Consumer Driven Health Care: Interesting Update

[Welcome Kaiser Network readers!]

We've been vocal proponents of Consumer Driven Health Plans (CDHP) for a long time, and have seen some of the positive results of putting consumers into the health care driver's seat. Since these plans are relatively new, long term trends have been difficult to ascertain, but that's beginning to change.

Recently, health insurance leviathan WellPoint (WP) published a report that showed some interesting (and hopeful) results. The folks at WP surveyed almost 8,000 of their groups that offered some kind of CDHP in 2007, and made some startling finds:

■ Those employers that adopted a CDHP in 2006 saw their health care spending decline, while those in non-CDHP plans saw spending increase from 7% to 10%

■ Most employers that offered a CDHP also offered other, more "traditional" choices, and families with children were still more likely to opt for the CDHP

■ One of the most oft-cited objections to CDHP plans is that they discourage folks from seeking preventive care (although the logic of this canard has always escaped me). Contrary to "conventional wisdom," however, the study found that "consumers enrolled in CDHPs had higher utilization of preventive care than consumers enrolled in non-CDHPs."

One of the things I most appreciated about the report was that it generally avoids industry jargon; that is, it's understandable to non-insurance-geeks. And it's not an overwhelming amount of information, so it's easy to go through fairly quickly.

Kudos, WellPoint!

[Hat Tip: NAABC]

More Good (CDHC) News...

Based on data amassed throughout 2004 and 2005, United Health Care recently announced that Consumer Driven Plans don't seem to prevent folks from seeking medical care. According to UHC, those who enroll in these types of plans don't forego needed medical care any more than their opposite numbers who went the "traditional" route.

This puts the lie to the oft-repeated (but rarely supported) contention of CDHP critics that these plans encourage chronically ill members to skimp on needed care, let alone healthy folks to skip out on preventive care opportunities.

I also found the raw numbers interesting, as well: UHC looked at data for a quarter of a million CDHP participants, and compared it to industry-wide numbers (based on a staggaring 10 million folks with PPO co-pay type plans). Compared to the co-pay folks:

■ CDHP members were 16% more likely to have a cervical cancer screening

■ 10% more likely to receive a cholesterol screening

■ 16% more likely to receive a prostate screening

■ 8% more likely to have well- child visits

Oh, they were just as likely to go for colon cancer screenings and mammograms.

Of course, this makes sense: if one has been empowered (through premium and tax savings) to make these choices, it stands to reason that folks who "get" the CDHP concept will take advantage of such benefits. I've also noticed that a number of High Deductible Plans (HDHP's) now include 100% coverage for many preventive services (vaccines, well-child care, mammograms, etc). As this segment of the industry matures, look for more plans to adopt this strategy.

And that would be a good thing.

CDHP Update

We've talked about some of the new, positive changes in store for HSA enrollees. And it's true that Consumer Driven Plans (CDHP) continue to grow in popularity (albeit not as quickly as some might have hoped). Still, the numbers could be better:

Segal-Sibson, an independent HR consulting firm, recently surveyed some 1200 employers, of which about 120 responded. On the one hand, such a statistically insignificant sample renders the numbers pretty meaningless. On the other, it's interesting to see even a small, unrepresentative slice of what's going on with CDH. One might presume that the folks who did respond had pretty strong feelings about the subject, which may be why they bothered to respond at all.

One interesting trend jumped out at me: of the employers which offered some form of CDHP at all, more went the HSA (Health Savings Account) route than the HRA (Health Reimbursement Arrangement) path. This seems to me to be just right: after all, the HSA emphasizes more personal responsibility and thoughtful health care consumption, while the HRA rewards those who spend more. Thus, if one of the stated goals is to rein in costs (both for health care and for health insurance), then the former method is desireable.

