Study: More Employers offer High Deductible Health Plans; HSA Contributions Double

The Kaiser Family Foundation and the Health Research & Educational Trust (Kaiser/HRET – http://ehbs.kff.org/) has published their annual survey of employer-sponsored health benefits. This year’s study found more employers offering high deductible health plans and that employer contributions to Health Savings Accounts doubled since 2007.

The study showed that thirteen percent of firms offering health benefits now offer a High Deductible Health Plan with an Health Reimbursement Arrangement (HDHP/HRA), a Health Saving Account (HSA)-qualified HDHP, or both in 2008. While the report notes that the increase does not represent a significant difference from the 10% reported in 2007, they do point out that there has been a statistically significant increase in the offer rate since the 7% reported in 2006.

As for the types of employers who have adopted HDHPs, the study found that firms with 1,000 or more workers are more likely to offer an HDHP/SO (saving option) than smaller firms. Twenty-two percent of firms with 1,000 or more workers offer an HDHP/SO compared to 13% of firms with 3 to 199 workers or 15% of firms with 200-999 workers.

The study also found that workers enrolled in HSA-qualified HDHPs on average receive an annual employer contribution to their HSA of $838 for single coverage and $1,522 for family coverage. These amounts are about double the amounts reported in 2007 ($428 for single coverage and $714 for family coverage), but this increase may be due in part to a change in legislation enacted by Congress in December 2006 that increased the maximum allowable annual HSA contribution. Although the increased amounts were allowed in 2007, due to the timing of the legislation, employers may not have had time to introduce higher contributions in 2007.  When those firms that do not contribute to the HSA are excluded from the calculation, the average employer contribution for covered workers is $1,139 for single coverage and $2,067 for family coverage.

Here are some other key findings related to HSA funding:

  • Small employers have significantly increased contributions: From 2007 to 2008, the amount contributed to HSAs for workers in small firms increased from $415 to $1,041 for single coverage and from $677 to $1,862 for family coverage. There was no statistically significant increase in HSA contributions for workers in large firms for either single or family coverage.
  • Not all employers are making contributions to employees’ accounts: In looking at employer contributions to HSAs, it is important to note that not all employers make contributions towards HSAs established by their employees. Twenty-eight percent of employers offering single or family coverage through HSA-qualified HDHPs do not make contributions towards the HSAs that their workers establish (covering 26% of covered workers enrolled in HSA-qualified HDHPs for single or family coverage).
  • But, the number not contributing is quickly decreasing: For single coverage, the percentage of firms that do not make a contribution to HSAs established by their employees decreased from 66% in 2007 to 28% in 2008. The report notes, however, that the 2008 percentage is similar to the percentage that was reported in 2006 (37%).

This year, the survey included questions for those employers offering HDHP/SOs on their opinions of the most successful outcome, biggest challenge, employee satisfaction, and primary reason for offering an HDHP/SO. Not surprisingly, forty-two percent of firms report that in their opinion, lower costs as the most successful outcome from offering a HDHP/SO.

Eighteen percent of firms reported helping employees engage in their health care as the primary reason for offering an HDHP/SO, with small firms (3-199 workers) being less likely (17%) than large firms (200 or more workers) (33%) to report this as their primary reason for doing so.

Health Plan Innovation Take: This report is more evidence that consumer-driven health care in the form of high deductible health plans associated with a tax-favored account has achieved significant acceptance among both large and small employers as a means of controlling the rise in health care costs. Both Presidential candidates have vowed to maintain the employer-based system of providing health insurance, So regardless of who moves into the White House in January, their health care strategy teams will need to figure out how to work these types of plans, including the accompanying HSAs and HRAs, into their overall health care schemes.

A Simple Proposal for Reforming Health Care without Busting the Budget.

