Health Savings Shortfalls
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.