One sign that health savings accounts (HSAs) promote effective consumerism: an employee who bid out his colonoscopy and then chose to drive 60 miles to save $500 on the procedure.
That example sums up the value of adopting consumer-directed health plans (CDHPs), such as HSAs or health reimbursement arrangements (HRAs), according to presenters at the 24th National Conference on Health, Productivity & Human Capital, on Sept. 15, 2010, in Washington, D.C., an event sponsored by the not-for-profit National Business Group on Health.
An overview of HSAs and HRAs and how they differ is provided in this sidebar.
"CDHPs can increase employee engagement, lower costs and help control the cost trend," said Roy Ramthun, former senior advisor to the Secretary of the U.S. Treasury for health initiatives and former senior health policy advisor to President George W. Bush. He pointed to a growing body of evidence, including a 2009 study by the American Academy of Actuaries, Emerging Data on Consumer-Driven Health Plans, which found savings in the first year of adopting a CDHP ranged from a year-over-year reduction in costs of 4 percent (Cigna) to as much as a 10 to 15 percent reduction in costs (Aetna, Uniprise).
"When compared to a control population enrolled in traditional plans that experienced cost increases of 8 percent to 9 percent, the total savings generated could be as much as 12-20 percent in the first year," said Ramthun, now president of HSA Consulting Services, a health care consulting practice.
Ramthun made the case that CDHPs promote higher employee engagement on cost issues without reducing the quality of health care received—and may improve quality by promoting conversations between employees and care providers that result in informed decisions to avoid unnecessary (and unnecessarily expensive) treatments and procedures.
He pointed to research by the not-for-profit Employee Benefits Research Institute (EBRI) showing 53 percent of CDHP enrollees participated in a wellness/health promotion program when available, compared with 42 percent participation among traditional plan enrollees. CDHP enrollees were more likely to ask for a generic drug instead of a brand name, check the price of service before getting care, and to talk to their doctor about other treatment options and costs. (To read more about EBRI's findings, see “CDHP Enrollees Are Cost-Conscious, Use Wellness Programs”).
Citing a seven-year study (2002-2008) of health care claims by Aetna, Ramthun noted that CDHP enrollees had a 5 to 10 percent lower emergency room use compared with traditional plan enrollees. HSA enrollees, in particular, realized the greatest reduction in non-urgent ER visits.
HSA or HRA?
While Ramthun considers HSAs and HRAs both superior to traditional preferred-provider organization (PPO) plans, he sees a greater incentive for behavioral change with HSAs. As noted in the sidebar, HSAs are portable and unspent funds are rolled over to the next year, whereas funds in an HRA may or may not accumulate from year to year, at the employer's discretion, and revert to the employer when the employee leaves the organization. In addition, because HRAs must be employer funded, whereas HSAs are funded by employee and/or employer contributions, employees typically have more "skin in the game" with an HSA.
"Employees are more receptive when it's their own money on the line in these accounts, and that money doesn't evaporate at the end of the year," Ramthun commented.
High Level of Care
CDHP members accessed the same or higher levels of care compared with enrollees in traditional plans, Ramthun said, citing the Aetna study referred to above. Among the findings:
• CDHP members with chronic conditions maintained the use of drug therapies for their conditions.
• CDHP members used preventive services, including breast and cervical cancer screening for women and diabetes-related tests and screenings, at the same or higher rates as traditional plan enrollees.
CDHPs and Reform
"CDHPs and HSAs, in particular, should thrive" given the looming 40 percent excise tax on "high value" health plans that goes into effect in 2018, Ramthun said. "Value" under the health care reform law will be calculated to include employer and employee premium payments. "Moving to a CDHP is the easiest way to avoid the tax," he observed.
An HSA Success Story
Stephen Kircher, president of eastern operations for 8,000-employee Boyne Resorts, also addressed the 24th National Conference on Health, Productivity & Human Capital. He discussed his company's success with an HSA, first as an option and then as a full-replacement for traditional plans.
Kircher noted that in 2005 Boyne Resorts added an HSA-linked plan as a high-deductible, low-premium option, with 30 percent adoption by employees that year. By 2007, adoption had grown to 70 percent, thanks in part to "education and advocacy throughout the company" on the benefits of HSAs.
In 2009, the company dropped all its non-HSA options, and saw a 21 percent drop in overall premiums for 2010, "saving each family an average of $1,400 per year," Kircher said. "We saw an $800,000, or 30 percent drop in company costs with the same contribution level," he noted.
The company now offers employees a choice among two HSA-compliant high-deductible health plans, one with a somewhat higher deductible and lower premium then the other, for employees who might prefer that option.
Stephen Miller is an online editor/manager for SHRM.
Making HSAs Work
Steve Forbes, CEO of Forbes, explains it takes continuing education and patience get employees to take advantage of health savings accounts.
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Consumer-Driven Decision: Weighing HSAs vs. HRAs, SHRM Online Benefits Discipline, May 2011
RAND Study: CDHPs Don't Adversely Impact 'Medically Vulnerable', SHRM Online Benefits Discipline, April 2011
Sweeping Health Plan Design Changes on Tap, SHRM Online Benefits Discipline, March 2011
Unexpected Boost for Consumer-Directed Health Plans, HR Magazine, December 2010
Health Savings Accounts Can Build Retirement Wealth, SHRM Online Benefits Discipline, October 2010
A Pollster's Insights for Effective Health Care Communications, SHRM Online Benefits Discipline, October 2010
Consumer-Directed Plan Growth Continued in 2010, SHRM Online Benefits Discipline, September 2010
Just the Stats: What's Known About Consumer-Driven Health Plans, SHRM Online Benefits Discipline, August 2010
Large Employers Project 2011 Health Plan Costs to Rise 8.9%; Shift to Consumer-Directed Health Plans Continues, SHRM Online Benefits Discipline, August 2010
Enrollees in Health Reimbursement Arrangements Spend Less, GAO Finds, SHRM Online Benefits Discipline, August 2010
Reform Creates Opportunities, Uncertainties for Consumer-Directed Plans, SHRM Online Benefits Discipline, March 2010
CDHP Enrollees Are Cost-Conscious, Use Wellness Programs, SHRM Online Benefits Discipline, December 2009
Most U.S. Employers with Consumer-Driven Plans Prefer HSAs, SHRM Online Benefits Discipline, November 2009
Consumer-Driven Health: Communicating CDH Plan Designs, SHRM Online Benefits Discipline, March 2006
SHRM Online Benefits DisciplineSHRM Online Health Care Reform web page