The Big Health Story In 2007: Consumers, Please Pick Up Your Keys. Please?
BY ALLISON BELL
December 19/26, 2006
The coming year may be the year when “consumer-driven health plans” either attract large numbers of consumers and employers or get relegated to the category of great niche products.
What Your Peers Are Reading
For 2 years, benefits consultants and health policy experts have been wondering whether health savings accounts and health reimbursement arrangements were on their way to being to the Aughties what health maintenance organizations were to the 1980s.
For the past 2 years, the answer seems to have been “no.”
Only 1.3% of the 1,600 insured, working-age adults who participated in a recent survey commissioned by the Employee Benefit Research Institute, Washington, and the Commonwealth Fund, New York, said they had employer-funded personal health accounts along with high-deductible coverage.
American’s Health Insurance Plans, Washington, includes dependents and self-funded health accounts in its total, and ?? has found that the number of health account owners increased to 3.2 million earlier this year, from 1 million in March 2005.
Either way, health account plans still appear to account for only a tiny percentage of the commercial health insurance market, the authors write.
Out in the real world, “there continues to be a good bit of interest” in health account plans, says Lamar Wright, a benefits broker with The Benefit Company, Atlanta. “But there’s more talk than action.”
One problem is that the cost of the high-deductible plans used with HSAs and many HRAs is still almost as high as the cost of the traditional plans, Wright says.
Up in Michigan, “we began to see more movement toward HSAs, but more to HRAs,” says Kristopher Powell, president of BenePro Inc., Royal Oak, Mich. “The employers were happy because of the cost savings, but it took a lot of work to get the employees up to speed.”
Once an employer has a health account plan for about 3 years,though, the employees seem to like it about as much they like other types of plans, and the well-established health account plans do not seem to generate any more employee complaints about claims than the traditional plans do, Powell says.
Cost increases at the health account plans seem to be about 2 percentage points lower than the increases at the traditional plans, and the difference adds up over time, Powell says.
The workers who do have employer-funded health account plans were about 20% more likely to stay out of the emergency room and much more likely to ask doctors to prescribe cheaper drugs and avoid unnecessary diagnostic tests.
Thanks to health account plan wellness benefits, the health account plan members were more likely to have had Pap smears and mammograms in the past year.
But researchers who conducted another survey for the Henry J. Kaiser Family Foundation, Menlo Park, N.J., found that 9% of health account plan members reported suffering from a temporary disability as a result of postponing seeking medical care due to concerns about cost, compared with 5% of the survey participants in traditional plans.
Other Trends To Watch
Here are some other health coverage products, trends and issues to watch in 2007.
2. Costs keeping going up. The consulting arm of Aon Corp., Chicago, is reporting that U.S. health care cost trends were up about 12% this fall for preferred provider organization plans and up about 10.5% for health account plans.
The health account plan increase is the lowest Aon has recorded since it began tracking the plans in spring 2004, and the PPO increase was the lowest since the 1990s.
But Wright says the rate of increase is still too higher. It “may have moderated a little bit, but only by a small amount,” he says. “Next year, I think costs will continue to go up by an amount larger than the general inflation rate.”
Meanwhile, underwriting has gotten stricter, and catastrophic claims limits are getting tigheter, Wright says.
3. Democrats. Another reporter here is writing the Washington article, but, clearly, the change in control of the U.S. House, the Democrats’ fragile hold over the Senate, and Democrats’ gains at the state level are bound, at the very least, to affect the agendas and witness lists of congressional and state legislature health finance hearings.
4. Consumer-driven health care reshapes traditional plans. One reason that health account plans may be having trouble competing is that they have rapidly succeeded at transforming conventional preferred provider organization and health maintenance organization plans.
The Kaiser and EBRI/Commonwealth Fund surveys have, for example, found that traditional plan members are getting much more cost and quality information from their plans than they used to, and that they often get more “consumer shopping” information than members of the health account plans do.
President Bush contributed to the push for transparency in health care costs in August, by signing an executive order that encourages federal health finance agencies to publish procedure prices and to come up with estimates of the overall cost of treating common conditions.
5. Wellness and disease management programs.
6. 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.
Despite continuing increases in major medical costs, most mini med issuers and brokers seem to be sticking to their goal of offering the mini med programs to workers who otherwise would have no health coverage, not selling programs to replace existing major medical plans,
In the Atlanta area, among Benefit Company clients, “there is some interest in mini meds, but not that much,” Wright says.
In Michigan, employers seem to be using mini meds mainly to help classes of employees who previously had no coverage at all, Wright says.
7. Financial services companies outside the major medical market may try to do what they can to rein in health care costs to improve their own performance.
Researchers at Ameriprise Financial Inc., Minneapolis, for example, recently published a survey report suggesting that 20% of workers surveyed may cut contributions to employer-sponsored retirement plans because of concerns about increasing health insurance costs and the increasing amounts employees must pay out of pocket for medical services.
8. Internal Controls. This may be another year in which the U.S. Securities and Exchange Commission may make executives at publicly traded health insurers wish they had never heard of stock options.
9. Mergers and acquisitions. This year, many health insurance market watchers are expecting at least one and possible two large managed care companies to be acquired.
In 2006, MultiPlan Inc., New York, a giant provider network company, made a very quiet splash by completing an acquisition of a major competitor, Private Healthcare Systems Inc., Waltham, Mass.
The old UICI, North Richland Hills, Texas, a specialist in niche health insurance products, generated some of the other activity, by changing itself into HealthMarkets Inc., a health account plan company, and selling some of the niche product divisions. CIGNA Corp., Philadelphia, acquired the Star HRG mini med unit, and UnitedHealth Group Inc., Minnetonka, Minn., acquired HealthMarkets’ student health insurance business.