Tellingly, few of the respondents even knew whether or not their employees made use of their accounts, or the various health imporovement programs that were made available. Thus, they had no clue as to whether or not such plans were of benefit. In other words, they really had no idea what their true cost savings were, nor whether or not their employees benefitted from their HSA's. Since health insurance premiums supposedly represent such a tremendous portion of a company's expenses, one would think that there would be some interest in ascertaining whether or not there was, indeed, a real value.

What was it Bob said a while back?

HSA's in Jeopardy?

As a member of the National Assocation of Alternative Benefits Counselors, I receive periodic updates on legislation, pending and otherwise, regarding HSA's, HRA's, etc. Mostly, it's routine stuff, and merely confirms information I've already received from other sources.

Today, though, I learned for the first time about a move in Congress to further complicate HSA (Health Savings Account) distribution requirements. Although the email did not mention the name, number or sponsor of the bill (nor, indeed, much of anything else), a quick search of Thomas.gov gave me the information necessary to write an informed post about it.

[PARA REDACTED: Thanks to a tip from a detail-oriented reader, I've been reliably informed (and confirmed) that the bill originally referenced here is NOT ABOUT HSA's, substantiated or otherwise. This makes it even more frustrating, since the NAABC "alert" made no mention of which bill is involved. I'll keep digging, and update as necessary. My apologies to Congressman McNerney. HGS]

Let's take a step back and talk about a detail of HSA's which we don't much discuss here. When one makes a withdrawal (or "distribution") from almost any "qualified" (i.e. tax-favored) account, there are certain rules and requirements. With Health Reimbursement Arrangements (HRA's) and Flexible Spending Accounts (FSA's), one is required to "substantiate" or prove that the expense is eligible for that favorable treatment. This is really a pretty simple hoop through which to jump: the receipt is going to say "allergy med" (so it's okay) or "Snicker's bar" (which is not) [ed: Dang! Are you sure about that?]. Under Section 105 of the Internal Revenue Code, only folks participating in HRA's and FSA's are required to provide that proof; HSA participants are pretty much "on their own." That is, unless and until one is audited.

Until now.

The (as yet unidentified) bill would change that, and require HSA participants to substantiate each of their withdrawals, as well. Is this a big deal? Maybe, maybe not. According to the NAABC email:

"The proposed solution to this undiagnosed problem is to require that expenditures from an HSA be substantiated as a qualified medical expense. This would surely lead to higher administrative costs and more hassles for consumers."

I'm not convinced that that conclusion necessarily obtains. After all, many carriers offer HRA and FSA administration gratis, or for a nominal fee. Admin costs for the HSA loss-funds (the actual "accounts" in "HSA") are already all over the board; as their popularity (and marketshare) continues to grow, more admin's will come into the market, and competition will help to rein in costs. Based on this fact alone, I doubt that substantiation will be much more than a minor nuisance.

UPDATE, NAABC Responds: I sent a link to this post to the NAABC, and Harvey Randecker, its president, sent me this helpful reply:

"My only point in circulating this "Alert" was to indicate exactly how consumer-driven health plans can be destroyed...incrementally.

After The Clinton Reform Plan [ed: "HillaryCare"] was defeated in the early 90's, Bill Clinton was quoted as saying that the lesson they learned was that, in order to get what they wanted, they would need to proceed "incrementally," passing small legislation that will chip away at the system and, gradually, force a more socialized system on the American public.

Now, due to the expansion of HSAs and HRAs, the only way to halt their growth is to make them less desireable to the public. Admittedly, I thought that [the recent Medicare] legislation...made HSA provsions too liberal and that it was bound to incite anti-CDHP legislators, once they assumed control, to do whatever necessary to reverse the trend and, to me, it looks like this is just the first small step.

We are so small staffed at NAABC that all we can do is pass along Alerts like this that we receive that we feel would begin to adversely affect the CDHP market in one way or another. Unfortunately, having a tiny staff means that we really don't have anyone with the time to really digest what we receive. Nevertheless, if we ignored the alarm bells being sent us, we would not be doing a service to our members.

I appreciate your comments."

