HSAs Bursting Out in New York

Published February 1, 2005

The New York Daily News reports “a burst of interest [in health savings accounts (HSAs)] now in New York.” It says, “for 2004, the new HSAs were slow to catch on,” but a survey by Mercer Human Resources Consulting, a worldwide consultancy firm based in New York, predicts “in 2005 12% of all employers will likely offer a so-called ‘consumer directed health plan,’ most of which will be HSAs.”

This “slow to catch on” expression is annoying. A December 20, 2004 editorial in American Medical News (AMNews), a publication of the American Medical Association, used the same expression. Most people were predicting there would be 2.5 million people with HSAs and another 2.5 million in health reimbursement accounts (HRAs) by the end of 2004. What is slow about going from zero to 2.5 million in one year?

Still, the New York Daily News article quotes Carmine Morano, president of PerfectHealth, as saying, “We’ve undertaken more presentations to employers on HSAs since the beginning of November than we did during all the rest of 2004. We believe HSAs are the wave of the future in health care financing.”

Source: http://www.nydailynews.com/business/v-pfriendly/story/261426p-223898c.html

Rules of the Road for HSAs

An important paper and resource has been published by the HSA Coalition and authored by its president Dan Perrin. “HSA Road Rules” provides in 23 pages virtually everything one needs to know about the laws and regulations regarding health savings accounts. It includes sections on HSA eligibility, HSA deposits, HSA spending, and specific sections devoted to HSA trustees, employers, and insurers.

All of the material is presented in numbered bullet points that make it easy to reference. It also includes tables on the “catch-up” provisions, investments, and allowable spending. It is a great supplement to the HSA Coalition’s Web page and vendor listings.

Source: http://www.hsainsider.com

Blues Promise National HSAs by 2006

The “HSA Road Rules” couldn’t come at a better time, as virtually all health insurers are launching HSA products.

AMNews reports that Blue Cross/Blue Shield will be offering HSAs nationally by 2006. The article, by Robert Kazel, says 23 Blue plans are already offering them, and that will grow to 39 plans by the end of 2005, presumably with some national identity and marketing effort.

The Blues expect to offer premium savings of 15 to 20 percent, which sounds low compared to other carriers. Kaiser Permanente, for instance, has reported about a 50 percent reduction in premiums for its HSA-compatible product.

In the article, Bill Sharon, senior vice president at Aon Consulting–an insurance and risk management company in Tampa, Florida–is quoted as saying, “Blue Cross has to have the HSAs or they risk losing HMO and PPO business they have.”

At least one Blue executive seems to get it: Cary Badger of the Regence Group, which owns Blues plans in Idaho, Oregon, Utah, and Washington, says, “Our research shows people don’t want others to make decisions about their health care, except their physicians maybe.”

Source: http://www.ama-assn.org/amednews/2004/12/13/bisb1213.html

Docs Should Talk Up HSAs

Another issue of AMNews, December 20, 2004, includes an editorial urging physicians to talk up HSAs with their patients, and it offers a new brochure from the AMA to help them do that. The editorial says, “The brochure is a concise primer on HSAs. It explains how they work, what patients should do if they want one and their employer doesn’t offer one, and gives sources of additional information.” The brochure, “Health Savings Accounts at a Glance,” may be downloaded from the AMA Web site.

Source: http://www.ama-assn.org/amednews/2004/12/20/edsa1220.htm for the article, and http://www.ama-assn.org/ama1/pub/upload/mm/363/hsabrochure.pdf for the brochure.

Dirigo Health Fizzles

Those watching the train wreck of TennCare in Tennessee may want to check into the Web site of the Maine Heritage Policy Center to keep their other eye on the fizzle of Dirigo Health in Maine. The center issues a periodic “DirigoWatch” publication that explains the mind-numbing intricacies of the program. Facts such as, “Only 20% of U.S. households will consume more than $2,000 in health care per year. Dirigo’s Family Premium is $10,300 a year with a $2,500 deductible,” will make you happy you don’t live in Maine or pay taxes there.

