August 2003                       return to the newsletter contents page

Consumerism Key to Containing Health Care Cost Increases

by Allen Wishner, CEO

Flexible Benefit Service Corporation

A new study shows that health insurance premiums will rise 50% by 2006 – an alarming statistic considering businesses are seriously overburdened already by a decade of annual double-digit premium increases. At this rate, the ranks of the uninsured are forecasted to swell by 10 million, up to 51 million Americans.

At the same time, the Democratic presidential hopefuls have come charging out of the starting gate with health care reform as their “defining” issue. Yet, what solutions have they brought forward, beyond universal health care – which simply shifts the burden from the private to the public sector but does not address the fundamental flaw of our existing system: lack of consumerism. In our present system, insured consumers face prices that indicate to them that health care is free or nearly so. There is no service that is more personal or more intimate. There is also no service that is more expensive. And there seems to be no limit to how much money we could potentially spend on health care services. Workers are insulated from the cost of consuming services, and their consumption limited only by their priorities.

As we look to the future, we can anticipate accelerated technological progress that will bring many new products to the medical care marketplace. These advances will rapidly expand the possibilities for spending money on health care. There is no more important issue than the future of our health care system.

Over the past several years, employers, workers, and the self-employed have been looking for ways to lower health care costs. Over the past six years, Congress made changes to the tax code establishing tax-favored status to consumer-driven health care models, specifically Archer Medical Savings Accounts (MSAs) and Health Reimbursement Accounts (HRAs). These new plan designs represent the beginning of a free market approach to reform the current health care system. Major organizations and even the health insurance industry have embraced plan designs that give employers and employees the ability to control and define contributions as a way to tackle – and even reduce – double-digit premium inflation.

Recognizing that excessively generous benefits lead to extraordinary utilization, the National Association of Wholesalers-Distributors has adopted a revolutionary solution for their more than 100 trade association members representing 40,000 companies with 150,000 places of business: A “plan of insurance” designed to reconnect the consumer with the cost of goods and services. Through a partnership with Flexible Benefit Service Corporation (FBSC) and Humana, Inc., they have worked together to design an exclusive, multi-state consumer-driven plan for their industry members which represents a significant portion of the nation’s annual $2.8 trillion merchant wholesale-distribution sales. They have taken a direct approach to addressing the problem of health care cost inflation by creating consumer incentives to conserve health care expenses. This has been the missing ingredient in our current employer-sponsored health insurance market. The plan works by combining a low-premium, high-deductible major medical policy with an employer-funded, tax advantaged “Health Reimbursement Account.” Since unused funds in the HRA roll over year-to-year, employees are given incentives to exert free market pressure on health care providers.

With the emphasis of health care reform on cost containment, consumer-driven MSAs and HRAs represent an alternative plan, designed to foster cost consciousness and economically driven choice at the level of the individual decision maker. Most of our health care problems related to rapid expenditure growth are due to the absence of a proper pricing system. Empowering consumers to take more responsibility for their health care will make prices more meaningful and stimulate competition among providers on the basis of price and service.

No system, public or private, can meet the demands for medical care in the quantities that are generated when patients view it as entitlement. If we are ever going to stabilize the cost of health care, we need to get every employee to treat health care dollars as if they were their own. Every penny spent on health care comes from us. We pay the taxes, we pay the insurance premiums, and we earn our benefits as surely as we earn our wages.

For more information about the new, consumer-driven NAW/FBSC Health Reimbursement Account (HRA), call Flexible Benefit Service Corporation (FBSC) at 1-888-345-7990 or, visit the NAW/Flexible Benefit Service Corporation co-branded website at http://naw.flexiblebenefit.com.

Allen Wishner is co-founder and Chief Executive Officer of Flexible Benefit Service Corporation, a full-service insurance brokerage firm located in Rosemont, Illinois. Allen is responsible for the development and promotion of plan designs that pursue consumer-driven economics-Archer MSAs, Cafeteria Plan Management, Health Reimbursement Accounts and the continuing administration and marketing of these plans.