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November 11, 2001 at 07:00 PM
HSAs Touted As An Answer To Rising Health Care Costs
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With the cost of health care increasing, employers are looking for innovative new ways to trim expenses when it comes to employee health plans.
“Its the employer who is the buyer of health care in the United States,” says Ed Philips, president of Philips-Cox Insurance Services in Virginia Beach, Va.
“These companies want to look good to the stockholders, so they have to trim costs – and health care is a major cost,” he says.
Philips says that because of the increase in health care costs, employers are starting to put more of the expense back on to employees. “You’re going to see a cost transfer accelerate.”
Dr. Michael Parkinson, who is chief health and medical officer for Lumenos, Alexandria, Va., cites three factors which are driving the need for a new kind of health care plan. “The foremost factor driving it is the return to double-digit health care cost inflation.
“Another one is the dissatisfaction with many of the limitations placed on patients under managed care,” he says.
“And the third,” he continues, “is the realization by informed purchasers that the current health care delivery system is extremely inefficient administratively, from a clinical standpoint it is excessively wasteful, and in many cases delivering sub par quality and often times dangerous medical care.”
A relatively new option in health care has evolved as a result of these concerns and is starting to attract interest from producers like Philips: employer funded Health Savings Accounts.
“These kinds of plans are meant to begin the education process,” says Robin Downey, who heads product development for Aetna in New York.
“People don’t understand what health care costs any longer,” says Downey. “People really think now that an office visit costs $10, and a drug costs $5.”
Philips agrees, “The mindset of most people with health insurance is that after the co-pay, it’s free.
“We’ve got to find a way to let people understand it really isn’t free, and they shouldn’t spend the money as though it’s someone else’s, because it is truly theirs,” he says.
Philips says that with an employer funded health savings account, participants can see the reward for better management of health expenses.
There are only a few companies marketing these types of plans, he says, and, Aetna and Lumenos are two of them.
Downey describes Aetna’s recently introduced Aetna HealthFund as “a PPO plan with a health fund attached to it, which is all employer funded.”
The basic mechanics of the program involve an employer, or plan sponsor, making a certain amount of dollars available to an employee for health care expenses. Dollars that aren’t used up in that year can be accrued for the employee to use for future medical expenses in later years. The health savings account is combined with a high deductible PPO-like plan.
“We call it a consumer directed health plan,” says Downey.
By combining a high deducible employer funded PPO plan with a health savings account, she says, the participant [employee] has more control over where the health care dollars go.
Dr. Parkinson agrees, “If there is a promise of control of the dollars, changing the locus of control from a third party to an individual who consumes those dollars, it’s much more likely that they’ll ask the hard questions of the system.”
Dr. Parkinson feels that by empowering the consumer to ask questions about health care and its expense, it will drive better quality and lower costs.
“Going into this some people have said that you’re probably going to see 10-20% improved reduction in cost for that portion of medical spending thats directly controlled by the consumer,” says Parkinson. “They’ll start to think of it as their money.”
By giving people more control over their medical expenses, says Philips, it will also improve the patient/doctor relationship.
“Now a doctor is going to be asked ‘How much is that prescription?’” says Philips.
