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Desperate to control healthcare costs, a growing number of employers are adopting high-deductible health plans paired with health savings or health reimbursement accounts.
Desperate to control healthcare costs, a growing number of employers are adopting high-deductible health plans paired with health savings or health reimbursement accounts-some even shifting all their employees into such plans.
An estimated 19.1 million Americans, or 11% of people with job-based or individual private insurance, were enrolled in such "account-based health plans" (ABHPs) in 2009. An Obama administration official says such plans likely will be sold in the new state health insurance exchanges in 2014.
While insurers tout proven savings and smarter consumer behavior with ABHPs, independent researchers insist there are many unanswered questions about whether such plans truly reduce medical spending, encourage patients to get needed services and reduce waste.
The concept of consumer-directed health plans was developed by free-market thinkers in the 1980s and 1990s, and gained strong support especially among political conservatives. Supporters say high-deductible plans combined with savings accounts give Americans greater control over their healthcare dollar, leading to lower spending and better health outcomes.
"Exposing [employees] to higher deductibles makes people behave differently," says Dennis Triplett, CEO of Kansas City, Mo.-based UMB Healthcare Services, which offers account services. "They seek preventive care, and they are more likely to stay out of the emergency room. They realize that if you regularly change the oil, you won't need to buy a new engine."
But critics worry that ABHPs place a heavy burden on lower-income, less-educated people who can't afford significant out-of-pocket costs and are less capable of making good health decisions. There is some evidence that people in these plans cut their use of inappropriate and appropriate services, such as prescription drugs for chronic conditions.
A new RAND study of 53 large employers found that families that shifted to high-deductible plans significantly cut back on preventive care, such as child immunizations and cancer screenings, particularly if their employer contributed little or nothing to a health savings account. But overall, studies show mixed results.
"People thought just creating more 'skin in the game' would get plan members to become better consumers," says Alison Galbraith, a health services researcher at Harvard Medical School. "But it's turned out to be a pretty blunt instrument. A person may want to be a good consumer but may not have the right information or ability to do that."
Despite the uncertainties, experts predict the shift to ABHPs will accelerate over the next few years as employers seek to reduce the per capita value of their benefit plans in order to avoid the upcoming excise tax under the Patient Protection and Affordable Care Act.
According to the latest Kaiser Family Foundation/Health Research and Educational Trust survey of employer health benefits published in October, 15% of employers providing benefits offered an ABHP in 2010, up slightly from 2009. Larger firms were more likely to offer them, including one-third of firms employing more than 1,000 workers. The survey covered employers with three or more workers.
The Towers Watson survey also found a growing number of employers planning to switch entirely to ABHPs.
The products "are growing, and I would expect them to continue to grow because employers are desperate to do something about rising healthcare costs," says Paul Fronstin, health research director at the Employee Benefit Research Institute. "But we shouldn't expect these things to be an overnight sensation."
There are two types of accounts associated with ABHPs: health reimbursement accounts (HRAs); and health savings accounts (HSAs). In HRA plans, the employer makes funds available to cover the worker's out-of-pocket health costs, but the money generally belongs to the employer if it's not spent. In HSA plans, the employer and employee can put pre-tax funds in the account for out-of-pocket expenses, and those funds belong to the worker. The tax exclusion for funds deposited in HSAs is projected to cost the U.S. Treasury $8 billion from 2010 to 2014.