It seems that a good way to end this week’s hand wringing about the individual health insurance market is to reference to a post that Joe Paduda left on the Managed Care Matters blog last Monday. Joe offered up a common sense approach to reforming health care without busting the budget. You can read the entire post here: http://www.joepaduda.com/archives/001326.html

Here is Joe’s simple proposal:

Congress could pass and the President could sign legislation prohibiting medical underwriting in the individual market, requiring insurers to cover pre-existing conditions, mandating community rating, and establishing a basic benefits plan. There are (at least) three mechanisms available to meet these objectives.

1. The legislation could require states to work with the National Association of Insurance Commissioners to develop model language that would meet these standards. (NAIC does this for lots of insurance types and policies today)

2. The Federal law could set forth minimum standards, while allowing states to require carriers in their jurisdiction to meet higher standards.

3. A new Federal regulatory body could be set up to ensure all insurance carriers comply with the standards set forth in the legislation.

To guard against ‘cheaters’ – the folks who wait till they get sick before signing up for coverage, the law should include a provision allowing insurers to increase rates for those that do not sign up within a certain time after they become ‘eligible’ for coverage. The increase would be pegged to the length of time the individual delayed obtaining coverage (similar to the way Part D works today).

Joe admits that his plan will probably raise premiums for the young and healthy, but argues that the way health insurance should work: “some subsidize others, with the understanding that when that ‘some’ (or when their kids break bones or they get hurt) someone else will help them out.”

Health Plan Innovation Take: Joe’s plan sounds quite a bit like the plan now in effect in Massachusetts, with one big exception: there is no mandate. Those who hold off on securing coverage will pay a higher premium – makes sense. Another thing I like about the proposal is that it would standardize the basic regulation of health insurance at the federal level while still using the NAIC to involve the states in the process. The part of this plan that I do not totally agree with is continuing to allow states to require carriers in their jurisdiction to meet higher standards. This will perpetuate the patchwork of insurance laws in place today along with special interests pushing for enhanced coverages at the state level. However, if allowing states to continue in the regulation process will make this plan politically possible, I am all for it.

And so, apparently, is Ron Williams, chairman and CEO of Aetna, who is reported to have said on Wednesday that Americans should be required to buy health insurance, bringing healthier people into plans that will help bring down costs. Speaking at the Detroit Economic Club, Williams also said that he favors:

–Selling health insurance across state lines.
–Expanding access of those now eligible to Medicare and Medicaid programs.

Here is the story from the Detroit Free Press: http://www.freep.com/apps/pbcs.dll/article?AID=2008810220304

Many Small Employers Say They Just Can’t Afford to Provide Health Insurance.

In yesterday’s post, I referred to an article published in the LA Times which reported on how the lack of employer sponsored health insurance is affecting those who are forced into the individual insurance market to obtain coverage. Today, the cause of this situation is revealed in a major new employer survey on health care reform released by Mercer, LLC. It comes as no big surprise that the majority of small employers believe that, at its current price, employee medical coverage is far beyond their means.

The survey of 545 employers who do not offer health coverage found that when asked their primary reason for not offering health coverage, 43 percent of all employers without employee plans answered “I can’t afford it”. Other reasons included employees being covered under other plans (20 percent), high workforce turnover (9 percent) and the perception that employees would rather have more pay than health coverage (9 percent).

When these employers were asked, if they were to offer a health plan, how much they would be willing to contribute per employee per month. For 59 percent, that amount ranges from zero to no more than $50. Only 10 percent said they would pay at least $200.

“This finding highlights how tough it’s going to be to ask very small employers to voluntarily take on the expense of providing health coverage,” said Linda Havlin, a Mercer worldwide partner. “It also helps explain why even relatively low-cost catastrophic plans like HSAs have not made great inroads with small employers that find it financially challenging to offer coverage.”

Unfortunately, there is not much indication that this trend will change in the future. About half of the employers not currently offering coverage say it is very unlikely that they will offer a plan in the next three years (49 percent) and only about a fourth say it is even somewhat likely.

