Defining Consumer-Driven Health Care

Published January 1, 2003

A consumer-driven health plan defines the dollar amount an employer will contribute to employee health insurance premiums and asks employees to be more responsible for their own health care decisions, lifestyle choices, and cost-sharing.

An employer gives employees a certain amount of money–a defined contribution–for health care. This is in contrast to a defined benefit plan, in which the employer defines and pays only for certain benefits.

Consumer-driven plans put consumers at the center of managing their own health care. While defined-benefit health insurance was created for all the right reasons, it shifted responsibility from “consumer” to “employer.” As a result, consumers became insensitive to the real cost of health care, an acknowledged factor in today’s health care inflation.

Consumer-driven plans put the law of supply and demand back into the hands of the consumer. That’s the way it is when you shop for a house or a car or your groceries.

The potential benefits of consumer-driven health plans, to employers as well as employees, are obvious. Better results for all occur when employees have more involvement and are fully engaged in purchasing health care and making their own health care decisions.

Consumer-driven health care is also the acknowledgment that tight-fisted control of health care, either by government or by corporations, does not work.

IT’S YOUR HEALTH is written by Conrad Meier, senior fellow in health policy at The Heartland Institute. This program is produced as a public service by Radio America. Meier passed away unexpectedly on March 18, 2005.