CDHPs Aren't Going Away

Philip Betbeze, for HealthLeaders Media, November 3, 2008

Well, the election is over.

Whew. Maybe we can all get a break from near-constant campaigning—at least for a few months.

We've all been listening to both candidates dish on healthcare, the economy, and the war—not necessarily in that order—and trying to figure out where their differences lie.

But I've got bad news for some of you. The focus of the past three years on consumer-directed healthcare likely isn't going away. I'm no oddsmaker, but something (the financial bailout) tells me there won't be a lot of money on the table to implement some sort of revolutionary plan for affordable healthcare, no matter who's running the White House and Congress on Inauguration Day. Whether you like it or not, we're looking at evolutionary fixes for the foreseeable future.

To be sure, both candidates for the presidency tried to attack healthcare affordability and accessibility in different ways, but both approaches are conducive to continuing CDH as an evolutionary step in the healthcare system.

Despite the fact that a number of studies have suggested that uptake in such plans is not so good, depending on whether employed people have a choice among traditional plans versus consumer plans, many more have shown that consumer-directed healthcare is doing what its proponents said it would—decreasing the cost of care.

Studies are a dime a dozen, and often, they trumpet the party line of the organization that commissioned them, so take what I'm about to write with your own grain of salt, but a WellPoint study released just last week concluded that while costs went down for WellPoint employer clients that switched to CDHPs this year, they rose for those using traditional HMO or PPO plans. Also, preventive care visits by those employers' workers went up—to the tune of 8.8%.

That's the kind of success, may I suggest, that no politician wouldn't like—especially as the cost of healthcare continues to outpace inflation, wage and profit growth for most companies by a wide margin.

Even with a wide majority in Congress, you won't likely see Democrats push seriously for a nationalized or single-payer healthcare system, because the will isn't there. After all, health insurers, banks, and other special interest groups don't just donate to Republicans' campaigns.

Vik Kashyap, CEO of Canopy Financial, says both candidates' plans would support the further growth of HSAs and the accompanying CDHPs they must be paired with. His company provides financial services for HSA funds, so take his words with a grain of salt too, but listen to what he has to say.

"You have to fail an intelligence test not to get into one of these plans, assuming your employer does the right thing," says Kashyap.

And there's the key. Many don't.

The savings companies reap from introducing CDHPs is often not translated into funding the employee's HSA. Sometimes they don't cover preventive care. My wife and I decided to pass on a HDHP offering from her employer because for one, she's pregnant, and two, the risks seemed to heavily outweigh the $600 annual "reward" for switching.

But when you look at the individual market, the differences become clearer, says Kashyap. "Compare qualifying high-deductible plans and those that are not, and you'll see stark differences in prices," he says.

However, despite this good news, there are still a lot of problems with these plans. For one, healthy people tend to choose them. And forget about qualifying for one if you have a pre-existing condition. But that's no different from any other plan on the individual market today.

But given this information from the WellPoint study, they're not going away soon, and that brings me back to the election and the candidates.

John McCain had called for the elimination of the current tax exclusion for employer-paid premiums, and, using revenue generated from the elimination of that tax break—estimated at $3.6 trillion over 10 years—to create refundable tax credits of $2,500 for individuals and $5,000 for families. Consumers could then use these tax credits either to offset the higher taxes from employer benefits or to purchase private insurance on the open market.

The way Canopy sees it, people receiving a fixed credit would be able to purchase insurance far more affordably and would theoretically be more careful with their health dollars, seeking lower-cost, needs-specific tailored plans, while forcing insurers to compete for their business. In this scenario, the savings would in turn be invested in a consumers? individual or family HSA.

Under the Obama plan, a "play or pay" mandate would require employers to either offer health insurance to their workers or to pay a tax to help fund public care. As the "play" component of the plan has not yet fully been specified, in lieu of funding a public program, companies could offer employees a flat rate defined contribution which could be used by employees to procure healthcare on the open consumer market. More likely under the Obama plan would be an increasing number of employers offering higher-deductible, lower-cost plans tied to HSAs to meet mandate requirements.

Pass the salt.

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at
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