You asked for (1) a summary of Switzerland’s consumer-driven health care as described in a recent Journal of the American Medical Association (JAMA) volume, (2) the status of such plans in the United States, and (3) results of UnitedHealth Group’s iPlan study of consumer-driven health plans.

SUMMARY

Switzerland requires each individual to purchase health care insurance and to contribute to the cost of benefits through deductibles and coinsurance, subject to an out-of-pocket maximum. This requires consumers to choose from over 90 insurers and a finite set of insurance plans. The compulsory insurance plans, plan premiums, and provider fee schedules are highly regulated. The government provides subsidies to low-income individuals and to public hospitals.

Research reveals that Switzerland has universal insurance coverage, higher per capita out-of-pocket expenses, 35% lower health care spending per capita, more available health care resources per capita, and equal or better health status outcomes than the United States. However, commentators note that the Swiss system is not the free market-based system that U. S. proponents generally think of when they discuss consumer-driven health care, but is actually closer to the universal health care plan proposed by President Clinton that combined consumer choice and government regulation.

The United States has permitted consumer-driven health care plans for more than 20 years through the use of spending accounts that make the consumer more responsible for how health care dollars are spent. The newest form of such plans is a Health Savings Account (HSA), which permits consumers to save and invest pre-tax dollars for future medical expenses. Proponents believe these plans decrease the number of uninsured and slow the country’s health care spending as consumers seek to obtain the most value for their money. Critics believe the plans lead people to forgo necessary medical services and attract only young and healthy participants, leading to adverse selection for traditional plans. Surveys suggest that 73% of American employers may offer HSAs by 2006.

UnitedHealth Group’s Consumer Solutions business, whose products include iPlan, a consumer-driven health plan, conducted a study of 45,000 consumers. It found that consumer-driven health care plan enrollees had a higher utilization of preventive services, fewer emergency room visits, and fewer claims than enrollees in traditional plans.

SWITZERLAND

Switzerland’s consumer-driven health care system was recently featured in the Journal of the American Medical Association (JAMA) in two articles that are enclosed: (1) Regina E. Herzlinger and Ramin Parsa-Parsi, Consumer-Driven Health Care: Lessons from Switzerland, 292 JAMA, Sept. 8, 2004, at 1213 and (2) Uwe E. Reinhardt, The Swiss Health System: Regulated Competition Without Managed Care, 292 JAMA, Sept. 8, 2004, at 1227. A summary of the Swiss system follows, based on these articles.

Compulsory Insurance and Universal Coverage

Switzerland has achieved universal health care coverage through a form of consumer-driven health care. The Swiss are required to purchase health insurance as a result of Switzerland’s 1994 federal Health Insurance Law. Individuals select from over 90 insurance carriers and a finite set of plans. They purchase the mandated insurance individually (not through an employer) and pay premiums directly to the insurer (not through payroll deductions). Each insurer is registered with the Swiss Federal Office of Public Health, which regulates insurance pursuant to the 1994 law. Insurers are prohibited from earning a profit on the compulsory insurance, but can profit from selling supplemental benefits policies.

Cost-Sharing Requirements and Plan Premiums

Compulsory policies vary by the level of required enrollee cost-sharing (deductibles and coinsurance rates). By law, insurers can set the annual plan deductible at SFr 300, SFr 400, SFr 600, SFr 1200, or SFr 1500. Current proposed legislation would increase the upper limit to SFr 2500. (A Swiss franc is about $ 0. 80. ) In addition to the deductible, an enrollee must pay 10% coinsurance on covered expenses, up to SFr 700 per year.

In addition to an indemnity plan of insurance, carriers may also offer a gatekeeper network plan that requires a primary care physician to approve visits to specialists and a restricted network plan similar to a health maintenance organization (HMO). Premiums vary based on the cost-sharing attributes and plan type. Average 2003 premiums were $ 119 per month for a high-deductible plan, $ 159 for a HMO plan, and $ 199 a month for a low-deductible plan. Discounts may be available for enrollees who do not use the insurance benefits often or for certain lifestyle characteristics (e. g. , non-smoker). The government provides tax-financed, means-tested subsidies to low-income families to assist in the purchasing of the compulsory insurance. The goal is to keep total premium for a family below 8% to 10% of the family income.

