A number of recent studies of Health Savings Accounts and similar plans are proving that companies and consumers who switch to these consumer-directed plans experience lower costs while maintaining access to needed health care.
For example, eHealthInsurance, the largest on-line health insurance broker in the U.S., conducted a survey of people who had purchased health insurance from among the 6,500 products it offered in the first six months of 2005. It reported that:
o Premium costs for HSA-eligible insurance dropped 15% between 2004 and the first half of 2005.
o Nearly two-thirds of HSA purchasers paid $100 a month or less for their plans.
o HSA plans are comprehensive, with most covering 100% of the costs of hospitalization, lab tests, emergency room visits, prescription drugs, and doctors' visits after the deductible is met.
o HSAs also continue to be attractive to those with modest incomes: More than 40% of HSA-eligible plan purchasers earned $50,000 or less annually.
Assurant Health, the leading health insurer for individuals and small groups, analyzed its data to see who was purchasing Health Savings Accounts and found a broad cross-section of interest:
o 73% of HSA purchasers were families with children
o 57% were over age 40
o 29% had family incomes of less than $50,000
o And most importantly, 40% did not indicate having prior health insurance coverage.
HSAs are clearly providing an attractive new option for the uninsured.
America's Health Insurance Plans, which represents the nation's major insurers and health plans, surveyed its members earlier this year and found that more than a million people were enrolled in HSAs as of March, 2005.
The study also found that:
o 27% of the policies in the small group market were sold to employers who didn't previously offer coverage
o Nearly half of the people covered by an HSA plan were over age 40.
McKinsey & Co. conducted an extensive survey of consumer-directed health care plans, holding focus groups, one-on-one interviews, and an in-depth study of more than 2,500 Americans regarding their health insurance arrangements.
It found that consumer-directed health plans increase consumer engagement in health care decision-making and health management, and it found improved care for those with chronic diseases. McKinsey also found:
o CDHC consumers were more value conscious: They were 50% more likely to ask about costs and three times more likely to have chosen a less extensive, less expensive treatment option. They also were much more likely to visit an urgent care center than a hospital emergency room.
o Consumers were more attentive to wellness and prevention: They were 25% more likely to engage in healthy behaviors and 30% more likely to get an annual physical. Why? 51% of CDHC consumers agreed "If I catch an issue early, I will save money in the long run."
This is the huge challenge of the CDHC movement. If consumers are to welcome new incentives to manage their health care and spending, they must have better information to support their decisions.
Aetna studied companies that had purchased Aetna HealthFund Accounts, its branded name for Health Reimbursement Arrangements.
Aetna prepared a study in June, 2005, comparing HRA experience in 2003 to the first nine months of 2004 and found that employer savings basically were sustained in 2004. In 2003, medical costs in the HRA plans increased 4%, and in 2004, they rose an average of 6%. Other findings:
o Costs fell by nearly 20% for some employers
o 50% of employees had some funds left at the end of the year to rollover into their account for the next year
o Companies with the highest employee uptake of CDHC plans had the greatest cost savings: Plan sponsors with 70% or greater participation had a 13.4% decrease in medical costs. Plans with less than 5% participation, had a 9.9% increase in medical costs.
Early evidence reported here shows that actual experience with consumer-directed health care products should calm the fears of critics that they would be attractive only to the healthy and wealthy. They clearly have broad appeal and offer a new option for the uninsured. Forrester Research forecasts that there will be more than 6 million HSA holders in 2008 and that they will accumulate almost $5 billion in assets by then.
But the marketplace still has a lot of work to do to make consumer-directed health plans attractive to millions more people. Better information tools, more consumer-friendly delivery options, more competition, and, most importantly, information on prices are essential for the market to work in the health sector, as anywhere else.
The most important conferences and networking opportunities to advance the conversation on consumer-directed health care will be held later this year in Washington, D.C. The Consumer Directed Healthcare Conference and The Emerging Technologies and Healthcare Innovations Congress will be held December 7-9, 2005 at the Omni Shoreham Hotel in Washington, DC. More information is available at: www.cdhcc.com/cdhcc.pdf.
Grace-Marie Turner is president of the Galen Institute, a non-profit research organization, focusing on free-market ideas in health policy. She can be reached at firstname.lastname@example.org. For more information on this study, please go to www.galen.org.