The first big step in the Megatrend of consumer-directed health occurred ten years ago, with enactment of tax-favored Health Savings Accounts (HSAs) for out-of-pocket medical expenses coupled with high-deductible health plans.

According to America’s Health Insurance Plans, more than 13.5 million people are covered by HDHP/HSA plans, a jump of almost 20 % in one year.

While HSAs gave a push to consumer-directed health, the Affordable Care Act could turbo-charge this trend.  With so much uncertainty about how healthcare reform will affect employer costs, new ACA compliance mandates could catalyze a transformation of employer-sponsored health coverage.

Facing a cascade of onerous new regulations, employers will share greater responsibility with employees for making choices about coverage options, health care providers and wellness programs. Read more.

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ACA Megatrend #3: Consumer-Directed Health

Mon Sep 16, 2013

The first big step in the Megatrend of consumer-directed health occurred ten years ago, with enactment of tax-favored Health Savings Accounts (HSAs) for out-of-pocket medical expenses coupled with high-deductible health plans.

According to America’s Health Insurance Plans, more than 13.5 million people are covered by HDHP/HSA plans, a jump of almost 20 % in one year.

While HSAs gave a push to consumer-directed health, the Affordable Care Act could turbo-charge this trend.  With so much uncertainty about how healthcare reform will affect employer costs, new ACA compliance mandates could catalyze a transformation of employer-sponsored health coverage.

Facing a cascade of onerous new regulations, employers will share greater responsibility with employees for making choices about coverage options, health care providers and wellness programs.

Among the most difficult ACA compliance rules will be the “Play or Pay” mandate that requires employers to provide “affordable” and “minimum value” health coverage or risk expensive penalties. 

But the ACA provision that will surely propel the trend towards consumer-directed health is the so-called “Cadillac Tax.”   Starting in 2018, Washington will levy a 40% excise tax on employer-sponsored health plans that exceed certain dollar value thresholds.  In the first year these triggers will be $10,200 for individual coverage and $27,500 for family plans, with higher levels in certain cases.

Experts predict that by 2020 the healthcare reform tax on high value health plans could potentially impact half of all employer-sponsored plans.  The Cadillac Tax could prove to be the single most important provision in the healthcare reform law.

With employers on the hook for a new 40% tax on their “excess value” health plans, it’s safe to assume they will do everything possible to limit premiums and increase participant  cost-sharing, precisely what Congress intended the provision to do.

The days of $250 deductibles and $10 co-pays are over.  The trend toward consumer leadership in healthcare and health insurance, sparked by HSAs, has now become a Megatrend.

Shifting from an employer-based to a consumer-based health coverage model represents a seismic change in the world of work.  It will no doubt prove challenging for employers and consumers and further complicate real-world implementation of the Affordable Care Act.  Consumer- directed health is inevitable; we can only hope that at the end of the day healthier families are its enduring result.