The Two Sides of Consumer-Directed Health

Critics of HSAs--and there are many--whose voices are being heard by the public and their representatives, still believe the strategy primarily relies on consumers tightening up their use of health care; that it will attract younger, healthier, middle-income consumers, who will leave older, sicker, or poorer individuals alone in conventional plan groups where costs will only soar the worse; and that the product is not mature enough for the industry to be rushing to it.

But HSA advocates ask, why pay for rich benefits plans during periods of your life when you don't need them as much? Why not bank the money for years when you are more likely to need it? "Most people won't even hit the deductible. The extra coverage that you would have had otherwise during that time won't do you any good when you're not here anymore," says Anne Silverman, vice president of compensation and benefits for the Americas, at Reed Elsevier.

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In addition, employers and insurers are reporting a wide demographic of subscribers for the HSA-based plans, many of whom are lower-income individuals who had no insurance in the prior cycle. Furthermore, larger-scale results with consumerism are starting to come in now. This past summer, Aetna provided an update on 13,500 of its members who used CDHPs--an analysis of their claims for the full 12 months of 2003. According the report, employers offering the new plans experienced low medical cost increases of 3.7 percent, while a full-replacement-plan sponsor experienced a medical cost decrease of 11 percent. These savings were driven by lower member utilization of physician and facility services, and greater use of preventive care.

"HSAs are a new vehicle but consumer-directed health is not new," insists Susan Relland, Health Policy Legal Counsel for the American Benefits Council. "We've had flexible plans for many years. HSAs just took the best pieces of HRAs, MRAs, and so forth, and combined them. None of the concepts are new. So it's not an issue of rushing at all, just a new way of approaching it."

Proponents believe that if HSA plans become widely prevalent, they might break the spiraling utilization of healthcare and actually decrease healthcare expenditures in this country for the first time ever, as a result of more efficient and selective care.

But for companies to wean employees from conventional, first-dollar plans, they and their workers will have to embrace change. Employers will have to sell the plans on the themes of savings and consumer choice--and make the plans conceptually and administratively easy. Most consumers understand how a 401k plan works, and many know what a flexible spending account is. Companies will have to promote a kind of health-benefits literacy by showing how HSAs combine concepts from these accounts.

Which partners employers choose for this benefit may hinge, in part, on which vendors offer the best communications and decision tools, and large insurers are certainly banking on this in their IT efforts. Certainly, the notion of incenting consumers to think about their choices has under-girded the entire evolution of HSAs. In a whitepaper on the results of the ABC forum, entitled "HSA Snapshot, A View from Large Employers," Meredith Baratz, vice president of marketing and product design at UnitedHealth Group, termed the new plans "a vehicle for driving consumer engagement and accountability."

After all, most use of healthcare is discretionary in a broad sense. Many believe that if a consumer starts to view his or her healthcare account funds as "my money," it's likely to change behaviors.

October 15, 2005

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