Thank you, Harvey, we appreciate both your prompt response and your insights. The point about staffing problems is, of course, spot on: it's one of the banes of such associations. It seems to me, however, that this may be one of the key benefits of blogs (such as IB): the ability to do "distributed computing" type analysis on these issues. The appeal of this method would be financial (i.e. free to the organization) as well as comprehensive (i.e. lots of folks working on pieces of the puzzle).

UPDATE 2: I received a phone call from Congressman McNerney's office this afternoon, after I'd already corrected the post. Although I was happy to have given the Congressman free publicity for his bill, I still wanted to know the name and number of the correct bill, since I still couldn't find it at Thomas. So I emailed the NAABC (again) to ask for this information, and their spokescritter had no idea what it was, or any other relevant and important details.

This is outragous: you don't send out an "Alert" about legislation when you don't even know the name or number of the bill. Regardless of the staffing issues, this is just inexcusable. I no longer consider the NAABC as a credible source for legislative information, and won't be troubling our readers with its "Alerts" in the future.

CDHP News: Lukewarm

Late last year, the Guardian Life Insurance company surveyed 1,000 working folks, specifically looking for their attitudes and opinions about Consumer Driven Health Care. Not surprisingly, the survey found that there's a lot of misinformation about CDHP, and that if we're going to have a meaningful national debate about its role, we need to clear those up.

While "traditional" plans still hold the lion's share of the market, consumer driven products (e.g. HSA's, HRA's, etc) are gaining ground, with some 14% of the market. Still, given that the current version of HSA's has been around for almost half a decade, I found that result disappointing (although not, frankly, surprising). The survey focused on the group market, though, so these numbers may or may not translate to the individual.

Part of the problem with that anemic enrollment is that almost half the respondents (44%) believe that such plans are actually more expensive than PPO's or similar plans, and almost a third (29%) are very concerned about what would happen if there was a catastrophic claim. There are two problems with this, of course:

First, high deductible plans are almost always going to have lower premiums than comparable co-pay plans. This just makes sense: if the carrier is off the risk for the little claims, they can charge less premium. The second problem is that, come a major claim, the high deductible plan will have - at worst - no greater out-of-pocket exposure than the co-pay plan, and often a lower one.

Another interesting find is that " (a) strong majority of consumers (85%) want more control over decisions that affect their health care, and 81% think health care costs should be transparent. Nevertheless, 33% of workers feel overwhelmed by too much information already."

That's really a shame. On the one hand, it illustrates that people do want to have some say in their own care, and a majority (think they) want more transparency in that care. On the other hand, there are still a lot of folks who are saying "TMI!" Still, they represent a minority opinion, and can easily avoid that overload (just swear off WebMD and Google).

Having done a number of employee enrollment meetings over the years, I wasn't the least bit surprised by the finding that over half (53%) of those surveyed listed co-payments for doc and hospital visits, not price, as their number one concern. That's not news to me (nor, I suspect, my colleagues): after carefully explaining how the high deductible plan and accompanying savings account work, the number one question I'm asked is always "okay, Mr Stern, that's really great. But what's my co-pay?" After explaining again how the plan works, and that there are no co-pays, the second question I'm asked is always "oh, that makes sense. So, then, what's my co-pay?"

I'm not trying to make fun of the employees here - after all, we're the ones who've been pushing $10 and $15 co-pays for years - but to illustrate the uphill battle we face if we're going to break through that 14% barrier. In the event, the complete results are here, and I'd recommend reading through it for even more insights.

Gary's Story

In September of 2009 a new client called me with news you never wish upon an enemy let alone a friend. His wife had been diagnosed with breast cancer. Not more than six months prior to that we had met to write their health insurance.

They had gone uninsured for a few months after the employer plan available to Gary had become unaffordable for them. Financial times were tough and he was now on a new path as a self employed consultant.

With a limited budget, I suggested that he buy a high deductible plan that was on the lower end of his price range but would provide major medical benefits and allow him to use pre tax dollars to pay his expenses. The initial plan was a $2500 CDHP with embedded deductible. It carried a monthly premium of $480 per month.