So what will these employers support in the way of healthcare reform? Employer health plan sponsors were asked to give their opinions on eight health care reforms that have been proposed by the presidential candidates, members of Congress or state governments.

One of the most hotly debated reform proposals to emerge during the presidential campaign is Senator John McCain’s plan to end or cap the tax exclusion for employer-sponsored health benefits. Forty-one percent of employers oppose such a plan, while just 30 percent are supportive. The larger the employer, the more likely it is to disapprove (57 percent of those with 20,000 or more employees disapprove).

Half of all employers oppose “play or pay” laws, which would require employers to either offer health coverage or pay into a government fund to cover the uninsured (just 31 percent are supportive and 19 percent neither approve nor disapprove).

Only two of the reform ideas have the support of the majority or near-majority of employers. Just over half (53 percent) support requiring individuals to have health coverage if they can afford it, either through their employer or purchased on their own.

While neither presidential candidate’s platform includes such an individual-mandate proposal, Senator Barack Obama’s comes closest, requiring that all children have coverage. Another, more radical approach to achieving universal coverage – a health care system like Canada’s, where the federal government is the sole payer for health care services – was rejected (51 percent of all employers, and 63 percent of very large employers, disapprove). Employers want to see everyone covered, but (emphatically!) not through a single-payer system.

Nearly half employers (46 percent) support having the federal government provide stop-loss protection to cover an employer’s catastrophic expenses.

Health Plan Innovation Take: With employers more inclined to disapprove than approve of any of the reforms, the results demonstrate the difficulties of trying to achieve consensus around health care system changes. It is also clear, that short of mandating coverage, these employers are not going to begin offering coverage. This brings us back to the dilemmas affecting the individual health insurance market described in the LA Times article.

LA Times Series Explores Nation’s Health Insurance Crisis

Anyone looking for a thorough examination of the issues facing today’s health insurance system should be sure to read check out the three-part series appearing in this week’s LA Times (www.latimes.com). On Tuesday, the Times explored the problem caused by fewer and fewer employers offering health insurances to their workers.

Using real-life examples, the article written by Lisa Girion and Michael A. Hiltzik looked at various situations where individuals were not able to secure coverage for themselves or family members in the individual health insurance market.

The authors note that because of rapidly rising costs, the percentage of Americans covered by traditional group health insurance has steadily declined over the past several years. This has forced more and more people who are seeking coverage into what they describe as a lightly regulated individual health insurance market where coverage is more expensive for all but the young and healthy, fewer benefits are provided, and insurers can reject applicants for even mild preexisting conditions.

Quoting Bruce Bodaken, chief executive of Blue Shield of California, the article suggests that universal coverage is the answer. Bodaken said government should mandate that everyone obtain health insurance and that insurers sell to all comers regardless of their health.

Health Plan Innovation Take: Agree or disagree with the conclusions drawn in this article that universal coverage achieved through a government mandate is the answer; the LA Times has done a very good job of stating that case that the status quo is not the answer. The subheads in the article spell out the problems: Cherry-picking, Rejection and rescission, Losing coverage, Skimming the risk pool, ‘A matter of economics’. Using real life families as examples, the Times has done a solid job of pointing out all the many ways the current system is flawed. This is good background reading for anyone interested in this issue.

Consumer-Driven Health Care Plans Grow by 25%: BCBS Study

A significant study on the effects of Consumer-Driven Health Care (CDHC) was released on Monday at the National Consumer Driven Health Summit in Washington, DC. The study presented by the BlueCross BlueShield Association said that enrollment in these types of health plans – launched as a way to increase consumer engagement – has increased more than 25% in the last year.

More significantly, the study showed that members who enroll in Consumer-Driven Health Plans (CDHPs), especially when coupled with a Health Savings Account (HSA), which is at least partially funded by their employer, are becoming more cost-conscious consumers. For example, 90% of those in CDHPs reported asking a doctor about the cost of treatment compared to 33% of non-CDHP members. Likewise significant numbers of the CDHP members reported that they chose a lower cost treatment option, used mail order pharmacies, and searched the internet for lower priced prescription drugs.

