Consumer Power Report #148

Published October 13, 2008

Wow! Between the elections and the market turmoil this is a golden age for news junkies. Remember back in the old days when the biggest “crisis” on people’s minds was the price of gasoline? When was that, a month ago? Seems like ancient history.

It feels like a cosmic game of 52-Card Pick-Up. Everything has been tossed into the air and will need to be rearranged when it all settles down.

Change is the theme of this issue. Things are moving fast in Consumer-Driven Health Care. The chairs are being rearranged as enrollment surges and venture capital dries up. The happy talk is over and investors expect results. Now there is no excuse for vendors to not be making money.

One thing we don’t discuss in this issue, but is certain to happen in the next two years, is the coming roll-up and consolidation of HSA administration. There are hundreds, maybe thousands, of banks and HSA administrators servicing maybe 500 to 1,000 accounts each. With that volume they simply can’t be doing a very good job of it. They can’t afford to spend much on information support and customer services. It is certain that a few strong players will start to acquire these micro books of business.

And, unlike the cause of the current turmoil, HSAs are good old-fashioned money in the bank. Real money and complete liquidity. How attractive is that these days?



Inside Consumer-Directed Health Care expects a surge in HSA enrollment among federal employees this year. In an article published in its October 10 edition, ICDC reports that the FEHBP’s most popular plan, the Blue Cross Blue Shield Standard Option, is increasing premium cost to employees by 13.4 percent for families (to $356.59 per month) and by 12.9 percent for singles (to $152.06 per month).

Meanwhile, Aetna’s HSA option has increased only 7 percent to $146.75 for families and $67.01 for singles. The Postal Workers Union HRA plan premium is unchanged at $189.37 for families and $84.17 for singles. And the GEHA HSA plan has remained unchanged for four consecutive years at $217 for families and $95.20 for singles.

Aetna’s Tom Bernatavitz is quoted as saying the increase in FEP premium combined with the turmoil in the economy has created a “perfect storm” for CDH plans. He points out that the premium savings and federal HSA contribution more than make up for the higher deductibles of the HSA plan, which are $1,500 for singles and $3,000 for families. Specifically, when compared to the Blues Standard Option, Aetna HSA enrollees will save $1,020.60 a year on premiums for singles and $2,518.08 for families. Plus, the feds contribute $750 and $1,500 to the HSAs for individuals and families respectively. So a family will save $1,018.08 on the annual cost of their coverage and an individual will save $270.06.

Sounds like both the unhealthy and the unwealthy would benefit from that deal.

SOURCE: Inside Consumer-Directed Care, October 10, 2008, Vol. 6 No. 19. I don’t believe this is available on-line, but go to their Web site for subscription information.


On the other hand, Medicare MSAs seem to be struggling. CMS issued new rules for Medicare Advantage plans (of which MSAs are one version) on September 18 for an effective date of October 1, 2008. These included a host of new regulations on market conduct and quality improvement, which I won’t go into here, but some of these required new contracts with brokers. Only a Federal bureaucrat would think it is possible to learn a new requirement and rewrite a contract in 12 days (including weekends). It reminds me of the initial roll-out of the regs governing Medicare MSAs that gave vendors 11 days (if I recall) to submit proposals. Who ever said the Bush administration was “business friendly?”

In any event, apparently Unicare is dropping its participation in the Medicare MSA market. I say “apparently” because there has been no announcement that I can find, other than several people receiving letters from Unicare that the program is being ended at the end of the year. But also (apparently) Coventry is stepping up to provide this coverage, at least in some areas. Again–no announcements and very little information.

The only reason I discovered this is because I happened to get a call from a broker in Mississippi who came across my paper on “Medicare’s Biggest Little Secret” and contacted me for more information. He does some business with Coventry so happened to know about it. There is no information on CMS’s Web site that I could find.

Please let me know if you hear of any other companies offering Medicare MSAs.

SOURCE: McDermott Will & Emery information on the new regulations ; Information on Coventry’s Medicare MSA programs


Revolution Health is merging with a company called Waterfront Media. Waterfront’s Everyday Health is the #2 health care Web site, after WebMD, and Revolution Health has been #3. The combined company could exceed the Web traffic of WebMD. Waterfront has a number of specific sites that emphasize consumer health issues. Waterfront is reportedly paying $300 million for Revolution and putting Steve Case on its board. Revolution LLC will continue intact with its investments in RediClinic, Extend Health, Brainscope, and SparkPeople. It sold its interest in ConnectYourCare to Express Scripts about a year ago.

