Consumer Power Report #210

Published February 4, 2010

Man, I go away for a month and all hell breaks loose.

Whoddathunk that when Consumer Power Reports resumed publishing in February that health reform would be dead in Washington? Yes, dead. As in “as a door nail.”

Don’t take my word for it. Listen to Lawrence O’Donnell on Chris Matthew’s Hard Ball ( on the very night of the Massachusetts election. O’Donnell was staff director of the Senate Finance Committee during the last big fight over health care, so he knows what he is talking about.

But the special interests we discussed in the last issue continued their lemming-like march to the sea. Just one week before the election they held a fundraiser for General Coakley, trying to save her election prospects. Not only did they fail to save her, but they actually helped her lose by illustrating how beholden she was to Washington.

Good. They all lost a bundle backing the wrong pony. But what’s new about that? They’ve been doing it all year long.

Now maybe we can get back to the original topic of this newsletter–chronicling the real changes that are happening in the real world of health care.




Let’s start with a story I missed earlier. That is the most recent National Health Interview Survey (NHIS) from the Centers for Disease Control and Prevention. This is the Big Daddy of all of the national surveys, and it finds that now 22.7 percent of the under-65 population is in “high deductible” health plans. This is up from 19.4 percent just one year ago. This includes 6.4 percent of the population with a health savings account, up from 5.2 percent last year. It does not separate out health reimbursement arrangements from other people with stand-alone high-deductible plans. The report also mentions that fully one-half of the individual market now has high-deductible health coverage.

SOURCE: Centers for Disease Control


Cigna has released the latest of its reports on the experience of its consumer-driven health plans. It issued a press release saying, “As overall medical costs continue to increase by double digits annually, medical costs for individuals in account-based consumer-driven health plans (CDHPs) went down 26 percent over four years.” And it adds that this happened, “while levels of care for their preventive medicine, chronic disease management and evidence-based treatments were higher than their counterparts in traditional PPO and HMO health plans.”

More specifically the study of 655,000 Cigna enrollees found:

  • Immediate and sustainable cost savings: CDHP medical costs are 14 percent less than traditional plans the first year, cumulative cost savings rise to 19 percent in the second year, 23 percent in the third year and 26 percent in the fourth year.
  • Higher levels of care: People with CIGNA Choice Fund received recommended care at compliance rates that were similar to or better than those covered by traditional CIGNA health plans. Key indicators such as use of preventive care, evidence-based care, and disease management program participation were measurably better among those in CIGNA CDHPs than those in PPOs and HMOs.
  • Less cost for those with chronic conditions: Medical cost trend was substantially less for CIGNA Choice Fund customers with hypertension (27 percent less), joint disease (21 percent less), and diabetes (15 percent less) than for individuals with either of those diseases in traditional CIGNA health plans. According to the study data, these cost savings were achieved without sacrificing care.

The press release quotes Chris Policinski, president and CEO of Land O’Lakes, Inc., as saying, “Offering consumer-driven health plans to Land O’Lakes employees is helping to keep health care costs in check, while maintaining or improving care quality. For Land O’Lakes, this approach supports our commitment to employees, while at the same time ensuring that we remain highly cost efficient.” Eight out of ten workers at Land O’Lakes are choosing the CDH plan over traditional managed care plans.

SOURCE: Cigna Press Release; Summary of Study


Perhaps related to the growth of consumer-driven health plans is a new finding by CMS that “In 2008, U.S. health care spending growth slowed to 4.4 percent–the slowest rate of growth over the past forty-eight years.”

Obviously a great deal of this was due to the recession, but it is interesting to note that of the personal health care spending growth of 4.6 percent, almost all of it (3.1 percentage points) was due to price increases and only 1.5 percent was due to an increase in the use of services. This would seem contrary to the experience of most recessions where there is a large incentive among people who think they may be laid off to increase their use of services while they are still covered, and there is downward pressure on prices.

It is also interesting to note that Medicare spending was not abated, but actually grew from a 7.1 percent rate of growth in 2007 to 8.6 percent in 2008. By way of contrast, private health insurance premiums grew by only 3.1 percent in 2008 and out-of-pocket spending grew by a mere 2.8 percent. This despite the substantial increase in the numbers of people with high-deductible health plans.

Of course the analysts at CMS don’t mention any role consumer-driven health might have played. In fact, they are probably not aware that it exists.

SOURCE Several related links


Benefits Selling Magazine ran an article on whether the health reforms in Congress would “destroy consumer-driven health care as we know it.” It notes a Wall Street Journal editorial that said Harry Reid “wants to kill consumer-driven health care.”

