[Welcome Industry Radar readers!]
Aetna recently notified agents in its Mid-Atlantic Region that the carrier would be discontinuing its "100%" Health Savings Account (HSA) plan designs. This is by far the most popular (and sensible) configuration for these kinds of plans (once the deductible is met, covered expenses are paid at 100% - no confusing 80/20 or co-pays). As a free-market kind of guy, I certainly respect this decision, even as I have trouble understanding it. Regular readers may recall that, a few months ago, Aetna undertook similar drastic measures with regard to its Health Reimbursement Arrangement (HRA) plans.
Now, I don't do a lot of business with Aetna - they're a fine company, but I just haven't found them to be all that competitive in this market - but was curious why they'd take such a dramatic step. Fortunately, I was able to connect with a carrier rep, who was happy to answer my questions as best she could (given that this is a recent development, details were understandably scarce).
So far, this blanket withdrawal affects only the "small group" market (2-50 lives); it's unclear whether it will eventually extend to the individual market, as well ("large group" plans are in another business unit). Our source found it ironic that they had just announced a raft of shiny new 100% plans, only to see them pulled a few days later.
I was curious about Aetna's rationale for scrubbing these seemingly popular plans. And that, actually, turned out to be the problem: they were popular. Very popular, in fact: apparently, quite a few groups found that they could install one of these plans and use the premium savings to reimburse employees (through their HSA's) enough to compensate for any additional out-of-pocket, thereby defeating the entire purpose of the plan. Claims apparently soared, and the company felt the sting of increased losses. This was basically a pricing problem: not enough premium to cover the unanticipated additional utilization. Of course, this begs the obvious question: why not just increase the rates on these plans instead of pulling them altogether?
The logic of that conundrum also puzzled our rep, but of course, what Home Office says...
Turns out that this is not necessarily a national phenomenon: while Ohio plans were deleted, this was not the case in other states. A big part of that is because loss ratios on this line were markedly different even in nearby markets. For example, I was told that Ohio loss ratios for this product ended up in the mid-90's, while just a few hundred miles away, Chicago-area losses were in the mid-70's. That's quite a difference. I did ask if we could see some of the actuarial studies which underpin these numbers, but (understandably) these probably won't be forthcoming.
One last bit that I found interesting, but may be a bit "wonkish:" based on the numbers, Aetna's actuaries seem to believe that a $2500 deductible is too low. While that might seem counter-intuitive, I'm not convinced that it is. Think about it: a typical co-pay plan with a $1000 annual deductible would actually incur $3000 in total out-of-pocket costs. By contrast, the maximum exposure on that HSA plan is about 17% less, with a lower premium, to boot! So one can see the attraction if the product is being "gamed."
It's a shame, really, because the point of these plans is to encourage consumer participation in the process, not to over-utilize.
[Hat Tip: Sara J]
Aetna recently notified agents in its Mid-Atlantic Region that the carrier would be discontinuing its "100%" Health Savings Account (HSA) plan designs. This is by far the most popular (and sensible) configuration for these kinds of plans (once the deductible is met, covered expenses are paid at 100% - no confusing 80/20 or co-pays). As a free-market kind of guy, I certainly respect this decision, even as I have trouble understanding it. Regular readers may recall that, a few months ago, Aetna undertook similar drastic measures with regard to its Health Reimbursement Arrangement (HRA) plans.
Now, I don't do a lot of business with Aetna - they're a fine company, but I just haven't found them to be all that competitive in this market - but was curious why they'd take such a dramatic step. Fortunately, I was able to connect with a carrier rep, who was happy to answer my questions as best she could (given that this is a recent development, details were understandably scarce).
So far, this blanket withdrawal affects only the "small group" market (2-50 lives); it's unclear whether it will eventually extend to the individual market, as well ("large group" plans are in another business unit). Our source found it ironic that they had just announced a raft of shiny new 100% plans, only to see them pulled a few days later.
I was curious about Aetna's rationale for scrubbing these seemingly popular plans. And that, actually, turned out to be the problem: they were popular. Very popular, in fact: apparently, quite a few groups found that they could install one of these plans and use the premium savings to reimburse employees (through their HSA's) enough to compensate for any additional out-of-pocket, thereby defeating the entire purpose of the plan. Claims apparently soared, and the company felt the sting of increased losses. This was basically a pricing problem: not enough premium to cover the unanticipated additional utilization. Of course, this begs the obvious question: why not just increase the rates on these plans instead of pulling them altogether?
The logic of that conundrum also puzzled our rep, but of course, what Home Office says...
Turns out that this is not necessarily a national phenomenon: while Ohio plans were deleted, this was not the case in other states. A big part of that is because loss ratios on this line were markedly different even in nearby markets. For example, I was told that Ohio loss ratios for this product ended up in the mid-90's, while just a few hundred miles away, Chicago-area losses were in the mid-70's. That's quite a difference. I did ask if we could see some of the actuarial studies which underpin these numbers, but (understandably) these probably won't be forthcoming.
One last bit that I found interesting, but may be a bit "wonkish:" based on the numbers, Aetna's actuaries seem to believe that a $2500 deductible is too low. While that might seem counter-intuitive, I'm not convinced that it is. Think about it: a typical co-pay plan with a $1000 annual deductible would actually incur $3000 in total out-of-pocket costs. By contrast, the maximum exposure on that HSA plan is about 17% less, with a lower premium, to boot! So one can see the attraction if the product is being "gamed."
It's a shame, really, because the point of these plans is to encourage consumer participation in the process, not to over-utilize.
[Hat Tip: Sara J]
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