NEW YORK (Business Wire EON) October 1, 2007 -- A new analysis by the management consulting firm Booz Allen Hamilton (www.boozallen.com) projects that up to 60 percent of the privately insured in the U.S. – 120 million people – will be enrolled in some form of high-cost health plan by 2020. As these plans become increasingly pervasive, more consumers will assume greater responsibility for the cost of their healthcare, sparking an emerging crisis in the middle class as many are forced to make tradeoffs between medical care and other critical financial needs.

Booz Allen’s analysis is the result of interviews with executives from leading Blue Cross Blue Shield and national health plans, as well as data and insights from industry trade associations, policy groups and government agencies. The findings point to the urgent need for a radical restructuring of the U.S. healthcare system as the move towards greater consumer cost responsibility – frequently touted as an integral part of the solution to rising health costs – is even today far more widespread than consumer-driven health plan enrollment data show.

“Giving consumers more cost responsibility in a broken wholesale healthcare market will not work,” said Gary Ahlquist, Booz Allen senior vice president. “The supply side of healthcare needs to be restructured such that patients can shop by comparing value. Consumers will also need real options for healthcare delivery and incentives to adopt healthy behaviors, along with new insurance and financial services products to help finance their care.”

As employers of all sizes weigh how they can continue to affordably provide health coverage to their employees, and the nation searches for solutions to cover the uninsured, Booz Allen finds:

Many consumers are being forced to spend more of their income on healthcare. Today, more than 20 percent of the privately insured, some 38 million people, face out-of-pocket healthcare expenses that account for more than 10 percent of their after-tax incomes.

More than 15 percent of the privately insured are already enrolled in a high-deductible health plan—including coverage acquired through an employer or individually. Ten percent of people enrolled in “conventional” plans such as a PPO faced deductibles exceeding $1,000 in 2007, up from only four percent in 2002. At the same time, enrollment in consumer-driven health plans paired with a tax-exempt Health Savings or Health Reimbursement Account is projected at five to six percent of the market in 2007.

Conventional plans with high deductibles and high out-of-pocket costs will continue to dominate. By 2020, Booz Allen predicts that enrollment in conventional plans with these high-cost features could reach 35 to 40 percent of the privately insured market, while enrollment in consumer-driven health plans paired with a tax-exempt Health Savings or Health Reimbursement Account could reach 20 to 25 percent.

Calls for mandatory coverage may force more employers and individuals to buy high-cost plans, which may not improve access to care. As employer coverage declines, the number of uninsured in the U.S. grew nearly five percent from 2005 to 47 million in 2006, according to data from the U.S. Census Bureau. States that mandate universal health insurance to help consumers gain coverage in the form of high deductible plans may ultimately have little impact as the out-of-pocket costs could prove too high a threshold for many to access care.

“Employer-provided health coverage has long been viewed as an important benefit and safety net. However, this is often no longer the case,” said David G. Knott, senior vice president at Booz Allen. “Even today, more than half of people enrolled in high-cost plans have no other healthcare option available to them. As the burden of healthcare costs increasingly shifts to the individual, consumers need solutions to ensure they can receive the care they need.”

A report on this analysis, “Healthcare Consumerism: Trends in Consumer Cost-Sharing,” is available on the Booz Allen web site.

About Booz Allen Hamilton

Booz Allen Hamilton has been at the forefront of management consulting for businesses and governments for more than 90 years. Providing consulting services in strategy, operations, organization and change, and information technology, Booz Allen is the one firm that helps clients solve their toughest problems, working by their side to help them achieve their missions. Booz Allen is committed to delivering results that endure.

With 19,000 employees on six continents, the firm generates annual sales of $4 billion. Booz Allen has been recognized as a consultant and an employer of choice. In 2007, for the third consecutive year, Fortune magazine named Booz Allen one of “The 100 Best Companies to Work For,” and for the past eight years, Working Mother has ranked the firm among its “100 Best Companies for Working Mothers.”

To learn more about the firm, visit the Booz Allen Web site at www.boozallen.com. To learn more about the best ideas in business, visit www.strategy-business.com, the Web site for strategy+business, a quarterly journal sponsored by Booz Allen.

Home