"Business Insurance" Takes a Close Look at Consumer Driven Health

 Whole Foods' John Mackey is Enthusiastic

 Not All Employers Find Huge Bargains

 Integrating HRAs, FSAs, and HSAs

 Employees are "Starting to be Engaged"

 HRA Companies Find Significant Savings

 "All Employers Would be Wise to Consider" HDHPs

"Business Insurance" Takes a Close Look at Consumer Driven Health

Whole Foods' John Mackey is Enthusiastic

We haven't visited the business trades in a while, but they are afire with consumer driven health care. The Feb. 7 issue of "Business Insurance" includes an entire section devoted to it with articles that get into the real machinery that make the wheels go round. It starts with an article by Jerry Geisel about the conversion to consumer driven health care by Whole Foods and its Chairman John Mackey. The article says, "Mr. Mackey is an enthusiastic proponent of the CDHP approach, whether it is based on an HRA or its cousin, a health savings account." At a recent speech to the World Health Care Congress, "Mr. Mackey said employers have revealed their 'incompetence' in the health care arena, referring to their inability to keep health care costs under control." It also cites NCPA's John Goodman as saying that widespread adoption of consumer driven plans will create cost consciousness among providers and patients - "If you control the money, the system will work better for you." On the other hand, Brookings Institution's Henry Aaron "questioned if exposing individuals to more health care costs will over the long run slow down cost increases."

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16155&a=a&bt=CDHP (A subscription is required to read all these articles.)

Not All Employers Find Huge Bargains

In the same issue, Joanne Wojcik cautions that "not all employers are finding huge bargains" in adopting CDHPs. A 2004 survey by Mercer found CDHPs cost on average $5,233 per employee per year while PPOs cost $6,095. But Black & Decker of Towson, MD couldn't find a plan that saved that kind of money, and it couldn't fund the HRA account very well, so few employees signed up, and the company dropped the plan. The article explains that "an employer that already has significant cost sharing with employees in its existing PPO plan may not be able to squeeze out any additional savings with a high-deductible CDHP." The article adds, "But employers going from very rich benefit plans with very little cost sharing with employees can save anywhere from 10% to 60% over their prior year's health care costs." A pricing study by CIGNA's actuaries estimate high deductible plans "cost an average 20% to 35% less than PPO plans before the HRA or HSA contributions are taken into account." The geography of the employer can make a difference, too. Twin Cities employers are seeing savings of 25% to 40% because that area hadn't moved to much employee cost sharing, according to Mickey Webb of RiskProNet International. Tom Beauregard of Hewitt Associates said, "The most effective designs are those that give employees a lot of incremental choices where they can find where they fall, from a risk tolerance standpoint, across a spectrum of choices."

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16165&a=a&bt=CDHP

Integrating HRAs, FSAs, and HSAs

Another article in the series focuses on the "stacking" of HSAs, HRAs, and FSAs. Sally Roberts reports that HSAs can be combined with HRAs and FSAs in three ways - a "limited purpose" FSA or HRA that covers allowable services below the HSA deductible such as vision, dental, and preventive care; a "post-deductible" HRA or FSA that kicks in once the HSA high-deductible has been met, and; a post-retirement HRA that allows accumulated HRA funds to be used only after an employee retires. There seem to be only a few pioneer companies that are using stacking so far, but many seem to be exploring the possibilities. Bonnie Whyte of the Employers Council on Flexible Compensation says, "What we are seeing a fair number of employers doing is using kind of a combination of FSAs and HRAs as training wheels to work into HSAs." The article explores a lot of technical issues, such as the "ordering" of the various programs - i.e., in a combination of FSA and HRA, which plan should pay first? The interesting thing is how many new tools benefits managers have to work with to control costs and improve employee satisfaction.

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16166&a=a&bt=HRAs

Employees are "Starting to be Engaged"

Judy Greenwald also weighs in with an article, "HSAs Help Ease Transition to Consumer-Directed Care." She cites the Neenah, Wisconsin-based Plexus Corp.that reports there was "kicking and screaming" when it moved to a CD health program two years ago. But benefits manager Sarah Novak says the company introduced an HSA with a high deductible last month and "employees ? are coming to her with reports of where they can get lower-priced prescription drugs. They are 'starting to be engaged, starting to look at the cost of health care, which I think is really key.'" The article goes on to explore what a variety of employers are doing about contributing funds to their HSAs. One organization in New Jersey puts in 50 cents for every dollar contributed by the employee (this is probably not allowed under IRS guidance, by the way) up to $500 for a single and $1,000 for family coverage, while First Pacific Bank of San Diego contributes a full $2,400 for singles and $4,800 for families. A lot of employers are wrestling with choosing an HSA or an HRA. Robin Downey at Aetna reports that in January, 57 of its clients with 51 or more employees chose an HSA while 65 picked an HRA. Rob Corrigan of First Health Group believes that "the higher the turnover in the company, the more likely they are to lean towards an HRA." But Ray Herschman of Mercer says HSAs "are beginning to surpass HRAs." He said, "The amount of commitment to move forward with HSAs is well beyond what we saw for HRAs, and part of it is because HRAs really did help people get familiar with the concept of an account-based plan."

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16162&a=a&bt=HRAs

HRA Companies Find Significant Savings

Jerry Geisel has another article in the series about HRAs. He cites Logan Aluminum whose rates were increasing at 12% a year before it bought an Aetna HRA. "The financial impact of the new plan was immediate and dramatic. Costs declined by about 6% in 2003, and preliminary indications are that they fell just over 1% in 2004." He reports that Aon Corp., one of the first companies to install an HRA, has been seeing cost increases of 4% for several years, compared to 10% - 12% for other Chicago area companies. Whirlpool Corp. in Michigan is reporting its HRA plan has had cost increases about 15% lower than the other plans it offers. Atlantic Marine in Jacksonville, FL said its HRA is on track to rise about 6%, and 70% of its employees chose the option, "well over three times the number its consultant expected." The article quoted Medtronic's Roger Chizek as saying, "We need to improve on the information available for cost, quality and outcomes." But it adds that that kind of information may not be that far off and is already becoming available. The article adds, "The early results of HRA-based plans, while by no means definitive, are encouraging, employers with the plans say. They say they have seen an immediate change in employees' health care purchasing decisions."

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16163&a=a&bt=HRAs

"All Employers Would be Wise to Consider" HDHPs

Finally, the publication sums it all up in an editorial, "CDHPs Cause for Optimism." It says, "By now it should be obvious that employers' adoption of consumer-driven health care plans is no flash in the pan." It says, "Hundreds of employers ? now offer the plans to employees with many more soon to come." Whether the approach leads to long-term savings is impossible to say at this juncture, but "there is reason to be cautiously optimistic ... That kind of incentive [CDHPs offer] is totally lacking in traditional plans where a third-party...pays just about everything." It concedes there are other factors at work, such as hospital consolidation, that will keep costs rising, but concludes that "[CDHP's] potential is promising and all employers would be wise to consider their adoption."

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=16161&a=a&bt=CDHP

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

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