The study also found other behaviors were significantly different for those in the HSA plans. More tracked their health care expenses and planned for future expenses. HSA-eligible enrollees also reported being more engaged in health and wellness including getting screenings, engaging in exercise, paying attention to good nutrition, and working with health coaches.

Also significant is the fact that the study showed that HSA-eligible enrollees were not skimping on care. In fact, they use more preventive services, and their use of necessary care mirrors non-CDHP population.

To view a PowerPoint presentation of the surevy results go to: http://www.bcbs.com/news/bluetvradio/consumerdriven2008/

Heath Plan Innovation Take: This study reinforces the vale of well designed HSA-type health plans in their ability to change behavior and to lower costs. Future policy makers would be foolish to turn their backs on a solution that is beginning to prove itself to be effective in controlling costs and improving care.

Massachusetts Provides Revised Guidance on Minimum Creditable Coverage Requirements

We have heard a lot this week about a would-be small businessman in Ohio and whether the Obama health plan or the McCain health plan would be better for his business and his employees. While this is all speculation at this point, a very real decision will be made today in Massachusetts that will affect the cost of health coverage small businesses will pay in that state and that could provide us with look at possible things to come on the national level if legislators attempt to micromanage the choice of plans available to employers and individuals.

The Connector Board is set to meet this afternoon to decide on revised Minimum Creditable Coverage (MCC) regulations. The regulations determine coverage standards for health plans Massachusetts residents must have to comply with the individual mandate. While there is no mandate that an employer’s plan satisfy the MCC requirements, employees enrolled in a plan that fails to meet them may be subject to a tax penalty.

Some employers, including Jon B. Hurst, the President of the Retailers Association of Massachusetts argue that the changes being considered will raise costs for small employers and businesses. Hurst, in a post on the Commonwealth blog, is calling for the Connector Board to call a time out to put on hold all of the changes proposed for January, 2009.

Hurst writes that efforts to derail the availability of important choices on high deductible health plans and health savings accounts ignore the reality of how small businesses and individual consumers live in times of no income growth.

Health Plan Innovation Take: Since the Connector Board is issuing final regulations to implement legislation that has already been passed, it not likely to call a time out or block any of the key elements of the plan. Understandably, if a governmental entity is going to pass legislation as Massachusetts has done that requires everyone to buy health insurance, there must also be rules defining minimum coverage. The problem arises when there are attempts to micromanage the process as looks to be the case with the Massachusetts rules around deductibles and prescription drug coverage that puts in question the ability of high deductible heath plans coupled with health savings accounts to qualify as credible coverage. As Mr. Hurst points out, in times of economic hardship it does not make sense to eliminate plans that Congress has put in place to make health insurance more affordable and to give patients more control over their health care expenses. Hopefully this lesson will not be lost on the next team of reformers to occupy the White House. Rules defining minimum acceptable coverage levels must be set so as to protect consumers from scams that offer no real protection, but they must be broad enough to allow for consumer choice and future innovation. To do this will require both wisdom and restraint.

Fewer Americans Report Seeing Health Care Quality Comparisons.

Some provocative numbers were released yesterday by Kaiser Health Tracking Poll. According to the latest poll conducted in August, only three out of ten (30%) Americans say they have seen health care quality comparisons of health insurance plans, hospitals, or doctors in the past year.

Now not all people make health care choices or decisions in a given year that would call for the use of quality information, but this is a downward trend from surveys in 2006 (36%) and 2004 (35%) and roughly equivalent to the level in 2000 (27%).

This data must come as a disappointment to those who are suggesting changes to health insurance plans that would rely on the public becoming cost-conscious consumers.

