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The Big Health Story In 2006: Waiting For Consumers To Drive

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Right now, health insurance brokers, insurers and policy experts are in roughly the same position they were in a year ago: looking to see whether health savings accounts, health reimbursement arrangements and other personal health accounts will transform the health finance landscape.

Last year, benefits consultants were wondering whether HSAs would be to 2005 what health maintenance organizations were to 1995.

For 2005, the answer appears to be “no.”

Although the benefits arm of Fidelity Investments, Boston, which handles large employers, says 3.9% of its clients’ health plan members have “consumer-driven health plans” that incorporate HSAs or HRAs, only 1.4% of 1,204 consumers who participated in a recent survey commissioned by the Employee Benefit Research Institute, Washington, and The Commonwealth Fund, New York, had CDHP coverage.

Although many employers wanted to talk about CDHPs this past year, fewer than 25% of group health clients seriously considered the plans, and fewer than 5% adopted them, says Kevin Roller, president of Roller Consulting Company, Conshohocken, Pa.

From employers’ perspective, “there’s a lack of quality information demonstrating that this is a win-win situation for everyone,” Roller says.

Nathaniel Brinn, CEO of HSA Bank, Sheboygan, Wis., a unit of Webster Financial Corp., Waterbury, Conn., says he sees large and midsize companies starting to dip their toes in the HSA water. In 2007, “we think the large companies will start to get more aggressive,” Brinn predicts.

Other Trends To Watch

Here are some other health coverage products, trends and issues to watch in 2006.

1. Efforts to improve the first-generation CDHPs. Brinn expects to see consumers and employers demand knowledgeable customer service from the banks that handle health account custody services, not just the basic ability to store and protect cash.

Other experts are hoping to see CDHPs develop better, detailed health care price and quality databases for consumers, along with enough CDHP performance data to show whether the programs really are improving the cost and quality of health care.

In December 2005, for example, the researchers who analyzed the EBRI/Commonwealth Fund survey data found that consumers who had high-deductible health coverage, either with or without personal health accounts, were far more likely than other privately insured consumers to talk to doctors about health care costs and to ask for prescriptions for cheaper drugs. But only 12% of the high-deductible coverage holders said their health plans provided hospital cost information, while 15% of the members of traditional plans said their plans provided such data.

Earlier, authors of a study published in the journal Health Affairs in November gave several CDHPs that incorporate HSAs or HRAs an average grade of F for the quality and quantity of their health care provider cost information.

Aetna Inc., Hartford, and CIGNA Corp., Philadelphia, are examples of carriers that are starting to put provider-specific price information on the web.

Meanwhile, employers are looking for conclusive evidence that shifting to CDHPs will lead to enough premium savings to justify a radical shift in plan design.

Destiny Health, Chicago, a unit of Discovery Health Ltd., Sandton, South Africa, is an example of an account-based health plan company that has been in the market since 2000.

Destiny figures show that, over the course of 24 months, a typical employer customer sees the share of prescriptions referring to generic drugs increase about 50%, according to Stuart Slutzky, a Destiny vice president. “That has a pretty dramatic effect on costs,” he says.

Health coverage rate increases are about five percentage points lower at a Destiny plan than a conventional plan, Slutzky estimates.

At HSA Bank, Brinn says he would like to see Congress tinker with the HSA program rules to raise the maximum HSA contribution limit, which now stands at $5,400 for a family.

Today, about 20% of HSA holders contribute the maximum amount each year and, in most cases, leave the money untouched, Brinn says.

2. Wellness and disease management programs. Out in the trenches, Roller and other benefits brokers and consultants say wellness programs and disease management programs are far more common than HSAs or HRAs.

Thanks to successful health management programs, in many cases, “our clients seemed to have had 0% to 10% [health rate] increases,” Roller says. “Most companies felt that was very good.”

Meanwhile, two new types of wellness programs that were rare in 2003 have been spreading rapidly: today, about 72% of large U.S. employers offer health risk assessments and about 40% offer personal health coaching, according to Watson Wyatt, Washington.

3. Limited benefit medical plans. Sellers of these plans hold costs down by capping benefits rather than increasing deductibles. A typical policy might cost workers only a few dollars a day but pay out less than $10,000 in benefits if the worker is hospitalized. The Human Resources Policy Association, Washington, drew attention to the products in October 2005 by including a limited benefit plan backed by a unit of UnitedHealth Group Inc., Minnetonka, Minn., in its new National Health Access program, a major effort to provide access to generously underwritten, consumer-paid health benefits for the four million freelancers, part-timers and others who work for large U.S. corporations but do not qualify for company-paid health coverage.

4. The uninsured. Government programs have helped increase the percentage of children with health coverage, and employers have managed to cover roughly the same number of workers that they covered in past years.

But many of the workers who are joining and increasing the size of the labor force do not have health coverage, and that reduced the share of workers covered by private, employer-sponsored health coverage in 2005, according to the federal Bureau of Labor Statistics.

America’s Health Insurance Plans and other industry groups are promoting tax incentives and risk pools for individuals with health problems as the best vehicles for reducing the ranks of the uninsured.

5. Mergers and acquisitions. UnitedHealth Group Inc. made a splash in July 2005 by agreeing to pay $8.1 billion in cash and stock for PacifiCare Health Systems Inc., Cypress, Calif.

6. Medicare reform. The new Medicare Advantage managed care program and the Medicare prescription drug plan are creating senior products sales opportunities for producers in that market. If successful, they also could influence the commercial health coverage market, by providing a model of the kind of public-private partnerships that might be used to provide health coverage for uninsured working-age people.

7. Market concentration. Some health policymakers could begin talking more about concentration of market managed care buying power in 2006. Researchers at the U.S. Government Accountability Office published a report in November showing that one carrier accounted for at least 50% of 2004 small group sales in nine of the 35 jurisdictions studied. In four jurisdictions, a single carrier accounted for at least 75% of small group sales.

The median small group market share of all Blue Cross and Blue Shield companies in the reporting states increased to 44%, from 34% in 2002.

8. Citizen soldiers are returning to their civilian employers after long tours of duty. Questions may crop up in 2006 about continuation of health coverage for returning reservists and Guard members and their dependents as well as coordination of benefits between civilian carriers, TriCare military carriers and the Veterans Benefits Administration system.

9. Katrina and Rita. Hurricanes slammed the New Orleans and Gulf Coast operations of health carriers such as Blue Cross and Blue Shield of Louisiana, Baton Rouge, La.; Humana Inc., Louisville, Ky.; and Private Healthcare Systems Inc., Waltham, Mass., a large provider network company. Early on, the carriers were struggling to restore operations while trying to find their own employees.

Now, operations are getting back to normal. Private Healthcare, for example, sent its president, Joseph Driscoll, to celebrate the reopening of its New Orleans regional office on Poydras Street.

But more pain lies ahead.

Louisiana Blue, for example, notes on its website that customers who were able to defer premium payments because of the storms now must pay all of the deferred premiums or face the loss of their health coverage.

Questions may crop up in 2006 about continuation of health coverage for returning reservists and Guard members and their dependents.

From employers’ perspective, ‘there’s a lack of quality information demonstrating that this is a win-win situation for everyone’


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