IN THIS ISSUE:
? CCC Conference Call with Treasury
? New Statistics on the Individual Market
? Do HDHPs Lead to Good Decisions?
? HSAs Slow In Philadelphia?
? Dayton Employers Dislike Consumer Driven Plans?
? HSC’s Strange Study
Galen’s Consumer Choice Community had a members-only conference call with Treasury officials on Friday, July 30, about the new HSA guidance. Included on the call were Treasury officials Roy Ramthun, Tom Reeder, and Bill Sweetnam (calling in from Florida where he had just finished a town hall meeting explaining HSAs).
I devoted all of last week’s issue to the new guidance (the officials were adamant that the Notices and Revenue Ruling they have issued are “guidance” and not regulations, though they are controlling on the IRS), but a few new thoughts came up. The Service has issued eight sets of rules on HSAs in eight months, and this is it for the foreseeable future. They said they also have other things to do. They reiterated that the HSA account holder has sole discretion over what to do with the HSA money – there is no requirement for substantiation or adjudication of withdrawals. If the taxpayer is audited, he or she will have to provide proof that the money was spent on a qualified medical service or pay taxes and a penalty on the withdrawal. The Treasury officials urged account holders to keep careful documentation, especially because of the multi-year aspect of HSA withdrawals (it is entirely possible for someone to incur an expense in one year but wait three or four or more years to withdraw the money from the HSA). I asked if they expect to target HSAs for audit activity in the first few years to ensure proper compliance, and they said they did not. HSA account holders will be no more likely to be audited than anyone else. A question came up about HSAs for Medicare beneficiaries, and they said they have no control over that. They did open it up slightly by ruling that a taxpayer would have to actually be on Medicare, not just eligible for it. They also pointed out that Medicare MSAs are allowed under the new Medicare law, but that is an issue for CMS to work on, not the IRS.
Overall, it was a fascinating call, and we are very appreciative that the Treasury folks were willing to take time out of their schedules to talk with us. Participation was free for CCC members, and we expect to do a number of similar activities to keep CCC members in the loop here in Washington and around the country. If you haven’t joined yet, you can get information by going to http://www.galen.org/cccintro.asp.
New Statistics on the Individual Market
The Kaiser Family Foundation held a briefing with eHealthInsurance on the individual market on August 2. An important new report, “Update on Individual Health Insurance,” was issued in conjunction with the briefing. This report provides some baseline information on the individual market so policy makers can have a point of reference instead of just relying on impressions and anecdotes when discussing individual coverage. The data in the report is based on actual sales made through eHealthInsurance, and includes information on age of the buyers, premiums paid by age and region, retention, and cost-sharing provisions. It finds, for instance, that nearly half of purchasers keep their policies in force for two years or more, with older buyers likely to keep it longer than younger ones. It also finds that premiums are quite affordable. The average is $147/mo for individuals, ranging from $87/mo for someone under 18 in the North Central region to $299/mo for someone over age 45 in New England. For families the average is $278/mo, ranging from $101/mo for an under-18 head of household to $542/mo for someone over age 45, both in the New England/Mid-Atlantic region.
Do HDHPs Lead to Good Decisions?
The July/August issue of “Contingencies” includes an article by Ian Duncan, a partner in the New York based actuarial firm Lotter Actuarial Partners. He asks, “Does a High-Deductible Plan Lead to Good Purchasing Decisions?” and concludes that it is likely to. He walks through the thought process of a family faced with ordinary medical decisions and finds they are likely to go to a walk-in clinic before an emergency room, question the bills they get, and switch to generic drugs over name brands. He concludes, “The potential for systemwide savings from consumer involvement is huge. But the devil is in the details, and the proper combination of financial incentives and consumer information must be built into products to yield both savings and good health care buying decisions.”
HSAs Slow In Philadelphia?
Is the HSA roll-out slow or speedy? Both perspectives are showing up in the press. The “Philadelphia Business Journal” includes an article, “Companies Slow to Offer HSAs as Option.” The largely negative article by Janet Mason says HSAs “offer conflicting options for employers and employees alike.” She advises that employers will be faced with “wading through the legislative technicalities of a complicated and expensive human resources undertaking.” She quotes a Mercer consultant as saying the plans offer a choice, but “choice also means confusion,” and an Aon consultant as being skeptical that insurance companies will be ready to offer a product by 2005. Even the NCPA is quoted as saying of HSAs, HRAs, and FSAs that “each is imperfect in its own way.”
Dayton Employers Dislike Consumer Driven Plans?
And the “Dayton Business Journal” features an article by Tracy Kershaw-Staley headlined, “Not all employers like consumer-based plan.” She cites a local company that believes “the concept will be too much of a change for employees who are used to first-dollar coverage.” She says “A new national study from researchers at the Center for Health Systems Change (HSC) shows [that] reaction is fairly common.” She quotes HSC president Paul Ginsburg as saying, “?many employers are skeptical about cost savings for their company. Some have crunched the numbers for themselves and don’t see the savings.” Another local employer is quoted as saying, “The day that I have to roll out one of these HSAs will be the day I become ashamed of my benefit package.”
HSC’s Strange Study on Consumer-Driven Health Care
The “new national study” by HSC cited above is a curious piece of work. It was published in July, 2004, but is based on interviews conducted in 2002-2003, some presumably before the IRS guidance on HRAs was issued on June 26, 2002, and well before the HSA legislation became effective on January 1, 2004 — and of course well before any of the current products were available. It provides no statistics on the number of employers interviewed, or the numbers that were or were not “interested.” Yet it concludes there is “Little Interest in Consumer-Driven Health Plans and Tiered Networks.” It sets up strawmen such as “vendors who tout their products as single solutions to rising costs,” but neither vendors nor advocates are suggesting there is any “single solution” to health care costs, or any other problem in health care. (The “single solution” crowd is usually touting Single Payer.) The notion that there is “little interest” in consumer driven health care could be contradicted by anyone who has attended any health care or human resources meeting in the past year. That does not mean that every employer, or even most employers, will adopt one of these programs. Only time and the market will determine that. But there can be no question that “many” already have, and many more will follow.
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