Consumer-driven Plans in Action: Costs Down 26%

Cigna has released the latest of its reports on the experience of its consumer-driven health plans. It issued a press release saying, “As overall medical costs continue to increase by double digits annually, medical costs for individuals in account-based consumer-driven health plans (CDHPs) went down 26% over four years.” And it adds that this happened, “while levels of care for their preventive medicine, chronic disease management and evidence-based treatments were higher than their counterparts in traditional PPO and HMO health plans.”

More specifically the study of 655,000 Cigna enrollees found:

• Immediate and sustainable cost savings: CDHP medical costs are 14% less than traditional plans the first year, cumulative cost savings rise to 19% in the second year, 23% in the third year and 26% in the fourth year.

• Higher levels of care: People with CIGNA Choice Fund received recommended care at compliance rates that were similar to or better than those covered by traditional CIGNA health plans. Key indicators such as use of preventive care, evidence-based care, and disease management program participation were measurably better among those in CIGNA CDHPs than those in PPOs and HMOs.

• Less cost for those with chronic conditions: Medical cost trend was substantially less for CIGNA Choice Fund customers with hypertension (27% less), joint disease (21% less), and diabetes (15% less) than for individuals with either of those diseases in traditional CIGNA health plans. According to the study data, these cost savings were achieved without sacrificing care.

The press release quotes Chris Policinski, president and CEO of Land O’Lakes, Inc., as saying, “Offering consumer-driven health plans to Land O’Lakes employees is helping to keep health care costs in check, while maintaining or improving care quality. For Land O’Lakes, this approach supports our commitment to employees, while at the same time ensuring that we remain highly cost efficient.” Eight out of ten workers at Land O’Lakes are choosing the CDH plan over traditional managed care plans.

Like Your Health Insurance Arrangements? Too Bad

Real World DC (Health Care Remix)

Like your health insurance and want to keep it, as candidate Barack Obama pledged?

Sorry. If you’ve got an insurance policy paired with an HSA, you’re up a creek.

Writing back in November of the Senate version of health care “reform,” the Wall Street Journal said of such plans (and consumer choice generally), that it “crushes them with malice-aforethought.”

Also under the gun: flexible spending accounts. It’s all part of a “we know better than you” arrogance that afflicts politicians.

David Goldhill, a media executive, recently wrote in the Atlantic Monthly that if a 22-year-old starts at his company today earning $30,000 and health costs grow at 3%, by the time he retires he’ll have paid out $1.77 million in premiums, lower wages, out-of-pocket costs and both sides of the Medicare payroll tax.If all that money were instead available via an HSA, including by borrowing against future contributions, “wouldn’t you be able to afford your own care?” Mr. Goldhill asks. “And wouldn’t you consume health care differently if you and your family didn’t have to spend that money only on care?”

This is precisely the future liberals fear because it would make health care less susceptible to political control. The Reid bill makes it impossible for people to choose better reform alternatives, the ones that can only be discovered through innovation and competition in a dynamic marketplace.

More recently, the Washington Times describes the restrictions that would be imposed on both HSAs and FSAs–measures that would actually increase spending on health care.

Declaring War on Patient Power

President Obama has repeatedly said that health reform will be a failure if it does not control future health care spending. Congressional leaders have said much the same thing. Yet over the past two decades, only one type of health plan has been shown to reliably change patient and doctor behavior: consumer-driven health care (CDHC), in the form of Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs).

So what happens to these plans in the reform bills before Congress? They are eviscerated. Even though the Senate bill leaves families with the same out-of-pocket exposure HSA plans can have today, the bill reduces the amount that can be deposited in an HSA to one-third of its current level. Even though over-the-counter drugs have enormous potential for cost savings, the bill allows HSA funds to be spent on prescription drugs only.

In these and (potentially) many other ways, Congress is declaring war on patient power, as Ron Bachman explains in this latest Health Alert.

Less Cost, Higher Levels of Care

Cigna has released the latest in a series of reports on its experience with consumer driven health care programs. It cites the key findings as -

Immediate and sustainable cost savings: CDHP medical costs are 14% less than traditional plans the first year, cumulative cost savings rise to 19% in the second year, 23% in the third year and 26% in the fourth year.

Higher levels of care: People with CIGNA Choice Fund received recommended care at compliance rates that were similar or better than those covered by traditional CIGNA health plans. Key indicators such as use of preventive care, evidence-based care and disease management program participation were measurably better among those in CIGNA CDHPs than those in PPOs and HMOs.

Less cost for those with chronic conditions: Medical cost trend was substantially less for CIGNA Choice Fund customers with hypertension (27% less), joint disease (21% less), and diabetes (15% less), than for individuals with either of those diseases in traditional CIGNA health plans. According to the study data, these cost savings were achieved without sacrificing care.

Move State Employees into New Health Plans

With states grappling with deficits that won’t go away even when the economy picks up, what can they do? To start with, move public employees into high-deductible health plans that are matched with contributions to health savings accounts.

That combination would save taxpayer money, and potentially save government employees money as well.

Michael D. LaFaive and James Porterfield explain how it would work in Michigan. Moving state employees would save taxpayers $106 million in its first year; making the same change for public school teachers would  save even more, or $451 million.

They’re After My Health Care

John Hood, president of the John Locke Foundation, says “they’re after my health care.”

Hood objects to the Senate and House plans on the usual policy grounds that you’ll find here–constitutional problems, looming fiscal disasters, to begin with–but he also finds a very personal reason: It would “almost certainly destroy my current health plan.”

