As I’ve noted repeatedly, there is a place for consumerism in health care, but it is by no means a panacea. And many CDH Plans are poorly designed and will likely lead to higher costs down the road – studies have indicated that when asked to pay more for maintenance meds, some people stop taking them. And that inevitably leads to a decline in health status and rise in the number of acute episodes.
The problem is exacerbated for people with little to no money in their HSA accounts; any maintenance medications, diagnostic tests, or preventive care will have to come out of their pocket – a pocket that is often empty.
Thus, while CDHPs (that don’t account for this limitation) may well save money in the short term by reducing premiums, they will increase employers’ costs over the medium to longer term.
Which leads to the next issue – most folks under 65 get their insurance from their employer. Unless health care reform somehow removes employers from the process, that is not going to change. For now, employers decide what coverage most Americans get – and therefore the ‘health plan’ has to make sense for the employer.
For employers, HRAs (where the employer ‘controls’ the funds) are a much better idea than HSAs (where the employee controls the funds; employees who leave a job take their HSA accounts with them). So employers are reluctant to fund an HSA account knowing that those dollars walk out the door when the worker does. In 2007, the (exhibit 8.5, p. 125) average employer funding for single coverage HRA accounts was $915 v. $428 for HSAs; for families it was $1800 for HRA v. $714 for HSA accounts.
One firm that looks to have figured out that HRAs are a better answer for small to mid-market employers is Barrett Benefits Group. (I have no business relationship affiliation with the firm). Their product, branded as ‘SharedFunding’, is perhaps best characterized as a hybrid. SharedFunding is an HRA-based high deductible plan with employee accounts that are funded as needed. Unlike other HRA-type programs, this plan requires the employer to fund the individual accounts on an ‘as-needed’ basis. This pay-as-you-go model significantly reduces both insurance premiums and funding requirements, while ensuring the employee accounts are funded appropriately.
Based in Ohio, BBG has recently expanded operations in Florida, and is developing other tools to help employers control the costs of chronic conditions.
Insight, analysis & opinion from Joe Paduda
I could not agree with you more about the high-deductible plans and their dysfunctionality in the wrong hands. Those who can save money and not spend on preventive care or on maintenance drugs, especially when they have a medical condition with no symptoms, will pocket the money in many cases.
I do not agree with your view that employers need to be taken out of the process. Employers are the only party that can create a healthy environment for a significant part of the employees’ waking hours. Moreover, they have potential financial benefits from investing in health. That they do not do so is not inherent in the way they function. We need to make employer-based health easier and more convenient, not take it away from them.
At Pitney Bowes and at many other companies, we invest in health and get great results. Our model should be followed, as well as adapted for small businesses.
MIke – thanks for the comment and observation. PB has certainly been a leader in this area, and I applaud your efforts.
One quibble – I noted that employers are going to remain a key part of the process due to political realities. In fact, if, and when, employers understand that buying health insurance is investing in productivity we will start to see a much more intelligent and effective health plan evaluation and purchasing process.
Joe Paduda