Consumer-Directed Care

States Increasingly Use Account-Based Plans to Lower Number of Uninsured

Reprinted from the Aug. 10, 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.

A standing-room-only crowd of about 60 people filled a cramped meeting room in the basement of the U.S. Capitol July 31 to hear about the strategies three states have employed to trim Medicaid costs and address uninsured populations. Health accounts, which can be used to encourage beneficiaries to take on a greater role in their health, are at the center of several of those initiatives. The briefing was sponsored by the National Center for Policy Analysis.

A Medicaid program in Florida has incorporated "reverse HSAs" to encourage healthy behaviors (e.g., smoking-cessation programs, weight-management classes, routine preventive care). Through the new program, enrollees begin the year with a zero balance in a health account, but can receive up to $125 a year, which can be used to pay for non-covered health expenses.

"The state is investing in healthy behavior with the idea that there will be a big payoff down the road," explained Michael Bond, Ph.D., a professor of finance at Cleveland State University who co-authored a paper that served as the framework for Medicaid reform efforts in Florida, Ohio and South Carolina.

So far, enrollees have earned $1.7 million in credits, but collectively have spent just $34,000, Bond says. Unused money can be rolled over at the end of the year, and balances can be used for three years after beneficiaries leave the Medicaid program.

Indiana, Massachusetts Target Uninsured

A bill signed into law May 10 by Indiana Gov. Mitch Daniels (R) uses an HSA-like account to encourage enrollees to behave more like consumers. The Personal Wellness Responsibility (POWER) account is the centerpiece of the Indiana Check-Up law, which is slated to go into effect on Jan. 1, 2008. The program targets uninsured adults who are not eligible for Medicaid, but who earn up to 200% of the federal poverty level ($40,000 for a family of four). Enrollees will receive an annual $1,100 contribution into their account, which they use to pay for health care services and prescriptions. Unused balances roll over at the end of the year. While the health coverage is substantially subsidized by the state, the account adds an element of personal responsibility, explained Mitch Roob, secretary of the Indiana Family and Social Services Administration. As many as 140,000 of the state's uninsured population could be covered by the program.

The health reform law that recently went into effect in Massachusetts "changed the conversation" about the role of the individual in the health care market," according to Tim Murphy. As the director of policy for former Gov. Mitt Romney (R), Murphy oversaw the development and passage of that landmark health care reform law. He is now president of Beacon Health Strategies.

Most state and federal health reform initiatives over the past 15 years have focused on the government's role, the role of business and the role of health care providers. "They never ask about the role of the individual," he told attendees. "But all of those [reform efforts] fail when the individual isn't front and center. So what we tried to do is put the individual in the center of the plan."

As a result of the new law, most of which went into effect last month, 150,000 previously uninsured residents have health coverage. Many of those health policies are compatible with an HSA, he added. According to a recent industry survey, 19,000 Massachusetts residents were enrolled in HSA-qualified health plans at the end of the first quarter of the year.

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