But, there are two main reasons given for the sagging use of quality comparison tools. First, the survey found that most people do not think there is a quality difference, and secondly, they find the available comparison tools difficult or very difficult to use.

According to the survey, less than half of the public believe “big” differences in quality among providers of similar health care services exist: four in ten say there are “big” differences in health plans (44%) and hospitals (41%), and three in ten believe there are “big” differences in specialists (33%) and general practitioners (30%). The survey also reports that nearly two-thirds (64%) of the public believe it is difficult to find cost comparison information on health care services provided by different doctors and hospitals. Many of those surveyed said that they favor recommendations by friends and family or past personal or family use over comparative quality rankings.

Health Plan Innovation Take: It is becoming increasingly clear that health plans, providers, and third party ranking groups are missing a key ingredient in their efforts to communicate quality differences. It is the human element. No one wants to click through mounds of data about infection rates, mortality rates, readmission rates, etc. to try to determine what health plan or provider is best for them. It is so much easier to ask someone at work, or their cousin, who they think is best.

Certainly the hard data that measures clinical quality is important and it is not something that can be readily observed by our cousin like the floors being clean or the nurse being friendly. We need to find better ways to demonstrate this information to the general public and to combine the quality data with anecdotal information supplied by users.

Go to Amazon.com or Bestbuy.com and you will see what I mean. Look up any item for sale there and you will see an assessment of an item’s quality, usually represented by one to five stars, combined with any number of postings by actual users of the item telling about their experience. If health care quality comparisons were this easy to understand, we would see their rate of use increasing, not decreasing, and we might just see the public becoming more cost-conscious health care consumers.

New Whitepaper Presents Clear Vision for Sustainable Healthcare Systems.

A new white paper produced by IBM Global Business Services outlines the drivers that the authors believe make today’s healthcare environment fundamentally different from the past as well as the possible scenarios for healthcare for the near future.

The paper called Healthcare 2015: Win-win or lose? makes the case that change must be made to the health care systems around the world and that the choices that have been left to the stakeholders of today’s healthcare systems are when and how.

The authors warn that if today’s stakeholders wait too long to act or do not act decisively enough, their systems could “hit the wall” – in other words, be unable to continue on the current path- and then, require immediate and major forced restructuring.

Instead of this forced restructuring the paper suggests stakeholders will need to make tough decisions and work hard to reach new levels of accountability.

The authors suggest that action and accountability are the basic ingredients of change and to successfully transform healthcare systems, countries will need to undertake the following actions:

  • Focus on value – Consumers, providers, and payers will agree upon the definition and measures of healthcare value and then, direct healthcare purchasing, the delivery of healthcare services, and reimbursement accordingly.
  • Develop better consumers – Consumers will make sound lifestyle choices and become astute purchasers of healthcare services.
  • Create better options for promoting health and providing care – Consumers, payers, and providers will seek out more convenient, effective, and efficient means, channels, and settings for health promotion and care delivery.

Health Plan Innovation Take: Clearly, this group of researchers has a good grasp on where the health care system should be by 2015 in order to remain sustainable. The problem remains: How do we get there? To this question the authors write, “Successful transformation will require all stakeholders to actively participate, collaborate, and change.” This we know. If someone was just able to align the interests of providers, insurers, patients, drug companies and others we could solve this problem well before 2015. The problem is we have not developed the forum in which this collaboration can take place.

The IBM authors note that this lack of a forum is a problem.

“Even so, bringing the entire portrait to life is an extraordinarily difficult, but vitally important task, which must be informed and achieved through a process of debate and consensus, and action and accountability.”

Perhaps the best “forum” for debate and consensus with this number of stakeholders with unaligned interests is consumerism. Let the market be the forum for aligning stakeholder incentives to achieve the goals of focusing on value, developing better consumers, and creating better options for promoting health and providing care. Otherwise, we will be facing the predicted “forced restructuring” sooner than we think. To see how that might look, just open the business section of your daily newspaper and read about the forced restructuring now underway in the financial services industry.

