TOPICS
TOPICS
Health Savings Shortfalls
President Bush has championed high-deductible health care plans and the savings accounts that accompany them as a viable solution to escalating medical costs. But now, two years after the option was added to the Federal Employees Health Benefits Program, employees have not yet warmed to the idea.
High-deductible health plans and health savings accounts have surfaced in both the public and private sectors as a way to drive down health care costs and encourage workers to make more informed decisions about their care. The "consumer-directed" plans feature lower monthly premiums than traditional plans, but in exchange, have higher annual deductibles.
Some federal employee groups strongly oppose the plans, arguing that they could result in higher premiums and reduced benefits for employees and retirees enrolled in more comprehensive, traditional offerings. Those groups cite a 2005 Government Accountability Office report that found most participants in consumer-directed plans are younger, healthier and better educated than those in comprehensive plans.
Daniel Adcock, assistant legislative director for the National Active and Retired Federal Employees Association, says the consumer-directed plans run counter to the way group health insurance was designed to work. Younger and healthier enrollees, for example, often pay more in premiums for their health insurance than the benefits paid out for their health care. As enrollees age, however, their health needs increase, and many get more out of health insurance than they pay.
Still, there may be little reason to worry at all. In 2006, only 0.2 percent of FEHBP's 8 million participants were enrolled in an HSA or similar plan.
According to Adcock, the low enrollment so far has meant that the offering has a minimal effect on the comprehensive FEHBP plans. But an administration proposal that would allow Blue Cross Blue Shield's Federal Employee Program to offer a consumer-directed plan could jump-start enrollment, NARFE argues. The insurance giant is now limited by law to offering a maximum of two plans.
Even if the administration's proposal were to surface and pass in Congress, Blue Cross has said it has no intention, at least for now, of adding HSAs, largely because the demonstrated low participation among federal employees would make the offering unprofitable. But the company has advocated establishing the option, should enrollment in HSAs ever take off.
Meanwhile, as you look ahead to the 2008 open season for picking health care plans, here are some things to consider.
One of the major shortfalls of consumer-directed plans is the ongoing lack of transparency in pricing, Adcock says. While employees may place thousands of dollars each year in HSAs, specific information on the price of doctor visits, blood work and other services is difficult to find, making it hard for employees to shop around.
"Buying health care is not like buying a refrigerator," Adcock said. "When you buy health care, it shouldn't be based on the lowest bet. It should be based on which doctor and which hospital will provide you with the best care."
The Office of Personnel Management, which runs FEHBP, did not return calls seeking comment.
According to Asparity Decision Solutions, which provides online tools to help federal employees make more informed decisions on health plans, the average cost of high-deductible plans to federal employees for 2007 was $1,778 for self coverage and $3,614 for family coverage. On average, the cost of health maintenance organizations was $2,189 for self coverage and $4,776 for family coverage.
A December 2006 survey by the nonprofit Employee Benefit Research Institute found that overall enrollment in HSAs remains low, and employee satisfaction continues to lag when compared with comprehensive plans. But as costs continue to rise, it will be interesting to see whether more employees view the trade-off of lower premiums for higher deductibles, and potentially higher out-of-pocket costs, as worthwhile.
COMMENTS
- Mr. Stuart makes some marvelous points about HSAs and how many can benefit from the program. The challenge in the marketplace is education. In a group environment for the 1st time people have to make an informed decision on the type of healthcare that want for the family. The problem is they don't understand how their current plan options work, the co-pay structure limits their understanding on how much they pay for healthcare and they forget to include the cost the pay for coverage into the entire cost for care. Very simply, people have a difficult time understanding the math problem when making the decision on purchasing health insurance. Larry Deegan Posted July 2, 2007 2:38 PM
- This article distorts HSA's, as do most articles about them. It's somewhat ironic that Adcock claims that prices are hard to find, but then that price shouldn't matter in health care. If price shouldn't matter, should we even bother to learn what prices are for healthcare? Tell that to all the medical providers and professionals connected with healthcare who make their living that way. He is right about his first statement that pricing is hard to find, but simply blanketing everyone with HMO coverage will not solve the problem and will only serve to allow insurers to hide costs even more than is already done. Likewise, while family HMO coverage might only cost $4700 or so to gvt. workers, this amount is certainly subsidized by us ignorant taxpayers. The true cost of insuring a family under an HMO plan is closer to $10-12k. The HSA savings, if the feds were consistent in their funding, would likely keep participants well-covered in the event of a medical need. The big difference, as the first commenter said, is that HSA's are about choice. The system just needs to be adjusted to give people the tools to make those choices based on sound information. Whether Congress has the stomach to take that next step and to remove the control from the insurers is the ultimate question in the success or failure of the HSA program. Benefits Advisor Posted July 2, 2007 2:04 PM
- When an employer offers choice, then EVERY employee is better off, because each worker can make a personal choice to stay with the current plan or choose a different option. HSAs are great for people who [a] have low out-of-pocket expenses (most insured Americans, particularly the young and middle-aged healthy), [b] want to reduce taxable income, [c] want to create a long-term health care savings vehicle in tandem with their 401(k), [d] have high unreimbursed dental/orthodontic, vision and chiropractic out-of-pocket costs and [e] value the certainty of premium savings over the possibility of high deductible expenses. HSA regulations place an out-of-pocket maximum on a family’s total liability ($11,000 in 2007), and most plans cap out-of-pocket expenses far below this level. Think of automobile or homeowner’s insurance: Individuals regularly increase their deductibles, knowing they are certain to reduce premiums but will be responsible for more of the out-of-pocket costs before the insurance company steps in and pays most or all of the remaining bill, with a ceiling on out-of-pocket costs. One reason health insurance is so expensive is that there aren’t incentives for patients to be prudent consumers. Patients have been paying less and less of the total cost of inpatient, outpatient and prescription drug services for more than 40 years. Imagine a family’s being allowed to fill a grocery basket every week for a $100 copay, regardless of volume purchased. That’s the incentive structure that many health plans contain. Health plans have evolved into “health coverage,” not “health insurance.” Health plans no longer cover against just unexpected risk (the definition of “insurance”). They also cover expected (routine physical, occasional sick visit, etc.) costs, with no relation between quantity demanded by patients and cost. HSA plans are not perfect, and cost information is in its infancy (and could be greatly enhanced if the largest payers, governments, began to publish cost figures to jump-start “transparency”), but HSAs offer the prospect of making a lot of individuals better off and returning to the pre-HMO (pre-1980s for most people) model in which patients felt some financial impact of their treatments. Bill Stuart Posted June 29, 2007 1:03 PM