When Gary called that day his first question was about pre-existing conditions. He was worried that since the policy hadn't been in force for very long that the insurance company was going to look back and cancel the policy. He was also worried that the insurance company was going to increase his rates to a point he couldn't afford it.

All of this coincided with the time when President Obama was pushing his new health care reform proposals. Gary's nervousness was a direct correlation to the false propaganda being pushed by the mainstream media and Democrats in congress. They were screaming about medical bankruptcy, people being dropped from insurance, and profit mongering insurance companies who would rather see you die than pay your claims.

I assured him that in Ohio there were laws in place that protected him from these things as long as he paid his premiums on time and wasn't fraudulent on the application. While this put him at ease his second question was very simple: we want Pam to see the very best doctors. Will my plan cover that? I assured him that it was and that the plan we had chosen was from one of the best and easiest to work with insurers. From this point forward Gary was at ease.

Fast forward to October 10, 2013. Pam has been cancer free for three years. Their oldest daughter is in grad school and their boys are busy playing high school sports. Gary's business is thriving and he employs a part time administrative assistant. Life is good.

Their insurance program now is a $5000 CDHP with embedded deductible and it carries a monthly premium of $648 per month. They understand that health care costs continue to rise and are concerned with how they will pay for insurance in the future. What prompted the discussion this time is Obamacare. Last week we began the process of sending out notices to clients about renewing early to avoid some of the unintended consequences of the law. Their policy renews April 1st so we wanted to take advantage of an opportunity to lock them in at a lower rate. It was also possible that they might qualify for a subsidy and that they could get a new plan through the Exchange although that wasn't very likely. In either event it is my professional responsibility to give clients all of their options and make recommendations based on their circumstances.

This is what we found. To early renew their current plan early will increase their premiums to $683 per month. Gary and Pam's household income is too high for them to qualify for a subsidy in the exchange but we ran rates with a January effective date for them to compare. The results were astounding. A plan with the same deductible that included coinsurance with a higher out of pocket maximum is going to cost $1180 per month!

Renewing early is a great strategy, but is essentially like putting a Band-Aid on a severed jugular. It successfully helps Gary and Pam's situation in the short term. Come next December when they are forced to play in the Obamacare sandbox who knows what will happen.

CDHC: Smaller Increases?

Deloitte Consulting recently surveyed about 150 large employer groups, and found that Consumer Driven plans (CDHP) experienced lower rate increases than their "generic" cousins. Now, this was on "large" groups, which probably included quite a few self-funded plans; I'm not comfortable (yet) extrapolating from this survey to small groups. Still, it shows a definite trend, which is good news.

Among the other findings in this survey:

■ the rising cost of health care benefits was a primary factor driving respondents' health care strategy

■ extensive plan designs, increased utilization and cat claims were cited as having major impact on medical plan costs

■ most employers believe that CDHP offers the most effective approach for managing costs and maintaining quality care

One of the challenges cited by folks who are wary of CDHC is the perception that it's all about shifting cost onto employees. Obviously, there is some truth to this: higher deductibles (even with lower total out of pocket exposure) means that folks need to become more involved in their health care decision-making. On the other hand, encouraging employees to become better health care consumers, along with wellness programs and disease management programs, were cited by 38% of the respondents as important, which would seem to mitigate this. That's almost double the percentage of just 3 years ago, when only 21 percent of respondents gave that answer.

Now that's progress.

On the Bleeding Edge...

of Consumer Centric Health Care. I make the distinction between Consumer Driven vs Consumer Centric because the plans we’ll be looking at encourage an insured to take at least some responsibility for their care. On the other hand, neither one would be HSA-compliant, so we’ll skip the CDHP label (at least for now).

