to
promote them as well. Overall, the entire insurance industry
realizes that it must promote these new generation health plans
to keep pace with consumer demand. As a result, many predict
that in 2005 we will see a significant increase in new generation
health plan options.
6. Another
significant development which surfaced in late 2004 is that
major insurance companies are starting to actively target employers
that do not currently offer group health insurance and employers
that are at risk of losing their group health coverage due to
low participation levels. As such, employer costs have dropped
fifty percent from old generation health plans. It is estimated
that there are approximately 900,000 small business owners in
California (employers with 2-50 employees). Of these employers,
about 50% offer group health insurance. Many insurance professionals
believe that a number of the employers who currently do not
offer health benefits will begin offering them in the next few
years, reducing the number of uninsured in California. These
lower priced new generation health plans will also allow employers
who might have dropped coverage because they couldn't afford
their current health plan premiums to select a lower priced
alternative and maintain their group health insurance plan.
