Are HSAs Ready to Battle a Public Plan?

Once trumpeted as the best hope to control spiraling healthcare costs, consumer-driven health plans have been largely pushed aside during healthcare reform talks in Washington. In fact, you're as likely to hear lawmakers use the phrase "capitation" as CDHPs.

In an attempt to resurrect CDHPs' standing and make them part of the healthcare reform debate, two reports released over the past week from the health insurance industry promote the idea of health savings accounts. But health insurers need more than just surveys given the heightened interest of a public health plan in Washington. The industry must improve on CDHP tools, such as cost and quality Web sites, real-time claims adjudication, and member outreach, in preparation of competition from a public health plan.

CDHPs may not be part of the current healthcare reform lexicon, but the interest is obviously there. Enrollment numbers have skyrocketed in the last four years. America's Health Insurance Plans announced that 8 million Americans are now covered by HSA-eligible plans, about 2 million more than at the start of 2008. Previous AHIP census reports show steady enrollment growth in HSAs from 1 million in March 2005 to 6.1 million members in January 2008.

HSAs are the more popular sibling in the HSA/Health reimbursement arrangement (HRA) family. HSAs allow both the employee and employer to fund the account and workers can take it with them when they change jobs. This combination, supporters say, leads individuals to view HSAs as their own money. The end result is people become better healthcare consumers.

Critics, on the other hand, charge that HSAs benefit only wealthy people, who use them as savings accounts. A Government Accountability Office report last year found average adjusted gross income of taxpayers with HSAs was $139,000 in 2005, compared with an average of $57,000 for all other filers.

AHIP, however, dismissed that argument, claiming that HSA holders have a broad range of incomes. AHIP's study, Estimated Income Characteristics of HSA Accountholders in 2008, claims that 49% of accountholders live in neighborhoods with median incomes under $50,000, and that the average total deposits for all HSA accounts were $1,634, while the average total withdrawals were $1,063.

Another study released last week showed that the vast majority of HSA owners are satisfied with their accounts. OptumHealth Inc., a wellness company that serves 60 million people, handles nearly 400,000 HSAs, and is owned by UnitedHealth Group, reported that 91% of 500 HSA owners randomly surveyed nationally this year are happy with their accounts. Piggybacking on AHIP's claims that HSAs are not just for the wealthy, OptumHealth reported that 70% of those surveyed make $75,000 annually or less. OptumHealth also reported that HSAs are actually achieving their goal—making better healthcare consumers:

• 64% of respondents said they inquired about generic options for medication.
• 47% said they asked their providers about charges.
• 83% said that people should research healthcare options to get the best price.
• 72% of respondents said that individuals should be responsible for helping manage their own healthcare costs.

These two studies were released at the same time that the healthcare reform debate rages in DC. That's not a coincidence. Private health plans are rightfully viewing portions of healthcare reform as a direct assault on their business.

HSAs, the poster boys for creating better healthcare consumers and lowering healthcare costs under the Bush administration, are not seen by most Democrats as a solution—but rather a problem that prices the poor out of quality healthcare.

Democratic lawmakers, instead, are discussing a public insurance option, which they say would create a level playing field to compete against private insurers, and ultimately reduce healthcare costs.

Despite lawmakers being enamored by a public plan, health plan officials are still viewing HSAs and CDHPs as a cost-saving, patient-empowering movement, as was evident in the health plan portion of the HealthLeaders Media Industry Survey 2009.

Beyond the HealthLeaders Media results, employers are increasingly turning to HSAs as a way to control costs. Sure, HSAs are not likely to be part of healthcare reform, but as long as Congress keeps those accounts as an option for businesses and private plans, employers will remain interested in reducing costs through better consumerism and cost sharing.

Health insurers have made a number of concessions in hopes of derailing a public health plan, but HSAs could be a way for private plans to compete against a public plan because the savings accounts will help keep costs down and provide a distinct difference to a public plan with low administration costs.

Health insurers should review their HSAs, improve their consumerism tools, and prepare for potential battle against a public plan.