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AIS's Health Business Daily
Featured Story, June 25, 2010 Account-Based Health Plans Will Thrive, Become More Complex Due to Economy and Reform Rules Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor (sdavis@aishealth.com) Several provisions included in the health reform law (e.g., removal of lifetime benefit caps, coverage of dependent children to age 26 and first-dollar preventive coverage) will lead to higher premiums, health plans say. And industry observers tell HPW that those inevitable rate hikes — combined with a still-struggling economy — are pushing more employers to consider lower-cost account-based health plans for the upcoming fall open-enrollment period. But, they warn, some provisions of the reform law will make health accounts more complex.
Jay Savan, an employee benefits consultant in the St. Louis office of Towers Watson, says the reform law is likely to have “a substantial impact” on the adoption of health savings account (HSA)-based plans, particularly among large employers that will face another year of rate hikes this fall. For the next plan year, many employers will face rate hikes in the “high single digits to the low double digits,” he predicts. “In a faltering economy, [moving to account-based plans] might be the last hope to mitigate costs and maybe bend or at least flatten the cost curve.”
Case in point: Medical costs for individuals enrolled in account-based health plans declined an average of 26% over four years, according to a December 2009 study of CIGNA Corp. members. The study, which evaluated claims data from 655,000 members enrolled in PPO, HMO and account-based plans, also determined that utilization of preventive care services, chronic disease management programs and evidence-based treatments were higher among account-based plan enrollees than for those covered by more traditional managed care health plans.
“If the share of Americans enrolled in [an account-based health plan] rose from the current 18% to 50%, and the results of the study were applied, the U.S. could achieve $350 billion in savings over 10 years,” says John Young, vice president of consumerism at CIGNA. “We expect that the lowest-cost insurance, with a tax advantaged account to offset spending, will appeal to many who were previously not buying insurance because it was too expensive but will now be mandated to buy it” under the reform law.
Nationwide, enrollment in HSA-eligible plans grew by 25% between January 2009 and January 2010 and has more than doubled since January 2007. While more than 10 million people are now enrolled in an HSA-qualified health plan, the number represents just 3% of the population, Savan notes.
Plans Tout Double-Digit Enrollment Growth
At the end of the first quarter of 2010, Health Care Service Corp. (HCSC) says 1.1 million members (about 10% of its commercial business) were enrolled in a plan that either included a health reimbursement arrangement (HRA) or was compatible with a health savings account (HSA). Enrollment in such plans is up 20% from the year-ago quarter. About 60% of the enrollment is in HSA-qualified plans, says Marlo Murray, manager of product development. She tells HPW that even more employers are likely to offer account-based options during the upcoming fall open-enrollment period as they search for strategies that will hold down coverage costs. A growing number of large employers, she adds, will move to full-replacement strategies. HCSC operates Blue Cross and Blue Shield plans in four states.
Savan says he’s also seeing more interest in full-replacement account-based plans among large employers. While the cost of medical services and drugs are the same regardless of the plan, employers hope that account-based plans will help reduce unnecessary utilization, he says.
Kathy Campbell, head of product engineering at Aetna Inc., agrees that more employers are considering a full-replacement strategy as a way to curb rising coverage costs. But plan design alone won’t help reduce medical costs, she warns. Health insurers and employers need to educate members about the cost of care. Medical services provided at a clinic or urgent care center, for example, can be significantly less expensive than care provided at a hospital.
Reform May Create New Challenges
The reform law could leave account-based plans as “the affordable option on the table,” says Murray. But some provisions of the law have raised concerns about the future of health accounts. Here’s a look at a few key issues.
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