GAO: HRA Healthcare Spending Less than Other Health Plans

Enrollees in a health reimbursement arrangement—a consumer-directed health plan that combines a high-deductible health plan with a tax advantaged account—were found in both public and private plans to spend less on healthcare annually than those enrolled in other types of health plans, according to the Government Accountability Office.

One of the reasons may be that enrollees in HRAs tended to be healthier—and therefore kept costs down, according to a GAO report. This pattern was evident even before enrollees signed up for the HRA, GAO says.

For instance, the average annual spending per enrollee for the public employer's HRA group was $1,505 lower than a preferred provider organization (PPO) group for the two-year period prior to switching. Likewise, the private employer's HRA group spent $566 less per enrollee for the two-year period prior to switching to the PPO group.

At the same time, in 21 GAO-reviewed studies, 18 studies found they were healthier than traditional plan enrollees—based on utilization of healthcare services, self-reported health status, or the prevalence of certain diseases or disease indicators.

Overall, spending for private employer enrollees in HRAs generally increased by a smaller amount or just decreased compared with those in traditional plans that GAO reviewed.

With public employer, from the two-year period before switching (2001 to 2002) to the five-year period after switching (2003 to 2007), average annual spending for the HRA group increased by $478 per enrollee. At the same time, it increased by $879 for the PPO group.

This smaller increase for the HRA group was partially driven by decreases in spending for prescription drugs. Also, average annual use of services per enrollee increased by a smaller amount—or decreased—for the HRA group compared with the PPO group for six out of eight services GAO reviewed.

For the private employer, from the two-year period before switching (from 2001 to 2002) to the three year period after switching (2003-2005), average annual spending for the HRA group increased by $152 per enrollee compared with $206 for the PPO group.

This smaller increase for the HRA group was partially driven by smaller increases in spending for physician office visits and decreases in spending for emergency room services. Additionally, average annual use of services for each enrollee increased by a smaller amount—or even decreased—for the HRA group compared with the PPO group for four out of seven services GAO reviewed.

GAO also found in its analysis that:

• While data from the national insurance carriers showed that enrollees in the HRAs were younger than those in PPOs, GAO's review of published studies produced mixed evidence on the ages of HRA relative to traditional plan enrollees.

• HRA enrollees were more likely to elect single coverage than traditional plan enrollees, GAO found. However, data from the national insurance carriers showed that 44% of HRA enrollees compared with 42% of PPO enrollees opted for single coverage in 2004.

• The published studies GAO reviewed "consistently found" that HRA enrollees had higher salaries than did traditional plan enrollees: for example, a case study of a large employer found the average salary of HRA enrollees was $93,409, compared with $69,555 for PPO enrollees.