My industry just loves acronyms: CDHP, HSA, HRA, PPO, you name it. Well, let’s add another one to that list: Self Directed Health Plan (SDHP). One of my carriers has just introduced one such, and it’s a pretty neat idea. They start with a high deductible group plan, and while they strip out the doctor’s visit co-pays, they leave intact the prescription drug card, as well as the co-insurance. The high deductible and absence of co-pays helps lower the cost dramatically.

“Well, Henry, what’s the big deal,” you may ask, “after all, we’ve seen low-end plans before.” What makes this one unique is that the carrier is paying the employee to stay healthy: the plan includes a Self Directed Account, funded solely by the insurer. That’s right, the carrier puts in $1,000 a year for each covered employee ($2,000 for families), to pay for routine and preventive care. Services such as annual physicals and immunizations get reimbursed directly by the carrier, but still count toward one’s annual deductible. Pretty cool.

A little bird tells me that one of our eastern seaboard states is working with an insurance company to develop and market a policy that’s also “out there:” all covered employees of companies that sign up for this coverage receive “executive series” medical exams. In fact, so do their covered spouses and children.

Once the employee’s (or family member’s) current health is assessed, they’re enrolled in a treatment plan (if applicable). They receive full policy benefits if they follow “doctors orders,” but receive a significantly lower level of benefits if they don’t. This will be very helpful for those with chronic conditions such as diabetes, Crohn’s, hypertension, etc.

The program is still in the planning stage, but the carrier, exam provider and re-insurer are all in place. So far, details are scarce, but I’ll pass them along as I learn of them.

Stay tuned…

Cannon Fodder

FoIB (and MedWonk Biggie) Michael Cannon has an interesting article in this month's Forum for Health Economics & Policy journal. In it, he proposes his solution to the health insurance issue:

"The creation of tax-free health savings accounts presents a new opportunity to reduce the distortions created by federal tax preferences for health-related expenditures that ultimately could help eliminate those distortions."

What he's talking about here are so-called "Large HSA's" with deductibles starting at $8000 ($16,000 for familes). His contention is that these plans, with ultra-low premiums, will allow employers to funnel more cash away from insurance carriers and into their employees' pockets.

A laudable goal, to be sure, but I have some issues with it. Last year, Michael was kind enough to share with me the "white paper" on which this was based. I found the idea intriguing (after all, I am a major proponent of CDHP and HSA's), but had some reservations, which I shared with him at the time.

I am absolutely thrilled for Michael to have been published in such an august journal, and hope (and presume) that his piece will spark a much-needed discussion.

I'd also like to share with our readers my response to Michael last year. Hopefully, this too will help move the ball forward:

1) I've always been a believer in "rising tides raise all ships" (paraphrase): when folks talk about the inequity of the employer write-off, they always talk about deleting or capping it. I've always wondered why it wouldn't make more sense to expand it; that is, enable everyone who buys their own cover to deduct it. I see that you've taken some of that with your bigger/better HSA idea, and that's a good thing.

2) Your idea about basically taking the whatever the e'er/e'ee pay for h/c insurance and running the whole thing thru an HSA is intriguing. Seems to me that this is a variation on (expansion of?) "cafeteria plans." I really like that.

Putting those two together (plus whatever else I haven't gotten to yet), I can see where there would be some significant progress. My only reservation is one of pragmatism: how likely is it that the class-warriors would embrace this (or even consider it at all)? Obviously, that's not a reason not to pursue it, but do you have a strategy in mind for dealing with the inevitable obstructionists?

ADDENDUM: In subsequent correspondence, I also pointed out to Michael the feasibility conundrum such a plan would face. Briefly, insurers know that there is an absolute premium "floor," below which they cannot go. These include fixed and administrative costs, morbidity and reserves. In other words, no matter how high the deductible gets, there's really only "so far" the premiums can be trimmed, until there's no savings to be had. That's why, for example, you save (say) $100 going from a $3000 to a $4000 deductible, but only $25 going to the $6000.

