AHIP Announces One Million HSAs Sold

• CDHCC Conference in Chicago
• Roy Ramthun Moves to White House
• AHIP Announces One Million HSAs Sold
• WellPoint Acquires Lumenos
• Segal Company Reports Favorable CD Health Experience
• Banking Opportunity Cuts Both Ways

CDHCC Conference in Chicago

I'm writing this week from the CDHCC conference, being held in Chicago this time. I'll report on it more extensively next week as it is just beginning, but it is always interesting to see how these twice-yearly events evolve. This time there seems to be a whole new level of participation, including well-known policy folks like John Rother of AARP, George Lundberg, former editor of JAMA, Regi Herzlinger of Harvard Business School, Ben Lytle former CEO of Anthem, and John Goodman of NCPA.
SOURCE: www.cdhcc.com

Roy Ramthun Moves to White House

Roy Ramthun is leaving Treasury to become the White House's health policy guru. This is wonderful news for those who believe in consumer empowerment and the ability of competitive markets to create the products and services people want at a price they can afford. Roy joined the Treasury Department a mere 18 months ago - just in time to become the point man for Health Savings Accounts. He and Bill Sweetnam at the IRS quickly became models of how to implement a new program. They were both very open to hearing from the people most affected by the new law. They reached out to the community by traveling all over the country to explain the law and discuss pending interpretations. They were quick to answer questions. And they secured the support of the very able career staff in both departments. Their strategy to move out guidelines as quickly as possible was important to getting HSAs off to a running start. While it may have seemed somewhat confusing to have additional Notices and Revenue Rulings throughout the course of 2004 (eight sets in all, if I remember correctly), it was far better to do it that way, than to wait until September when every issue was settled before issuing guidance.

The challenge they faced was daunting. The law was signed by the president on December 8, 2003 and went into effect on January 1, 2004. Most people barely had time to read the new law before it was effective - especially if they wanted to celebrate Christmas that year. The issues were complex, such as defining preventive care and sorting out stacked versus whole family deductibles. And everybody had an opinion and was eager to share it. Through it all, Roy was calm, purposeful, and open to ideas. He worked incredibly long hours, sometimes answering e-mail on his Blackberry at midnight.

The Galen Institute has said from its inception that tax policy and health policy are one and the same. So it is gratifying that the White House's chief health strategist will be someone who cut his teeth at Treasury. Congratulations, Roy.
SOURCE: If you would like to add your own note of appreciation, please send it to me at GMScan@aol.com and I will pass it along to Roy, and publish it on the Galen web site.

AHIP Announces One Million HSAs Sold

As proof of how effective Roy and Bill's efforts were, America's Health Insurance Plans (AHIP) released its latest survey of HSA enrollment on Wednesday, May 4. It finds that in just 14 months, over one million people have enrolled in HSA-qualified high deductible plans. The enrollment breaks down to 556,000 in the individual market, 147,000 in small group, 162,000 in large group, and the rest uncategorized or unknown. Importantly, 37% of the individual enrollment was for people who were previously uninsured, as was 27% of the small group enrollment. Unfortunately, this is a count of High Deductible Health Plans, not HSAs. Many employers are not funding the HSA, leaving that to the employee. This is a mistake. The time to activate the account is at the time of enrollment when people are thinking about it. Even if the employer put just $100 in the account to get it started, it would fast-track the process and increase the sense of ownership.
SOURCE: www.ahip.org

WellPoint Acquires Lumenos

WellPoint has announced it is acquiring Lumenos for $185 million. It is an interesting development, especially because many people thought the recent sale of MSAver to First Tennessee Bank would infuse enough capital into Lumenos to keep the company going long enough to reach profitability. As with Definity, I am personally disappointed that the company did not go public. There is an enormous amount of venture capital out there and a thirst among investors to get a play in CD Health. Plus there hasn't been a significant health care IPO in some time. It's easy for me to say since I don't have any money at stake, but I expect an IPO for a solid company like Lumenos would wake up Wall Street and fetch a lot more money than WellPoint paid. One indicator that WellPoint got a deal is that its stock price immediately rose by about a dollar upon the news of the acquisition.
SOURCE: biz.yahoo.com

Segal Company Reports Favorable CD Health Experience

The newsletter Inside Consumer-Directed Care reports on a survey by the Segal Company of 27 large employers who are pioneers in consumer driven health. These companies jointly employ 650,000 people of whom 110,000 are enrolled in a CDH plan. These employers report extremely favorable results:

• 50% said CD Health has decreased overall medical spending trends, and only 8% said it has increased trends
• 46% said medical costs or claims had dropped, and 21% said they increased
• 33% said hospital costs or claims dropped, and 25% said they increased
• 54% said Rx costs or claims dropped, and 17% said they increased
• 29% said the number of office visits went down, and 8% said they went up
• 46% said the number of emergency room visits went down, and 25% said they increased
• 65% said generic substitutions increased, while only 13% said they went down

Banking Opportunity Cuts Both Ways

Certainly the banks are paying attention. American Banker published an article by James Knight, MD, chairman of 1st Pacific Bank of California, headlined, "What HSAs Mean for Banks." Dr. Knight predicts that the "advent of health savings accounts portends an enormous transformation in the financial services and health insurance marketplace." He says that high-deductible health plans should lower premiums by 45% to 50%, freeing up an enormous amount of cash for banks to seize. "The financial industry is beginning to realize that as much as $300 billion a year in what used to be insurance premiums is now up for grabs for tax-free deposits or invested assets." But he cautions that insurers are able to set up their own banks to retain that money, and cites UnitedHealth's Exante Bank as an example. He says in November, 2004, Exante "was said to have 150,000 accounts with assets of $110 million ... [and] now appears to be growing its banking portfolio very rapidly."
SOURCE: The article appeared on April 29. It may be accessed on-line, but you have to register for a free two-week subscription. Go to: www.americanbanker.com

Please send all comments/questions directly to me at gmscan@aol.com.

Consumer Choice Matters is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at www.galen.org for more information.

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