The article walks through the provisions, including a cap on FSAs and limits on using HSAs for over-the-counter drugs, but concludes that the alarm is probably overstated, and consumer-driven health might actually do well under these reforms. It ends up quoting me as saying that even if passed the reforms will probably never be implemented and in the meantime, “employers have to deal with today’s reality. They look at prices going up, they look at the recession, they look at unemployment and how to retain the people they want to keep. The consumer-driven approaches are more attractive today than they have ever been and employers have to make benefit decisions now. They can’t let political happy talk get in the way. I’m very optimistic that ultimately, consumer-driven approaches are here to stay and will grow substantially.”

SOURCE: Benefits Selling Magazine

By the way, I will be keynoting the Benefits Selling Expo on April 20 at the Gaylord National Hotel just outside of DC. The theme of my talks will be “What Just Happened?” Go to for more information.

Our friend Paul Kitchen, president of nHealth in Virginia, had an op-ed published in the Richmond Times Dispatch discussing what real health reform involves. He writes, “Rather than a proposed solution that relies on complicated new mandates, regulations, and government oversight, we need a far simpler, market-based and common-sense approach, one that businesses large and small are already discovering in growing numbers.”

He explains, “By moving away from the decades-old co-pay, managed-care system of HMOs and PPOs–a critical shift that neither congressional bill addresses–we can remake health care in this country, making it more affordable, accessible, and manageable for virtually everyone.” And he adds, “In essence, the paradigm shift is this: What consumers formally paid to insurance companies in the form of high premiums, they now pay to themselves through their Health Savings Account.”

He concludes, “This is where we the people can reform our health care system. By pushing for additional transparency in the price and cost of health care and converting CDHPs’ lower health care premiums into a direct investment in a more engaged consumer-patient, we have the ability to reform the system ourselves.”

SOURCE: Richmond Times Dispatch

Jeff Bakke, the executive vice president of Lighthouse1, makes similar points in CDHC Solutions Magazine. He writes, “This article is about health care reform. Not the kind of health care reform unfolding through various legislative bodies of the U.S. government or monopolizing the headlines. Not health care reform you can vote ‘yes’ or ‘no’ to or the kind of reform that requires sweeping mandates or laws.

“This version of health care reform has been growing rapidly over the past several years, framed by fundamental consumer behavior principles and structured by employment and tax laws. This health care reform is powered by a segment of the population who now realizes that health and wealth are permanently and critically connected. This reform reduces cost as a means to expand coverage, instead of believing the opposite approach will somehow work.”

He goes on to explain the advantages of consumer-driven health and then notes, “one of the biggest threats to reaching the goal of affordable health care for all is, ironically, health care reform. Just as consumer-directed health care is becoming mainstream in time to make a real impact on the health care market, there is a strong possibility that government reform may eliminate some of the tax advantages of the accounts that make up the backbone of the CDHC solution.”

SOURCE: CDHC Solutions

Another good friend, Dr. Mike Ellis, wrote to defend HSAs in the Advocate in New Orleans. He wrote, “HSAs dramatically lower premiums, making coverage more affordable for everybody (and) increase participation in prevention and wellness, and improve patients’ compliance with treatment programs.” He urged readers to actually look at the evidence and they will see that, “HSAs are a no-brainer for any income-level person who runs the numbers, including the payroll and income tax savings, especially. They do better economically even if they spend it all each year.”

SOURCE: The Advocate

Even in Massachusetts people are sticking up for HSAs. Massachusetts Lawyers Weekly published an article by Jim Edholm that said, “HSAs are a law firm’s best friend.” He says, for instance, “an equity partner’s premium is mistreated by the tax laws. Her premiums are treated as pass-through income. So if the premium is $16,000 and the equity partner’s $16,000 is paid by the firm, she has to declare the premium as taxable income. She pays every miscellaneous medical cost with after-tax dollars. That means she has to earn $1.80 to pay $1.00 in medical bills. The HSA solves that problem via deductible deposits.”

SOURCE: Market Wire

An article in eCreditDaily reports that Chase has seen a big surge in HSA activity in the past year. Deposits grew by 30 percent and “Chase added 115,000 HSAs and $220 million in deposits last year, bringing its total to 500,000 health savings account holders with $740 million.”

SOURCE: eCreditDaily

And Bill Boyles’ Consumer Driven Market Report (CDMR) says HSA Bank saw an increase of 26 percent in HSA deposits this year and now holds $668 million in 260,000 accounts. UMB reports an increase in the number of accounts of 21.6 percent in the fourth quarter alone, with an increase of 35.7 percent in deposits and assets.

SOURCE: CDMR 2010 #1 (not available online)