Consumer Health Technologies

Since the enactment of the Medicare Modernization Act by the Congress in 2003 allowing for the establishment of Health Savings Accounts (HSAs), the consumer driven health care (CDHC) industry has seen unprecedented growth in accounts based coverage designed to empower health care consumers. Recent industry data on costs and utilization trends in HSA and Health Reimbursement Account (HRA) plan options suggest that employer plan options and employee enrollment patterns will indeed progress. The current trend is well poised to accelerate as more employers expand the offering of CDHC based accounts or choose to implement full replacement coverage, forcing employees to adopt a high deductible health plan and bear more responsibility for the cost and therefore spend more consciously. As a result of the shift in employer-sponsored health plan options and choices; the CDHC industry will continue to see dramatic changes in the cost and utilization of account-based plans.

The recent shocks to the U.S economy and the fears of a recessionary business environment present additional challenges for employers and individuals seeking to maintain quality health care coverage. Recent data suggest that employers are gravitating toward a variety of CDHC options. In the last year, over 40% of employers offered at least one CDHC option, such as an HSA or HRA coupled with a high deductible plan as the principal replacement option for traditional indemnity or managed care plans. In the next five years, according to estimates from the Consumer Driven Health Care Institute (CDHCI), we can expect to see over 60% of all employers offering a CDHC plan as either the sole or primary option for employer-sponsored health coverage. The core rationale for the shift to CDHC plan options and the shift away from first-dollar or limited payment by employees is a simple one: cost. CDHC plans have shown their power in the market place as a result of not only the cost savings to employers, but also the higher than expected levels of savings among account holders. Recent data suggest that cost and savings are a primary and motivating factor in the shift to CDHC account-based plans. The average annualized health benefit premium costs savings of Fortune 1000 firms that replace tradition plans with account based plans range from 18-23 percent. In addition, the accumulated savings among employees are at a higher level than expected and represent a considerable accrued benefit over employees with traditional health plans. A recent survey released statistics that an overwhelming 91 percent of account holders are satisfied HSA account owners. The overall cost savings associated with HSA accounts can also be attributed to the lower premiums and the account owners heightened engagement with their financial and physical well being.

The enrollment in high deductible health plan products with HSA accounts also provides additional proof of the growing use by employers and employees. Industry data shows that over 8 million participants were covered by HSA qualified Health Plans at the beginning of 2009, up from 6.1 million in the beginning of 2008. Estimates from a broad range of sources (America’s Health Insurance Plans-AHIP, The US Treasury Department and CDHCI) project that HSA qualified Health Plans will exceed 10 million by the end of 2010. The growth in HSA account usage is diverse and broad with employers and employees of all sizes electing to choose this option over traditional plans The most significant growth is among large employer groups that represent 45 percent of enrollment with approximately 2.8 million covered lives, however small firms are embracing HSA accounts too. Innovation and technology are creating tremendous market opportunity for expanding options and choices within the vast array of account based plans offered in today’s health benefit market place.

The utilization of account-based health plans continues to show a trend toward savings accompanied by the emergence of the ‘educated consumer.’ In particular, the most recent industry statistics show an increase in the savings rate and account balances associated with HSA accounts. Importantly, the data also show that premium growth with HSA accounts is generally less than traditional indemnity and managed care plans, even when the employer fully funds the account. This is a key point that many employers have seen in recent years as a result of the experience of employers that fully or partially fund the underlying account. Academic and industry research reflects not only higher levels of satisfaction when accounts are funded by employers, but also that accompanying premiums are lower for funded accounts due to higher utilization of allowable preventive care health care services.

What does the current trend and utilization data associated with HRA, and HSA accounts mean for their future use in the market place? The answer to this question is rooted in the past success and cost savings that will continue to accrue to employers and individuals that gravitate toward them in the future. The accumulated data and experiences associated with account-based plans is on a path of expansion and those of us in the healthcare benefit and CDHC industry should have the foresight to be prepared to meet the opportunity and challenges associated with increased demand for these types of products. Account-based plans are here to stay and will continue to command attention as the health care benefit landscape transforms.