New health plans appeal to well-off

By Kristen Gerencher
CBS.MarketWatch.com
July 18, 2004

SAN FRANCISCO (CBS.MW) -- Workers who choose "consumer-driven" health plans are likely to be healthier and more affluent than those who choose to stay with traditional health plans, according to a Consumers Union analysis of two new studies.

The studies provide one of the first looks at how several types of high-deductible health plans -- where consumers accept more responsibility for funding and managing their care -- are functioning in the marketplace. Just 10 percent of employers offer such plans this year, according to the Society for Human Resource Management.

One study tracked how 16,000 workers at the University of Minnesota perceived their 2002 health benefits, while the other surveyed 4,680 workers at health insurer Humana's Louisville headquarters. Both studies appear in the August 2004 edition of Health Services Research, a journal from Blackwell Publishing.

At the University of Minnesota, 46 percent of those enrolled in a consumer-driven plan said they had a particularly positive experience with it, while 24 percent reported having a particularly negative experience. Enrollees were more likely to be faculty members or administrators and had significantly higher incomes than those in other health plan options -- $71,406 vs. $48,148.

Those with chronic illnesses turned up in both regular and consumer-driven plans and reported similar experiences across plan types, suggesting those in consumer-driven plans didn't view themselves as disadvantaged, the study said.

Eight percent of enrollees in high-deductible plans at the University of Minnesota switched out after one year compared with 5 percent attrition for traditional plans, the study said.

Surprisingly, having leftover money in individuals' health-spending accounts at the end of the year seemed to make people more indifferent to the plans. Carrying extra funds decreased the likelihood of saying they had either a positive or negative experience, which may result from their having little contact with the plan, the study suggested.

Election year hot button

The issue of how these plans are shaping up may be important as the election nears for two reasons: Health savings accounts, or HSAs, which became law in January as part of the Medicare reform bill Congress passed late last year, are a cornerstone of President Bush's health-care platform and are gaining early interest from employers as well. Bush also promotes the use of tax credits for people to purchase their own high-deductible plans. Earlier this year, his administration proposed making the premiums associated with these accounts tax-deductible.

HSAs are meant to encourage employers who don't offer medical benefits to provide low-cost, high-deductible coverage. With an HSA, workers with a health plan that has an individual deductible of at least $1,000 a year or a family deductible of $2,000 could set aside that amount in their account. The limit rises to $2,600 or $5,150 a year respectively if deductibles are higher.

Traditional health plans, by contrast, often have deductibles ranging from $250 to $500, and in some cases don't require consumers to meet a general preset threshold before full benefits kick in at all.

Employers seem ready to experiment. Almost one in five are "very likely" to offer a high-deductible health plan with an HSA by 2006, according to a recent survey of 991 employers by Mercer Human Resource Consulting. More than half -- 54 percent -- said they're "somewhat likely" to offer the combination by that time.

Dueling deductible levels and approaches

Some employers and health insurers say plans with deductibles ranging from $1,000 to $2,000 hold down health-care costs by empowering consumers with tools to make better decisions and incentives to use medical services more efficiently. Critics contend that high-deductible plans undermine the goal of insurance by separating the well-off and healthy from the sicker and poorer instead of spreading the risk equally, and can keep people from seeking the medical care they need.

Gail Shearer, director of health policy analysis at Consumers Union, is in the latter camp. She said the studies show consumer-driven plans cater to upper-income people, leading wealthy sophisticates to "game the health-care system" at the expense of lower-income and less healthy and educated people.

Even the names "consumer-driven" or "consumer-directed" promoted by health insurers give consumers false impressions, Shearer said, noting a more honest term would be "defined contribution health plans."

"This is not about consumers being in the driver's seat," Shearer said. "This is about shifting costs to people who are sicker."

At Humana, only 7.3 percent of employees chose the consumer-driven option. The typical profile was a white, college-educated male in an exempt position compared with those who chose different health plans, the study said. Those enrolling in consumer-driven plans also tended to be older, age 40 on average compared with 35.

"High-deductible plans appeal disproportionately to higher-income consumers," Shearer said "You can't pretend anymore that it affects different income levels the same, and you also can't pretend that the level of your deductible doesn't matter based on your health status."

What's more, health-policy experts' tracking of high-deductible plans "creates a sense that valuable dollars are being spent in an effort to rearrange the deck chairs on the Titanic," Shearer wrote in a commentary that appeared with the two studies.

Ultimately, the health-care system won't be able to support both types of offerings, she said. "Over time, this risk segmentation is very likely to lead to the demise of low-deductible coverage."

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