The other problem is that, while I remain convinced that HSA's are a potent weapon in the fight against health care costs and consumer apathy, I don't believe that it is the only such. While "Large HSA's" may appeal to some "large employers," I'm not convinced that they'll play well with smaller groups (or in Peoria, as they say).

Nevertheless, Michael's made an impressive beachhead in the ongoing battle to solve the health insurance "crisis," and we applaud him for that.

CDHP Wins Another Round

Consumer Driven Health Plans (e.g. HSA's, etc) continue to help solve one of the underlying, persistent problems facing health care delivery: cost.

As we continue to demonstrate here at IB, health care costs drive health insurance costs. That is, increases in the cost of care directly affect the cost of financing (insuring) that care.

One proven method for reining in that trend is through health plans that empower and involve the consumer. Recently, UnitedHealthcare underwrote another major study of Consumer Driven Plans, and how they have affected costs. They studied their own claims experience for the past 5 years, and found that these plans "consistently delivered lower cost than PPO plans in four of the five years, even after adjusting for differences in health status, demographics and other influencing factors. Importantly, the bulk of the savings are attributable to changes in health utilization, not cost shifting to the employee."

That last part is key: one of the major arguments against consumer-centric plans has been a (false) perception that they come at the expense of the insured. Turns out, not surprisingly, that that's not the case.

The study comprised over 400,000 insureds, which seems like a pretty decent sample size. Folks (and fellow wonks) who'd like more details can access the results by clicking here.

Mark the Unhappy Liberal

Self employment has been good to my client Mark. He went from working for "the man" four years ago to building his own small business. Over those years times were tough for Mark and his family. Getting the business off the ground was tough and because of a prior medical condition Mark's wife was uninsurable. The good news was he was able to utilize COBRA and pay an "outrageous" premium of $798 per month for a $3000 single deductible CDHP plan. When it expired in 2011 the family was forced to make a decision. I had advised him with his COBRA decision and now he was calling again hoping to find cost savings and make sure that his wife had insurance.

The good news was we were able to insure the entire family and lower the deductible to $2500 single deductible. The new cost was $498. Mark and his family couldn't be happier. In their opinion it was all because of Obamacare. Fast forward to last month.

With an income of $95,000 per year and a plan that was no longer going to be available because it doesn't meet the law, I encouraged Mark and his family to take an early renewal option to avoid the high costs associated with community rating and new mandated benefits. His 2013 rate was $632 and an early renewal option would only increase the rates to $651. 

Against my advice he refused the early renewal. "You've been a great help but I believe in the Affordable Care Act. There is no way that the costs and subsidies will make me any worse off." So we went the other direction and started the process at goodluck.gov. Finally on December 20th we were able to get through the website and pick a plan. The results only shocked one of us.

Starting tomorrow he will have a new plan. It is with one of three insurance companies who are contracted with his wife's specialists but wasn't the lowest cost option. His benefit will be better with a $500 savings in his deductible and the family will get a subsidy estimated at $101 per month. 

The problem is the new premium. It will cost him $1142 per month and this includes his subsidy. $5892 per year more than if he had simply early renewed. Unfortunately for Mark and his family Obamacare didn't bring peace and joy this holiday season. Instead it left him with a big lump of coal.

Healthy Living and Insurance: By the Numbers

When it comes to the relationship between healthy lifestyles and insurance costs, we tend towards ambivalence: on the one hand, there's no question that choosing healthy foods and habits is a good thing; on the other, there's scant evidence that this will dramatically reduce insurance premiums.

So of course we'll muddy the waters a bit more, with some news from United HealthCare. UHC recently emailed agents some information on the (potential) relationship of healthy choices and lower premiums. Based in part on the 2009 Employer Survey on Purchasing Value in Health Care (by Watson Wyatt), we learn that two thirds of those surveyed claim their employees' poor health choices are the "biggest challenge to maintaining affordable health care coverage."

Left unremarked in the UHC email was this little tidbit:

"51 percent of companies have a CDHP in place — nearly a 9 percent increase over last year. Enrollment rates in CDHPs are also increasing at a pace of two percentage points per year, rising to 12 percent in 2008."

