2. Consumerism Still Not Living Up to the Name
With the federal government, state legislatures, aggressive business groups and corporate clients now breathing down their necks, vendors are scrambling to provide the information necessary to turn health-care users into informed consumers. But such tools are still years away.
3. Health Plan Vital Sign
Consumer-driven health plans aren’t quite flatlining, but their growth is extremely slow. The percentage of employees enrolled in a consumer-driven plan with an HSA or HRA rose from 3 percent in 2006 to just 5 percent in 2007. Employer adoption slowed in 2007, and will moderate again in 2008, according to a Mercer survey.
4. Fatal Flaw May Doom Consumer-Driven Health Plans
Consumer-driven health plans were designed to help slow rising health care spending by corporations. But the schemes may fail if employers don’t provide employees with proper education.
6. Kaiser Survey Shows Consumer Plans Instigate Premium Slowdown
The Kaiser Family Foundation’s much ballyhooed annual health care cost survey may be flawed, but it might prove that new products in the health care market, specifically consumer-driven plans, are forcing health insurers to lower their premiums.
7. More Employers Offering Only Consumer-Driven Health Plans
Plagued by high health care costs, more employers are embracing the concept of replacing all existing medical insurance plans and implementing a full-replacement consumer-driven health care program. But, they are proceeding with caution.
"It took 20 years for 401(k) plans to enjoy widespread adoption, so it’s not surprising that consumer-driven health plans, which have been around for a half-dozen years, haven’t taken off overnight, the plans’ proponents say. “Given the newness of the plans, the indicators are actually pretty good,” one says. "
By Fay Hansen
n the first six years that 401(k)s were available, 7.5 million employees enrolled
and total plan assets reached $92 billion, according to the Employee Benefit Research
Institute. After six years of consumer-driven health plans, only 3.8 million employees
are enrolled, and health savings accounts hold only $4 billion. It should be noted,
however, that it took 401(k)s 10 years to surpass defined-benefit plans in number
of participants, and 20 years to enroll a majority of workers.
Even now, with 401(k)s hitting the 30-year mark, participation
and savings remain woefully inadequate. Only 77 percent of employees with access
to a 401(k) participate, the median account balance is only $66,650, and asset allocation
is often bizarre. There’s little reason to think that the same employees who can’t
manage 401(k)s are prepared to run a cost-benefit analysis for their health care
spending.
"Transformation takes time," says Jay Savan, principal at
Towers Perrin. "For 30 years, we engrained people in managed care. The consumer-driven
arena has existed for only six or seven years, but people are aggravated because
they don’t see results. Given the newness of the plans, the indicators are actually
pretty good."
Savan notes that HSAs are really savings vehicles that are
even more tax-advantaged than 401(k)s. "Account-based health plans have value to
employees because they enable retirement," he says.
The savings are slim, however. According to America’s Health
Insurance Plans, 88 percent of the HSA accounts in 2006 had average annual balances
of less than $2,500; only 4 percent had balances of more than $5,000.
"People are aggravated because they don't see results. Given the newness of the plans, the indicators are actually pretty good."
—Jay Savan, principal, Towers Perrin
Empirical research demonstrates that a company match is necessary
to drive 401(k) participation; early evidence from consumer-driven health plans
also points to a need for employer seeding. But more than a third of the large employers
offering HSAs do not contribute to the accounts, and among those who do, the average
contribution is only $626, according to Mercer.
The tax savings from health savings accounts are not likely
to cover the average deductible. For a single taxpayer earning $40,000 a year in
2007 and using the standard deduction or itemized deductions of 18 percent before
HSA contributions, the tax savings from a maximum account contribution of $2,850
would be $428, according to the Treasury Department.
Despite these limitations, the consumer-driven health plan
industry, including many financial institutions, continues to push the plans. Two-thirds
of the financial institutions responding to a January 2008 Wolters Kluwer Financial
Services survey already offer HSAs, and one-third of those that don’t are planning
to offer them in the next quarter. The Financial Research Corp. forecasts that health
savings account assets will reach $15 billion by 2010, a pittance compared with
the more than $2 trillion in 401(k) accounts, but a potential new market for the
banking sector.
Despite the comparisons to 401(k)s, employers are unlikely
to shift all health costs to employees or to cut coverage to catastrophic care only,
according to Blaine Bos, a partner at Mercer.
"To move costs totally onto employees, you would have to reform
the entire health insurance industry," he says. "We could go to a place where employers
offer catastrophic coverage only, but there’s not a lot of appetite for that when
benefits are an important part of the compensation package and most employers are
concerned about recruitment and retention."
Workforce Management, April 7, 2008, p. 26
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Fay Hansen is a Workforce Management contributing editor based in Cresskill, New
Jersey. To comment, e-mail editors@workforce.com. Next Article: 2. Consumerism Still Not Living Up to the Name
With the federal government, state legislatures, aggressive business groups and corporate clients now breathing down their necks, vendors are scrambling to provide the information necessary to turn health-care users into informed consumers. But such tools are still years away.
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n the first six years that 401(k)s were available, 7.5 million employees enrolled
and total plan assets reached $92 billion, according to the Employee Benefit Research
Institute. After six years of consumer-driven health plans, only 3.8 million employees
are enrolled, and health savings accounts hold only $4 billion. It should be noted,
however, that it took 401(k)s 10 years to surpass defined-benefit plans in number
of participants, and 20 years to enroll a majority of workers.