Source: http://www.mainepolicy.org/portals/0/Final%20DirigoWatch%20II.pdf (This is the Spring 2004 issue. The Fall 2004 issue doesn’t appear on the Web site.)

UnitedHealth Buys Definity

UnitedHealth Group purchased Definity in December for $300 million. I suppose this is good for the consumer-driven (CD) health care movement. It certainly underscores United’s commitment to CD health, especially after it converted to high-deductible plans for all of its own employees.

Definity will give United an instant presence in the self-insured HRA market, which should fit very well with its earlier acquisition of Golden Rule Insurance Co. and the fully insured HSA business. (Definity is not an insurance company but instead serves as an administrator for large, self-funded employers. Golden Rule is an insurance company that sells products to companies that are too small to self-fund or just prefer not to.) Both firms can arrange high-deductible health plans and market HSAs along with them, but they aim at very different segments of the market.

Recent conversations I’ve had with United executives indicate they have moved well beyond their prior reliance on wresting discounts from provider networks, to an understanding that the future lies with first-rate customer service and support.

Still, I hate to see one big company gobbling up innovators and competitors. Competition is always good for any industry, and innovation comes hard for giant corporations. Also, I was looking forward to Definity going public. They had the potential to be a blockbuster IPO that would have gotten the attention of Wall Street, which would have been good for the whole movement.

Another curiosity here is that Definity fetched only $300 million when it was covering some 500,000 lives, while Golden Rule was reportedly sold for $800 million while covering 600,000 or so people. One newsletter publisher told me the disparity shows the advantage of being a soup-to-nuts insurance company with tangible assets.

Source: http://www.usatoday.com/money/industries/health/2004-11-29-unitedhealth-definity_x.htm

DEA Reneges on Pain Management

Another setback to consumerism in health care came from an entirely different quarter. In November, the U.S. Drug Enforcement Administration (DEA) reneged on an understanding with pain management physicians made only in August that would have clarified the legal use of prescription narcotics.

An article by Washington Post writer Marc Kaufman said the reversal in the DEA’s attitude will leave “many pain doctors and patients more fearful than before that they could be arrested for practicing what they consider good medicine.”

A DEA statement said, “[I]t is a longstanding legal principle that the Government ‘can investigate merely on a suspicion that the law is being violated, or even just because it wants assurances that it is not.'”

Yikes! This is a new “legal principle” to me. Since when can the government conduct criminal investigations just to get assurance that a law is not being violated? Who among us is not subject to a criminal investigation under such a standard? Meanwhile, many thousands of Americans will be condemned to suffer agonizing pain because of the DEA’s decision.

Source: http://www.washingtonpost.com/wp-dyn/articles/A20537-2004Nov29.html

End of PPOs by 2010

William Boyles, publisher of the Consumer Driven Market Report, has published a monograph on the dismal future of Preferred Provider Organizations (PPOs). “PPO fee schedules are the worst payment structure imaginable for the coming century,” Boyles argues.

“PPOs protect physicians from price competition by giving them a guaranteed revenue stream as long as they play the game,” Boyles writes. “Thousands of physicians in an area are guaranteed the same price [per procedure] … with virtually no control over volume. PPO discounts are a complete and total mirage. … The basis of [consumer-driven health care] is price transparency and individual patient control over their own medical claims. …”

He predicts, “In the immediate future a member will be able to see their actual claim payments in an online array next to the average physician charge in their zip code, along with the names of other physicians within a half mile who charge less, and a map and directions.”

Boyles doubts that tiered networks will work as a survival strategy for PPOs, either, because bureaucratic decision-making about which doctor fits into what tier cannot compete with real-time pricing. He concludes PPOs will not survive the decade.

Source: http://hmsresearch.net/docs/PPOs.pdf

Greg Scandlen ([email protected]) is director of the Galen Institute’s Center for Consumer Driven Health Care and assistant editor of Health Care News.