Insurers are required to enroll all applicants for compulsory insurance and must do so at community-rated premiums, meaning that the same premium is charged each enrollee of the same plan, regardless of individual characteristics. Premium rates are audited by the Federal Office of Social Insurance, which has the authority to reduce proposed premiums. Because of the community rating, some insurers may enroll more than a proportionate share of high-risk individuals, where high risk is determined solely on enrollee age and gender. To alleviate this inequity, the government makes a post-enrollment risk adjustment through which insurers with above average risk pools receive compensation from those with below average risk pools. (Supplemental coverage premiums may be individually adjusted for enrollee history, risk, and gender).

Physicians, Hospitals, and Prescription Drugs

Switzerland is made up of 26 cantons, or government regions. A physician fee schedule is negotiated per canton between the physicians’ association and the insurance association. The schedule than applies to all physicians and insurers in that canton. For enrollees of only compulsory insurance (i. e. , without supplemental coverage), physicians are prohibited from billing for any service not covered by the health insurance policy.

Public hospitals are owned by the cantons and receive government subsidies. Enrollees with only compulsory insurance must seek care at the public hospitals. Those with supplemental coverage may access private hospitals, for which fees are negotiated with the insurance companies. Only hospitals on a cantonal-approved list are eligible for reimbursement under the compulsory insurance plan.

The Federal Department of Home Affairs determines the prescription drug formulary (the list of drugs covered by the insurance) and sets the maximum allowable prices for drugs. It also determines which laboratory services and durable medical equipment are covered by the insurance.

Results of the Swiss System

Herzlinger and Parsa-Parsi found that Swiss health care expenses are lower than those of the United States while outcomes for selected diseases are the same or better. The Swiss also have more health care resources (e. g. , hospital beds, equipment, physicians) per capita than the United States. Competition between Swiss insurers helps keep administrative costs down. Because of the compulsory nature of the Swiss system, the authors site inefficiencies not seen in the U. S. system, such as higher hospital admission rates and much longer hospital stays. They conclude, however, that the less regulated and more expensive U. S. system is overall more inefficient and inequitable than the Swiss scheme.

Reinhardt makes note of the relatively higher out-of-pocket expenses for the Swiss compared to other nations and a high use of resources while still achieving a total health spending per capita that is 35% lower than in the United States. He concludes that this is because prices of health care are substantially lower in Switzerland, which is perhaps due to the heavy government regulation throughout the health care system. He also points out that the Swiss system is not the free market-based system that U. S. proponents generally think of when they discuss consumer-driven health care, but is actually closer to the universal health care plan proposed by President Clinton that combined consumer choice and government regulation.

U. S. CONSUMER-DRIVEN HEALTH CARE

Consumer-driven health care proponents in the United States believe that this is the next step in the evolution of affordable and accessible health care in our country. They believe that putting more health care decision-making in the hands of the individual consumer will slow the growth of medical costs and decrease the number of uninsured.

The U. S. concept of consumer-driven health care relies on traditional market forces of supply and demand, more transparent pricing, government oversight, and a government safety net. According to proponents, in a consumer-driven model, consumers buy health insurance directly from insurers, insurers freely design and price insurance plans, and providers freely price health care services. Consumers are given information about the quality and cost of health care to make informed decisions and have significantly more control over how they spend health care dollars. Insurers and providers rely on typical market competition relative to price and quality to win consumers and make profits.

Proponents indicate that government still plays an important role in a consumer-driven health care system. Government regulates anticompetitive activity, unfair trade practices, fraud, insurer solvency, and provider credentialing and conduct. The Swiss system currently engages in more stringent regulation than U. S. consumer-driven health care proponents envision.

Critics of consumer-driven health care plans in the United States believe that such plans will lead to adverse selection for the competing traditional plans. In other words, they believe that consumer-driven plans will attract the young and healthy, leaving the higher-risk individuals to the traditional plans. This would cause the price of traditional plans to increase, thus putting additional cost pressure on those individuals needing the most health care services and potentially leading to an increase in the uninsured. Critics also fear that consumer-driven plans will cause individuals to avoid necessary care because of cost concerns.

Products

The most common consumer-driven model in the United States combines a high-deductible health plan with a health care spending account. The high-deductible plans generally carry lower premiums than traditional lower-deductible plans. Spending accounts give an individual more control over when and how to spend health care dollars. Such plans include Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), and Health Savings Accounts (HSAs).