“So you’ll have to pardon me,” he says, “if I view liberals’ political promises about health care with scorn. Rather than truly addressing the problems with the current system, they are bound and determined to destroy any health care financing arrangement that puts power in the hands of individuals rather than government and the special interests who control its subsidies and dictates.

HSA Market Growing, but Threatened by Legislation

The Miami Herald reports that Blue Cross Blue Shield of Florida has decided to use only an HSA program for all its 5,000 employees. The article says, “The Jacksonville-based insurer’s leaders have become firmly convinced that an HSA plan makes sense because it requires workers to make their healthcare decisions — and rewards those with healthy behaviors.”

It adds that this year about three-quarters of employees have opted for the HSA on a voluntary basis, so it is not much of shock to switch and only three or four employees have raised concerns. The company assesses premium contributions on a sliding scale, so lower-income workers pay much less than the higher-income managers.

Meanwhile, Business Insurance reports that General Motors is also using a full replacement HSA for its white collar retirees.  Jerry Geisel writes, “the annual deductible will be $2,500 for individual coverage and $5,000 for family coverage. The maximum annual out-of-pocket expense will be $3,500 for individuals and $7,000 for families.” The company is working with Bank of America as the default HSA administrator, though retirees are free to use any other administrator if they prefer.

Forbes adds a cautionary note for people with HSAs. Ashley Hawkins writes, “At last count 8 million participants had $10 billion in HSAs. That figure will rise to $71 billion within five years, figures Eric Remjeske, president of Devenir Group, a Minneapolis consultant to HSA plans. He forecasts that a seventh of the dollars will be in balances large enough that the HSA operator can offer mutual funds as an investment option. A typical plan has $2,000 as the minimum for that feature.’ But warns that some administrators are charging excessive administrative fees for investment funds that can eat away at the balances.

She cites United’s Optum Bank, which switched from the Vanguard Fund to funds like Munder and Thornberg. The service charges tripled when that happened. The article goes on to discuss the pros and cons of these fees, but she clearly prefers Vanguard over other investment managers.

And writing in Philly.com Colin Hanna asks, “If President Obama is serious about “bending the cost curve” on health care, as he says, then why is he trying to kill health savings accounts, one of the few proven methods of controlling health-care costs?”

He cites some of the recent studies showing that HSAs do indeed, “bend the cost curve,” and says, “Despite these cost benefits, the future of HSAs is in jeopardy. All of the health-care bills making their way through Congress require minimum benefits in excess of the low premium, high-deductible plans associated with HSAs.”

He cites a number of people who are thrilled with their HSA experience and concludes, “If Obama is interested in cutting health-care costs and increasing patient choices, and if he wants to show that he means it when he says that he is open to Republican ideas, he should embrace the effort to expand the availability of HSAs. They save money for employers and employees alike.”

There IS a Better Way

Is there a better way to health care reform? Why, yes, yes there is. And members of Congress would know about it if they paid any attention. The Associated Press reports that more and more employers are switching to consumer-driven plans. It writes, “This year, more employers may include a new type of plan that can chop premium payments by nearly 20 percent and give consumers a tax break.”

The article describes how these plans work and then quotes the obligatory skeptic: “‘It doesn’t fit most people,’ said Jon Beyrer, vice president of wealth management for Blankinship & Foster, a Solana Beach, Cailf.-based financial advisory firm.” But it goes on to also quote someone who is very pleased: “On the flip side, Jim Green hasn’t paid a dime for health care since signing up a couple years ago for HSA-based insurance through his employer, Indiana’s state government. Green, 56, said the state pays his entire premium and contributes about $1,500 to his account every year. When he visits the doctor, he simply pulls out a charge card that takes money from the company-funded account. ‘My wife and I are not sick very often, and we don’t go to the doctor very often, so it’s covered everything we’ve had,’ he said.”

And: “Business owner Don Ehlerding faced annual premium increases as high as 20 percent until he switched to consumer-directed health plans a few years ago at his Fort Wayne, Ind., motorcycle dealerships, which employ about 30 people. Increases have since been between 8 percent and 10 percent. ‘That’s the only thing we’ve been able to do to control premium cost,’ he said.”

The article summarizes: “The percentage of employers with more than 1,000 workers who offer a consumer-directed plan has climbed from 10 percent in 2005 to 28 percent this year. That figure has jumped from 4 percent to 18 percent over the same span for companies with 200 to 999 workers.”

Whole Food Employees Praise Innovative Health Insurance Ideas

Whole Foods employees talk with Reason.TV about the health care coverage that the grocery store union doesn’t want them to have.

A union official in the video says that the workers don’t know any better.

(For background, see John Mackey’s essay in the Wall Street Journal. Mackey is the CEO of Whole Foods. )

Weigh more, pay more

North Carolina’s state employee health insurance plan needed a $675 million legislative rescue plan. Although health savings accounts (HSAs) are the best way to combine lower premiums and personal responsibility, they are not in the offing anytime soon.

Instead, the State Health Plan will offer more generous insurance for non-smokers and those with a BMI under 40. All employees will lose their current plan in exchange for a less generous plan unless they prove their smoking and BMI status. Some in the press have started calling this a “fat tax.” Whatever flaws this plan has – such as mistaking a low BMI for good health, dropping the BMI threshold over time, giving employees little choice – the basic concept is not bad. State employees should bear more of the cost of their care. The plan just goes about it the wrong way and continues to ignore the other looming problem – retiree health costs.

Not every bad idea is a tax. Calling this proposal a tax is as wrong as when President Obama tried to argue with George Stephanopoulos and the Merriam-Webster dictionary.