Health blogger Dmitriy Kruglyak sees the demise of Revolution Health as a stand-alone operation as undermining the premise of the “Health 2.0” movement. He says that, given Steve Case’s substantial funding, Revolution “tried almost every Internet health idea under the sun. Many of those came by way of acquisitions, while many were developed internally by copying competitors. While it is hard to call this approach focused, at least they had a chance to try and copy almost everything that had promise, giving them the first dibs at success.” But, “despite impressive starting war chest and exhaustive experimentation, most revenue streams failed to materialize, aside from plain-vanilla advertising.”

He argues that most of the “Health 2.0” companies are suffering the same illusions of the DotCom bubble–they are in love with the technology but do not have a sustainable business model. He concludes, “The sooner people ditch the hype and focus on proving their claims with metrics, the faster we will realize the true promise of the eHealth.”

SOURCE: Baltimore Business Journal; Dmitriy Kruglyak’s Blog; iStockAnalysis article; Everyday Health Web site


The Tipping Point Is Here

The annual survey of the Centers for Disease Control finds that 20.3 percent of all people under age 65 have a high-deductible health plan (HDHP)–more than the number covered by public programs (19.4 percent). The HDHP is defined as having a deductible of at least $1,100 for an individual or $2,200 for a family. Over one-fourth of this number also had a dedicated account (HRA or HSA).

SOURCE: CDC Report on NHIS Survey

Long Overdue

The Chicago Tribune reports on a lawsuit being brought against the Social Security Administration and the Department of Health and Human Services. The suit challenges the current rule that if an eligible person declines to accept Medicare Part A, he will forfeit his Social Security. Attorney Kent Masterson Brown represents three plaintiffs who argue they are already well-insured and able to pay their medical bills without the help of Medicare. They also have well-established relationships with their doctors, which could be jeopardized if they participated in Medicare.

The suit alleges the current rule was put into place without being published beforehand in the Federal Register, a violation of the Administrative Procedures Act.

SOURCE: Chicago Tribune

The Joy of Mandating

As part of the much-vaunted Wall Street Bailout, Congress enacted a new mandate requiring “mental health parity” for all employers–if they provide health coverage. This is not the first mandate Congress has enacted, but it is the biggest since the Pregnancy Discrimination Act of 1978.

Press reports say millions of people will be helped by the new mandate and 90 percent of employers will have to change their current coverage. Yet advocates and the CBO say it will cost only pennies. The CBO estimate is 0.2 percent added cost to employers.

Both things cannot be true, but it is easy to underestimate the costs when you are talking about someone else’s money. Maybe there should be a mandate on advocates and bureaucrats that they put their own money at risk when they make these projections–maybe lose a month’s pay for every percentage point they are off.

Members of Congress are already talking about additional mandates for things such as autism and slacker children to age 25 or higher. They may have discovered what state legislators have known for decades: It is fun to enact mandates on employers because you can claim to have “done something” about a social problem without spending taxpayer money. It is the perfect solution when the budget is bloated with Iraqi War costs and the price of the bailout.

SOURCE: Business Insurance; BI’s History of Mandates


Dear Greg:

Here’s the sad state of affairs:

Who is making out like bandits brainwashing Americans into thinking they need insurance that costs $7,000 to $12,000 a year? I have been a successful user of extremely inexpensive major medical insurance for most of my adult life. This proved to be a financial lifesaver when my daughter spent 13 days in the hospital two years ago. Her insurance coverage cost approx. $70/month. The total costs billed to me were over $50,000. After going through the insurance company, I’ll estimate the costs came down to $20,000.

Do the math.

Insurance cost = $840 plus a $1500 deductible — no, wait — she got ill in February. So the insurance cost: $140, plus the $1500 deductible and with the 80/20 rule, my out-of-pocket could not exceed $6,000. Total cost that year $6,140.

Compare that to the cost of the insurance my company is now required to pay out because I am in a union: $640/month. I must go to their proscribed panel of facilities or pay much more out of pocket. Do the math: $7,680 in insurance premiums alone! That’s NUTS.

If I were told to pay insurance premiums for my car or my home with the same exaggerated plans, I would tell the agent, “Get OUTTA here!” And, most people would, wouldn’t they? Then why are they clamoring for the ridiculous from their employers and now (god forbid) a socialist plan from the Feds?

You mentioned in these briefs that people are going to the doctor less. I see your facts, but that is hard to believe. Only when they are forced to pay out of their own pockets will they go home and practice “Heal thyself.”

I loved the reference I read in Forbes recently that gave Lasik eye surgery as an example of competitive medicine bringing costs down, as this surgery is rarely covered by insurance. People shop around for the best provider at the best cost.

I am frightened, Greg, because no one is preaching this low-cost solution to our “crisis” in care and insurance costs. The surge for socialist takeover is looming and we know what a fiasco that will bring about.

By the way, I make $10.41/hour as a Caregiver. I need that money the unions force my employer to shell out for excessive insurance to go into MY pocket.

I appreciate you watchdogs. Keep on fighting for us!

LN Shapely
Poulsbo, WA