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Health Insurers Pushing 'Consumer-Driven' Plans

Posted on: Thursday, 1 December 2005, 18:00 CST

By Julie Forster, Pioneer Press, St. Paul, Minn.

Dec. 1--Call it a bellwether: This year UnitedHealth Group, one of the largest health insurers, dumped the array of more traditional managed care plans it offered its 40,000 employees and gave them two choices: a so-called health reimbursement arrangement or a health savings account.

"This was a signal to our clients about how seriously we take the consumer-driven health plan movement," said Daryl Richard, a spokesman for Uniprise, the UnitedHealth business unit that focuses on large employers.

It's a movement with considerable momentum, particularly among big companies, and no shortage of controversy.

One in five of the nation's largest employers now offer the so-called consumer-driven plans to their employees, nearly double last year's total, according to a Mercer Health and Benefits survey released last month.

The survey still puts the percentage of all employers offering consumer-driven plans at a slim 2 percent; in Minnesota, however, that figure is 13 percent.

And at employers offering the plans, few employees are opting for them if given other choices. And those who do tend to have higher incomes and can handle the sizable deductibles these plans often require.

The health industry has embraced consumer-driven plans as a remedy for spiking costs. The aim is to provide the same incentive for people to compare prices for health care as they do for cars, haircuts and shoes.

But critics say it's really about shifting risk, and tossing more of the cost of care into the laps of the consumer, a trend that has particularly harsh implications for those who earn less money.

Health savings accounts are the latest twist for consumer-driven plans: Employees contribute money tax free to an account, which earns interest. If they don't use it, it grows year to year and it can be placed in different kinds of investment accounts, from aggressive growth to something more conservative.

If need be, employees pay for medical expenses like broken legs and doctor visits from that account until they meet their deductible and other insurance kicks in. The downside: The deductibles are high, sometimes running to $7,000 for family and $3,000 for single coverage.

The growth of consumer-driven plans is brisk. Blue Cross and Blue Shield of Minnesota, for example, expects 150,000 of its members to be enrolled in consumer-driven plans by January. About 82,000 will be using health savings accounts. That's up nearly 80 percent since the beginning of this year.

Consumer-driven plans are catching on faster than HMOs and PPOs did in the '80s and early '90s, said Blaine Bos, head of Mercer Health & Benefits in Minneapolis.

Critics say most workers are unwilling converts. And they say that consumer-driven plans are siphoning off healthier people from managed care programs. These people -- often younger, single workers -- are betting they won't need much health care. That then leaves managed care plans with only people who need more medical care, putting those plans in financial peril.

"What you will find as health savings accounts proliferate is that we are going to see a segmentation of the previous insurance pools," said Ron Pollack, executive director of Families USA, a Washington, D.C.-based advocacy group for health care consumers.

The result will be that traditional plans become unaffordable and unviable. According to Families USA, health savings accounts are part of an accelerating effort to shift more health costs to America's working families.

The topic of health savings accounts is now seeping into labor negotiations or in advance of collective bargaining. "This is the new buzz," said Bernie Hesse, a union organizer for the United Food and Commercial Workers Local 789. The union's blunt response: "We're not interested."

In part that's because one out of three employers who offer the accounts don't contribute money to them as the plans allow, according to a 2005 benefits survey by Kaiser Family Foundation. That makes it more difficult for low-wage workers to skim off their paychecks to build an account balance. "If you are a low-wage worker, how can you divert money into an account?" Hesse asks.

In other words, workers who will be able to afford health savings accounts will tend to be higher paid workers. That's been the case at the University of Minnesota.

Those faculty and staff members who signed up for a health reimbursement account tend to have higher incomes, said Dann Chapman, the university's director of employee benefits.

Starting in 2006, the university's 17,000 eligible employees will be able to sign up for a health savings account.

Under that plan, the university kicks $500 into the accounts for a single worker and $1,000 for a family. But the deductible runs $3,500 for a single employee and $7,000 for family. "There is a substantial window there before the health care coverage kicks in and after the employer contribution is exhausted," he said.

When consumer-driven plans are offered side by side with other plans, most employees chose something different.

At the University of Minnesota, just 6 percent of the faculty and staff picked a consumer-driven option.

At Delta Environmental Consultants in Shoreview, employees had the choice of a few traditional plans or a health savings account. A little over 5 percent of the 700 employees chose a health savings account this year.

But with the company seeing cost savings already, that number is likely to rise. Delta is promoting health savings accounts among its work force. "The goal is to capture another 5 percent in 2006," said Andy Winsor, a human resources project manager. "Compared to our two other plans, we have seen the most cost savings with this one."

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UNH,

Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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