Consumer-Directed Care

A Great Consumer-Directed Plan Design Cannot Overcome Education Shortcomings

Reprinted from the June 15, 2007, issue of INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results.

Even a well-designed consumer-directed health (CDH) plan won't be effective at controlling health coverage costs or improving employee health if it isn't combined with a thorough and continuous education strategy, according to a new study from Towers Perrin.

The study — based on a survey of 1,000 employees — finds that people tend to be uncomfortable with a perceived financial risk associated with account-based plans. Employee expectations of CDH plans, the report finds, often are driven by comparisons to more traditional forms of health coverage. Case in point: Employees often don't understand that unused HSA dollars roll over at the end of the year. Rather, they incorrectly assume that HSAs have the same "use-it-or-lose-it" feature of flexible spending accounts (FSAs). Unused FSA dollars revert back to the employer each year. The study, conducted early this year, analyzed self-reported perceptions around plan design, tool and resource availability and employer communication efforts. Surveyed employees are either currently enrolled in an account-based plan or are enrolled in a more traditional plan that was offered alongside an account-based option.

The study suggests that employers face "significant risks" if negative reactions to the plans go unaddressed. The overall perception on the part of employees is that CDH plans are cheaper and inferior to more traditional coverage choices, according to Towers Perrin.

However, the study also finds that when employees have a strong understanding of their CDH plan, and feel comfortable with the level of perceived financial risk associated with it, they become more competent health care consumers.

Employees who have a negative view of their CDH plan tend to be those who work for an employer that didn't do an effective job at helping them understand the account, says Jay Savan, a consultant in the St. Louis office of Towers Perrin. "There are plenty of employers who have done a very poor job implementing [CDH] plans," he says. "Employers that help employees appreciate the perceived financial risk of these plans, as well as the possibility of long-term wealth buildup, will be most effective. But that's not to say that education trumps everything. If you screw up the design of the plan, employees are not going to like it."

Firms Target Employee Education

One of the chief drawbacks related to employee education is the lack of useful educational tools, says Steve Parente, Ph.D., an associate professor in the Department of Finance in the Carlson School of Management at the University of Minnesota. "HSA Web interfaces are still not as advanced as Definity [Health's] version 1.0," he says.

A partnership between one of the nation's largest printing companies and a communications firm gives health plans, HSA administrators and employers a way to outsource their CDH communication strategies. While Portland, Ore.-based Finity Communications provides the content and Web delivery for the SmartPodHSA product, Chicago-based Moore Wallace (a division of R.R. Donnelley & Sons Co.) takes care of the print and data management. Moore Wallace's Business Communication Services division prints documents such as medical bills, financial statements and enrollment materials for health plans. Moving to CDH educational materials was a natural step, says Steve Keca, director of product development at Moore Wallace.

Through the partnership, Keca says the two firms can offer their mutual clients a "complete package" of effective educational materials, which typically are rebranded by the client. Boston-based Sovereign Bank, for example, partnered with Finity to launch a co-branded suite of CDH learning tools for its own employees as well as for its clients. The new service, launched last March, features educational portals that offer interactive tools, movies, "wizards" and other information to help people better understand the benefits of HSAs.

Ron Peremel, president and CEO of Myfinancialadvice, Inc., says his firm has a low-cost option for employers that want to help employees understand the intricacies of HSAs. The Boulder, Colo.-based firm connects employees to certified financial planners — via telephone and e-mail — who can answer questions, explain the financial benefits and risks of an HSA and provide specific recommendations.

"We started the company on the premise that there are millions of mainstream consumers who need good affordable financial advice and don't have access to it," Peremel explains. "And there are literally thousands of financial advisers that would love to be in that marketplace, but can't do it affordably."

Large employers (1,000 employees or more) typically pay a $3,500 setup fee and $75 for each HSA session an employee has with a financial planner. The Web site's landing page is co-branded with the employer, and the planners are educated about the employer's health coverage options before they talk with employees. Smaller employers pay a flat fee that includes the coaching sessions. The fee for individual users who want to use the service on demand can range from $20 for basic financial advice to $1,500 for complete financial planning.

"HSAs are massively beneficial to employers if they can make them work. But if they don't get much enrollment, they are nothing but a hassle," he says, adding that about 80% of a typical employer's work force would be better off financially with a well-structured CDH plan than with more traditional coverage."

The Towers Perrin research shows that employee education and communication strategies regarding account-based health plans have a tremendous effect on the success of the plans. Conversely, plan-design features have little bearing, positively or negatively, on how an employee perceives the plan, according to the report's authors.

To see a copy of the report, visit www.towersperrin.com and click on the Press Room.

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