Get ready for another dose of "personal responsibility." Just as many employers have shifted the onus of saving for retirement to employees by swapping traditional pensions for 401(k)s, a similar trend is emerging in employer-provided health insurance. Triggered by skyrocketing health care costs, employers are experimenting with a new approach known as consumer-driven health care plans.

Although such plans are still a small portion of the market, the idea of putting health care dollars and decisions directly in the hands of employees is catching on quickly. In theory, consumers will make more judicious decisions -- such as choosing generic drugs over more expensive name brands -- when they are spending their own money. Proponents of the new approach say traditional plans insulate consumers from the true cost of health care.

There are several variations on the consumer-driven concept, but, in general, here is how it works: Start with a high-deductible policy, say, $1,600 for an employee or $3,200 for the employee and his or her family. Add a tax-free reimbursement account into which the employer deposits a set amount of money each year, say, $1,000 for an individual or $2,000 for a family. Employees draw on the funds to pay qualified medical expenses, including those not normally covered, such as Lasik eye surgery, orthodontia and prescriptions for Viagra. If the employee exhausts the reimbursement account, he or she pays the remainder of the plan's deductible out of pocket before the insurance kicks in. In the above example, the potential out-of-pocket cost would be $600 for an individual and $1,200 for a family.

Here's the kicker: If you don't spend all the money in the account, what's left rolls over to the next year.

Winners and losers

Critics of the approach -- including Gail Shearer, director of health-policy analysis for Consumers Union -- worry that younger, healthier employees will flock to the new plans, and older, sicker ones will stick with traditional insurance. That could decimate the risk pool, Shearer warns, driving up premiums for traditional policies.

The jury is still out as to whether consumers will change their spending patterns in response to the new option. But one thing is certain: More people will encounter it firsthand over the next few years. Since 2001, the number of participants in these plans has grown from about 4,000 to more than 500,000. A survey conducted by Mercer Human Resource Consulting found that 40% of firms with 20,000 or more employees will probably offer a consumer-driven health care option by the end of 2004. For smaller businesses, says Dave Delahanty, a consultant with Buck Consultants in Minneapolis, it may eventually be the only option.

--Reporter: Katy Marquardt

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