Health Savings Plans Start to Falter
Despite Employer Enthusiasm for Consumer-Directed Approach,
Patients Express Dissatisfaction With How the Accounts Work
By VANESSA FUHRMANS
President Bush and many big employers have hailed “consumer-directed” health plans and savings accounts as an effective weapon in the battle against runaway medical costs. But several years after the plans got off to a fast start, the approach appears to be stumbling — largely because of consumers’ unease in using them.
Eight million to 10 million Americans are enrolled in consumer-directed plans, which involve a high-deductible insurance policy that can be combined with a savings account to help pay for out-of-pocket health costs. The plans, which have lower premiums but shift more of the responsibility for health-care spending onto consumers, got a big boost in late 2003 after Congress created portable health-savings accounts that participants can use to sock away pretax dollars and let them grow tax-free. Employers often put money in the accounts to subsidize the higher deductibles.
SPEED BUMP
Enrollment in consumer-driven health plans
• Number of U.S. workers (excluding dependents) enrolled in such plans through work was 2.7 million in 2006, vs. 2.4 million in 2005.
• 40% of employees in a consumer-directed plan say it was the only choice available from their employer.
• Where employees have a choice of health-plan options, only 19% choose consumer-driven plans.
Source: The Kaiser Family Foundation
The plans are accomplishing some of what they intended: A raft of data show that people enrolled in the plans do tend to spend less on care than others. That is encouraging more employers to introduce such plans to their workers over the next two years.
But low enrollment and low satisfaction among workers who are offered them raise the question of whether consumer-directed plans will stall before they ever hit the mainstream. Few employers are focusing on the costly measures — such as offering better coverage or more consumer education — that may be needed to accelerate these plans.
Enrollment is growing faster on the individual market and among sole proprietors, but that may be because the plans are often the only affordable option.
Where employees do have a choice, only 19% choose the newfangled plans, the Kaiser study estimates. In the Federal Employees Health Benefits Program, which has offered the plans for several years, only about 50,000 of its eight million members were enrolled in them in 2006, according to industry estimates. At lightbulb-maker Osram Sylvania, just 5% of employees enrolled in the plans in 2006, their first year.
In addition, those who are in consumer-directed health plans often report lower satisfaction and confusion about how the plans are supposed to work.
Though the consulting firm says consumer-directed plans have much potential, its executives were surprised consumer responses were so negative.
“If I were a product manager in any other industry and saw scores this low in customer satisfaction and understanding, I’d be thinking of pulling that product from the shelves or retooling it,” says David Guilmette, managing director of Towers Perrin’s health-care consulting practice.
One reason for the frustration is the uphill battle many consumers describe in trying to shop for their health care. Six years ago, Howard Katz, an industrial-design research consultant in rural eastern Pennsylvania, bought a family health plan with a savings account and a deductible that is now $5,650. But getting specific price information on which to base purchase decisions for MRIs, doctor visits and blood work has been difficult, he says.
And the money in the health savings account gets spent; only once has enough remained to roll over to the next year.
Now, he says, he has rejoined a company as an employee after working on his own, and one of the perks is regaining traditional health coverage. “Now I don’t have to act like a medical examiner anymore,” he says.
A growing number of industry experts believe that for consumer-directed plans to succeed, they have to offer coverage that is at least as rich as traditional plans. That means providing upfront coverage of most preventive services and treatments and a generous contribution to employees’ accounts.
“If you’re just trying to cost shift, and you only get 10% of your employees in, they are the youngest and healthiest, and you haven’t accomplished anything in terms of health-care costs,” says Bill Sharon, a senior vice president at Aon Consulting, the human-resources consulting arm of insurance broker Aon Corp.
“We’d heard concerns from employees that they weren’t going to get the right care,” says Julie Thibodeau, co-director of human resources at Osram Sylvania. This year enrollment between the two consumer-directed plans rose to 15%.
