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Will 2007 Be Make-Or-Break Year For Consumer-Driven Health Plans?

By Staff Writer

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The coming year may be the year when “consumer-driven health plans” either attract large numbers of consumers and employers or are relegated to the category of great niche products that never quite caught on. 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 this decade what health maintenance organizations were to the 80s.

Thus far, the answer seems to be “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.

America’s Health Insurance Plans, Washington, includings dependents and self-funded health accounts in its total, 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 be 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, 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 increases at the traditional plans, and the difference adds up over time, he says.

The workers who have employer-funded health account plans said they 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 wellness benefits, the health account plan members were more likely to say they have had Pap smears and mammograms in the past year.

But researchers who conducted a 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.

Here are some other health coverage trends to watch in 2007.

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 rise was the lowest since the 1990s.

But Wright says the rate of increase is still too high. 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 for self-insured plans are getting tighter, he says.

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 PPO and HMO plans.

The Kaiser and EBRI/Commonwealth Fund surveys found, for example, 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 “health care shopping” information than health account plan members 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.

Wellness and disease management programs gather steam. Health insurers and employers had trouble pushing these programs a few years ago, when complaints surfaced that the programs required large upfront expenditures with little assurances of quick returns on the investments. In the past few years, though, concerns about the U.S. obesity epidemic have helped program organizers get more attention.

Limited benefit medical plans get more mainstream appeal. 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.

Aetna Inc., Hartford, and CIGNA Corp., Philadelphia, also are developing mini med programs.

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, brokers say.

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, Powell says.

Financial services companies outside the major medical market may try to do something. Companies that sell products such as disability and life insurance and retirement products are starting to notice that rising health insurance costs could be a problem for them as well as for the health insurers.

Researchers at Ameriprise Financial Inc., Minneapolis, for example, recently published a report suggesting that 20% of workers surveyed may cut contributions to employer-sponsored retirement plans because of concerns about rising health insurance costs and the increasing amounts employees must pay out of pocket for medical services.