Monday, April 16, 2007

More Than 10 Million Are Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work

Consumer Driven Market Report (CDMR) has issued a report on the success of consumer-driven care in the marketplace.

CDMR reports that over 6 million people are participating in health plans that have a health savings account (HSA) as part of their plan—that is an increase of 2.85 million in the last year.

Similar health reimbursement accounts (HRAs) now total 4.1 million and are growing at a rate of 1.2 million per year according to CDMR.

Eleven insurers now have over 100,000 covered lives in HSAs and HRAs.

The top five include:
United Health Group 2,145,000
Wellpoint 821,000
Aetna 627,000
CIGNA 500,000
Assurant 400,000

Having ten million people in consumer-driven care today reflects huge growth for a market that is just a few years old.

It also reflects a consumer-driven market that is still only 5% of the U.S. private health care system.

At 5% of the private market, consumer-driven care, with its HSAs and HRAs, does not make up enough of the market to make a real difference in reducing our nation’s huge health care bill.

My own opinion about HSAs and HRAs has always been that they are no silver bullet solution. While HSAs and HRAs do little if any harm, I question just how much good they will do in improving either health care quality or cost.

The old rule is that 15% of the people incur 75% of all health care costs. Once these people blow through their HSA or HRA deductibles, they are in a full-pay area and their incentives haven't changed one bit.

That said, HSAs and HRAs can certainly have a positive impact on smaller dollar costs below that threshold. Consumer-driven plans have done a lot to move the country to use more cost effective generic drugs, for example. And, HSAs are one heck of a good tax preference especially for people who are going to have a high deductible health plan anyway. I have also told my insurer clients that they have to offer these plans if for no other reason than to stay current with market demands.

I also know that HSA and HRA programs are often priced lower than conventional plans. But that is generally explained away by the higher out-of-pocket expenses these plans incur and the likelihood of the healthier joining (positive risk selection). There is yet no definitive evidence just what an HSA or HRA does to control cost and improve quality.

Am I right in my pessimism that HSAs and HRAs are not going to have a fundamental impact on either health care cost or quality?

Well, at 5% of the market and 10 million people, we should be at a point where we will soon have enough data to know. We won't have to argue about it much longer.
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