Flexible Spending Accounts. FSAs permit employees to allocate a portion of their salaries pre-tax for certain medical costs not covered by their health insurance policies. Employers may also contribute to the

accounts. FSAs are permitted under Section 125 of the Internal Revenue Code. The code includes a “use-it-or-lose-it” rule that means employees forfeit any money left in the account at the end of the year.

Health Reimbursement Accounts. Employers fund HRAs with money used to reimburse employees for qualified medical expenses, in accordance with Sections 105 and 106 of the Internal Revenue Code and per 2002 U. S. Treasury guidance. Employers receive preferential tax treatment on the funds set aside by deducting it is a business expense. All unused funds can be rolled over to the next plan year but remain the property of the employer should the employee change jobs.

Health Savings Accounts. HSAs allow employees to set aside pre-tax dollars for medical care. Employers may also contribute to the accounts. The 2004 Medicare Modernization Act created the HSA, which builds upon an earlier version, the Medical Savings Account. HSA money can be invested in stocks, bonds, or mutual funds and earnings are tax-free. Money may be withdrawn tax-free so long as it is spent on medical expenses. The account can build year to year, helping to fund future health care needs. HSA funds belong to the employee, who can take the account with him when he changes jobs, like a 401(k) retirement savings plan.

Insurers

More than 80 insurers offer HSAs in the United States, according to America’s Health Insurance Plans (AHIP), a national trade organization. Of those, 13 offer HSAs in Connecticut. Seven of these offer HSAs to individuals, four to small employers, and eight to large employers. Table 1 shows the insurers reportedly issuing HSAs in Connecticut.

Table 1: HSA Insurers in Connecticut

Source: America’s Health Insurance Plans at http: //www. hsadecisions. org/directory. asp (viewed 1/4/2005).

Not reported by AHIP as an HSA carrier is UnitedHealth Group, which acquired Golden Rule in 2003. Golden Rule Insurance Company, a leading provider of individual insurance, including HSAs, issued a news release in September 2004 stating that its customers had exceeded more than $ 110 million saved in HSAs and that one of every three customers now enrolls in an HSA. UnitedHealth Group is also in the process of acquiring Definity Health Corp. , the nation’s second-largest writer of consumer-driven health care plans in 2003. Definity projects 500,000 consumer-driven plan enrollees in 2005, and UnitedHealth projects an additional 850,000 enrollees (Business Insurance, Nov. 29, 2004).

Employers and Individuals

By 2006, 73% of U. S. employers are likely or somewhat likely to offer HSAs, according to Mercer Human Resource Consulting survey. As many as 32 million employees (20% of all employees) may enroll in a high-deductible consumer-driven account over the next five years, according to Edward Kaplan of Segal Co. , a national consulting firm.

As of December 2004, consumer-driven health care plans covered more than 1. 5 million Americans, according to the National Association of Health Insurance Underwriters. The federal government is offering 10 million employees an HSA option in 2005, according to a Business Week article (Howard Gleckman, Your New Health Plan, Nov. 8, 2004).

IPLAN STUDY

UnitedHealth Group’s Consumer Solutions business, whose products include iPlan, a consumer-driven health plan, conducted a study of consumer-driven plan enrollees that showed such plans drive positive changes in consumer behavior and medical costs. The company said in its June 18, 2004 news release that the study showed that when consumers become an active participant in health care and receive the necessary tools to navigate the system, better health care decisions and better use of resources follow.

The study analyzed 20,000 iPlan enrollees and 25,000 traditional health plan participants over a two-year period. The study found that iPlan enrollees had: (1) a drop in the number of claims per 1,000 enrollees compared to the year before enrollment; (2) a decrease in emergency room visits; (3) significantly less-than-expected medical cost trends; (4) reduced specialist visits, outpatient surgeries, and X-ray and lab services; and (5) higher utilization of preventive services.

Tom Policelli, President of iPlan, said the study shows that enrollees in consumer-driven plans are more selective about the services they receive and the health care dollars they spend. The higher use of preventive care seems to demonstrate that iPlan participants are paying more attention to their health.

The study also found that iPlan enrollees (1) had a higher registration rate on UnitedHealth’s consumer information web site; (2) called customer service most often to verify account balances; (3) carried an account balance into the new plan year in the majority of instances; and (4) used in-network services, which cost less than out-of-network services, at least 90% of the time.

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