Study identifies HRA potential and the next set of challenges

THE STUDY The report summarizes the experience of three employers by following 16,000 enrollees who moved from a traditional plan in 2002 to UnitedHealth Group's iPlan product in 2003. Although the design varied among the employers, all three offered an iPlan product that combines an HRA with catastrophic medical expense coverage and separate comprehensive benefits for preventive services.

Employer A offered the iPlan product alongside various Preferred Provider Organizations (PPOs), with the iPlan product having the highest employee contribution.

Employer B offered the iPlan product alongside an Exclusive Provider Organization (EPO), Point-of-Service (POS) plan, and a PPO.

Employer C offered the iPlan product only, after offering an EPO, POS and PPO in 2002. This employer based its HRA (ranging between $300 and $1,800) on length of employment, regardless of contract type.

Because of this structure, the HRA accounted for between 20% and 120% of the deductible, which was $1,000 for medical and $500 for drugs. Prescription drugs were included.

ANALYSIS AND OBSERVATIONS While the report contains analyses of the experience of each individual employer, it also looked at the experience across all three employers.

Among the observations:

On a "paid claim" basis, all three employers showed a savings or no claim-cost trend compared with the previous year. This probably occurred due to slightly lower benefits and changing consumer behavior. (Paid claims are defined as amounts paid from the catastrophic coverage and the HRA in 2003 compared with the benefit paid claims in 2002.)

When the outstanding HRA balance was conservatively added to paid claims (since this is a potential employer liability), the cost trend ranged between -0.3% and 11%, which is still well below the 12% to 18% trends that predominated nationwide.

Among the three employers, the number of employees carrying over a balance ranged between 33% and 74% of the iPlan population.

For those employers offering the product on a "slice" basis (as one choice among several), the iPlan product attracted a better selection of health risk, higher-income employees, and more families; the degree of each was dependent on the employee contribution for the iPlan product.

In general, the iPlan product yielded a reduction in utilization, especially in office visits, emergency room, outpatient surgeries and prescription drugs.