Insurers Embrace HSAs, Opponents Launch Astroturf Campaign

Published April 1, 2004

Employee Benefit News reports, “with the ink barely dry on the colossus Medicare bill, [i]nsurers have already begun planning, developing, and rolling out new HSA products. Industry watchers say the HSAs are the logical evolution in the market trend toward consumer-driven health care.”

The article goes on to discuss product development efforts at Aetna, Humana, and United Health Group. These will likely not be available until mid-year 2004, but Starmark “plans to offer new products that can be coupled with HSAs beginning in February (and) American Medical Security, which currently offers HSAs for individuals, will have products available by April for small employers.”

The article also notes that “Fortis Health sold the first individual HSA in the country and now has products for both individuals and small groups.” EBRI’s Paul Fronstin adds a cautionary note, “It’s probably not useful to look at 2004 as an example of whether HSAs might take off. These things don’t take off in the first year, and they shouldn’t be expected to.”


In the Field

Recently a number of additional vendors have announced their own versions of consumer-driven coverage. To wit:

  • Blue Cross Blue Shield of Minnesota has announced an HRA-driven plan for smaller employers called “Options Blue.” The plan features high deductibles, employer-funded accounts, first-dollar coverage of preventive services, and a strong on-line customer support and disease management program called Blueprint for Health. The company press release says Blueprint for Health saved the company $36 million in the first year of operation (for its regular business) and resulted in an 11 percent drop in ER visits and a 14 percent drop in hospital admissions, for a per-member claims savings of $500.
  • Lumenos is adding HSAs to its product line. It is well-positioned to serve this market through its wholly owned subsidiary MSAver, one of the first MSA administrators in the country. It will convert its MSA business to HSAs and continue to serve the small group market, while adding an HSA option for large employers. Company President Chip Tooke says, “HSAs broaden the appeal for consumer-driven programs by creating more flexibility and product options for employers and employees. Ultimately this empowerment will lead to better health outcomes and a more effective use of health care dollars.”
  • The Principal Financial Group has announced a new consumer-driven product it calls the Principal Reimbursement Arrangement. It is aimed at the small to mid-sized market and features an insured HRA with consumer support services such as health assessments and case management. The news release says, “the Principal Reimbursement Arrangement is funded through premiums, allowing the employer to determine the portion paid by employees.”
  • BENU has inked its first contracts in Oregon. It provides a “consumer-driven benefits exchange” program that offers employees a choice not only of plan design, but of carrier. In Oregon it provides both Kaiser HMO coverage and two designs from Cigna. The value BENU brings to the package is a “unique risk mechanism that eliminates carrier problems with adverse selection,” according to Kaiser’s Denise Honzel.

Click Here to Oppose Progress

A Congressman’s office forwarded the following e-mail. This one office has received about 100 of these, supposedly from constituents, and several other offices are also being deluged. The arguments are being circulated by the National Association of Retired Federal Employees (NARFE). (See the “open letter” on pages 6-7 for a thorough rebuttal of these claims.) These folks know how to apply pressure:

“I am writing to ask you to urge Office of Personnel Management (OPM) Director Kay Coles James to withdraw plans being made by her agency to offer costly Health Savings Accounts (HSAs) with high-deductible catastrophic health insurance in the Federal Employees Health Benefits Program (FEHBP).

“I believe the proposal could further increase the premiums I pay for my comprehensive FEHBP coverage by siphoning off healthy enrollees into catastrophic/HSA plans. And, the nonpartisan Congressional Budget Office (CBO) says that legislation to make the savings accounts and high-deductible insurance available in the FEHBP would cost taxpayers nearly $1 billion over five years. Moreover, research by the nonpartisan RAND Corporation, the Urban Institute, and the American Academy of Actuaries indicates that premiums for coverage under a traditional health insurance policy could at least double if HSA use becomes widespread.”

The letter goes to say, “Although HSAs may provide short-term financial gains to some individuals, their growth in the FEHBP could result in higher costs for enrollees and taxpayers in the long run. It’s a mistake to transform a successful group health system–where risk-sharing keeps health insurance affordable and predictable throughout life–to an ‘every man for himself’ scheme–where premiums and out-of-pocket expenses are only reasonable for healthy participants.

“Some elected officials have held up the FEHBP as a model for other employers and health care systems to emulate. However, the imposition of HSAs on the FEHBP will have the opposite effect by encouraging employers to replace traditional health insurance with less-comprehensive HSAs. As a result, traditional health insurance may no longer be an affordable option for those of us in need of comprehensive coverage and our risk of losing coverage will only grow as HSAs become more dominant. For these reasons, I urge you to ensure that OPM withdraws its proposal to offer costly HSAs in FEHBP.”

If you want to see what sophisticated lobbying is all about, go to the NARFE Web page, headlined “Stop New Threat to FEHBP,” where you can send this letter to your members of Congress with just a click of the mouse. You don’t have to be able to write or even think. All the writing and thinking has been done for you, courtesy of the union bosses.

They Don’t Get it

The New York Times must be reading the Democrats’ play book–or vice versa–because in an editorial it says the President’s tax credit proposal “does not seem like nearly enough to enable people near the poverty level to buy individual policies (and the AHP proposal) is fraught with potential difficulties. But (AHPs) would clearly benefit the NFIB, a major Republican Party contributor that could reap substantial revenue selling policies.” Curiously, the Times calls the President’s ideas “a skimpy menu of warmed-over health care proposals (that) have been kicking around for years without exciting enough interest to be passed by Congress.”

Actually, that is a better description of Senator Edward M. Kennedy’s (D-Massachusetts) “play or pay” mandate that has been “kicking around” for at least 30 years, “without exciting enough interest” even to come to a vote in Congress.

In fact, ideas like tax credits for the low-income, premium deductibility for the middle-income, AHPs for small businesses, tort reform for physicians, and HSAs for all of us, are refreshing new approaches to solving old problems.

When it comes to “warmed over” ideas, the New York Times has a corner on the market.


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