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Testimony Before the Joint Economic Committee On Impact of “Consumer-Driven” Healthcare on Consumers

Employers, who provide health insurance for about 60 percent of the U.S. population, are increasingly under pressure to constrain their spending on health insurance premiums, which have been growing in recent years at an annual rate of 5 to 8 percent. This pressure is aggravated by the recent weakness in the economy. One way to reduce the employer premiums for health insurance, and to make payments more predictable, is to switch to a “defined contribution” approach to health insurance, similar to the shift in recent decades from defined benefit pensions to defined contribution pensions. In the employer health insurance market, a key distinguishing feature of its effort to move toward a defined contribution model is high-deductible coverage. As indicated by the title of the Joint Economic Committee hearing, the term that insurers and employers have coined to name this new trend in the marketplace is “consumer-driven healthcare.” Consumers Union, which appreciates the opportunity to present our views to the committee, is troubled by this trend in the marketplace. In our testimony, we plan to explain why we believe this type of coverage is misnamed, misguided from a policy perspective, and a dangerous distraction from the health insurance crisis that faces 43.6 million uninsured consumers and tens of millions of underinsured consumers.