Fewer Americans Getting Health Coverage through Employers

As a follow-up to yesterday’s post about the Norvax online health insurance quoting service for individuals, a new report is out that says fewer Americans are receiving health insurance thorough their employers. In fact three million fewer Americans under the age of 65 received health insurance through employers in 2007 than in 2000, according to a report from the Economic Policy Institute in Washington.

The report, “The Erosion of Employer-Sponsored Health Insurance,” attributed the growing uninsured population across the country to declines in employer-sponsored health insurance.

According to the report, no category of worker has escaped losses in employer-sponsored health insurance since 2000, with every race, education level and work status experiencing declines.

Health Plan Innovation Take: What’s the problem with the decline in employer-sponsored health plans? Can’t these people buy a plan on their own through an agent or an online service like Norvax?

While many (young and healthy) individuals find that they can actually purchase an individual health plan for less money than they were paying for the plan offered through their employer, many are finding that they cannot purchase an individual plan at all.

Remember, group health insurance plans must be offered at the same price to all who are eligible, regardless of their age or health status. However, individual health policies are individually underwritten. This means that if you have preexisting conditions, or are obese, you will pay more for your policy than someone without these conditions – if you are offered a policy at all.

In fact, Norvax says that one out of every six online shopper is deemed “uninsurable” for standard coverage, due to either a pre-existing condition or a Body Mass Index (BMI) of 39 or higher. While these individuals could still obtain insurance, these two conditions will probably make it more difficult and more expensive.

This is a problem that will need to be solved if the trend continues, which I think it will, towards the widespread dependence on individual health policies. Unfortunately, if laws are passed to mandate guaranteed issue individual policies, as was done in Massachusetts, prices will have to increase for individual policy holders – even the healthy. Without instituting penalties for not buying insurance (again a part of the Massachusetts plan) will more individuals chose to go without coverage? They probably will.

Let’s just hope that as lawmakers get involved in this issue, that they do keep open money saving options like health savings accounts. It seems that the Massachusetts connector has now decide that minimum credible coverage for a health plan in that state must include prescription  drug coverage below the deductible, thus eliminating HSA-type plans in the state.

The Face of the Online Health Insurance Shopper is Revealed

With the number of employers offering health insurance to their workers declining, the group health insurance market is shrinking. Meanwhile, the individual market has exploded to $115 billion a year. This is according to Norvax, an online health insurance technology company.

Norvax recently completed an analysis of nearly half a million people who have requested a health insurance quote or to be contacted about health insurance. What they found is that while there is a growing number of people looking for insurance online, only about 5-10 percent are really confident enough to complete the purchase online. The remaining 90-plus percent want guidance and are turning to insurance agents and brokers for advice and guidance.

To answer the needs of consumers seeking easy access to individual health insurance, Norvax launched an online shopping site, GoHealthInsurance.com, which offers side-by-side plan comparisons from more than 70 carriers, plus live access to a network of more than 10,000 experienced agents who can assist customers in finding the insurance plan best suited for their individual needs.

To date the typical online insurance shopper using the Norvax site is a single woman from the south who is in her twenties and who does not currently have health insurance.

Insurance agents are also seeing value in web-based marketing because they are able to get a better picture of who the customer is and how they prefer to look for and receive information making it easier for them to tailor the way they interact with their customers.

Health Plan Innovation Take: Norvax is an innovator in the way health insurance is being marketed in the US.  The health insurance market is rapidly becoming an individual market and individuals are going to use the internet to find the plan that best meets their needs and their budget.

Health care proposals discussed by both of the presidential candidates and by many state legislatures would give further impetus to individuals shopping for health insurance on their own. This hybrid model of combining an on line shopping experience with the guidance of an experienced broker promises to be a key element in helping people make the transition from group to individual health coverage.

Now all we need to do is figure out a way to convince the young “invincible” males in the population that they need to have health insurance, too.