That's great news for those of us who think that encouraging insureds to be more proactive, and to take a greater role in their health care and insurance, is a good idea.

Another survey, this one by Buck Consultants, found that over half of the surveyed employers intended to "actively pursue a culture of health for the future." It's not clear what that means; one presumes this would include stop-smoking programs, some kind of regular excercise incentive, that kind of thing.

The carrier even included a handy flyer that can be printed out (and distributed) which recaps some of the findings and offers helpful suggestions.

Kudos to UHC for making this information available.

CDHP's: The Expanded Version

National Review health blogger (and FoIB) Avik Roy has written an insightful and helpful post on the role of Consumer Driven Health Plans (CDHPs). He examines the pro's and cons (including a link back to our own exclusive expose on network re-pricing problems).

His conclusion - that Consumer Driven plans will shine under ObamaCare© - may be a bit controversial, but it's certainly well-reasoned and supportable. Recommended.

Take Two Aspirins, and Email me in the Morning...

Well, health care transparency isn't the only thing that Minnesota BX is up to:

"Some of Minnesota's largest health care providers, including HealthPartners and Blue Cross and Blue Shield, are beginning to cover e-visits between doctors and patients, an unusual step nationally and an attempt in part to contain exploding health care costs."

A patient simply emails his questions (or concerns) to the doc, who then responds via email. This cuts down on wait times for appointments, and the patient gets a quicker response. Folks who are out of town (on business or vacation, for example) can still "consult" with their preferred doctor, and not have to sit on hold or play phone tag.

That's the good news. The bad news (if it can really be classified as such) is that only about 25% of doc's have bought into this concept, and consumers aren't exactly knocking down the (virtual) door to participate, either. Part of the problem was that physicians couldn't charge for their email consults, which would tend to discourage widespread adoption of the practice. Once carriers start reimbursing for them, that should change (eventually).

This seems to me to be tailor-made for CDHP (Consumer Driven Health Plans): after all, the idea is to empower the patient to make informed decisions about his health care. What better way than electronic communication?

Very cool.

Charge it!

Growing up, “be careful what you wish for” was always a popular saying around my home. And, as a vocal (and vociferous) proponent of Consumer Driven Health Care, I should have seen this coming:

"As consumer-driven health plans gain traction, banks and health plans are teaming up to develop health care credit cards that they hope will reduce the increased out-of-pocket costs for employees that go along with (them)."

It seems that the convenience of these cards may also have a downside: as consumer credit card debts continues to climb (according to the article, it’s about $2,300 for the average citizen), charging health care could contribute to a substantial increase in such debt.

Now, I must confess that the concept of a “credit” card for HSA’s, FSA’s, and the like is somewhat foreign to me: I’ve always considered these to be more in the nature of debit cards. That is, they simply replace my checkbook when I’m paying for health care. Whatever funds are in the account represents the amount I have to spend; no more, no less.

So it came as a surprise to me (must be my sheltered existence) that financial service companies would set these up as unsecured lines of credit, as opposed to merely account balance conduits. But that’s apparently what is happening:

“The card, at a 12.96% interest rate, may be used to pay for elective or quality of life procedures, such as laser eye surgery, cosmetic dental care, orthodontry [sic] and hearing aids. Prices for such services easily go into the thousands, but Citi Health Card enables patients to "structure payment plans of up to 48 months, so members can customize their payments to fit their overall financial planning and medical spending."

The first two items, at least, aren’t even “kosher” by IRS standards; that is, they’re not eligible for tax free reimbursement under Section 213d. The beauty of our capitalist system is that folks are free (for the most part) to buy the things which are important to them.

Maybe I’m just a fuddy-duddy, but I’m skeptical that a credit card is the best vehicle for CDHP’s. Still, it will be interesting to see if the idea takes off.

Dangerous Musings [Updated & Bumped]

[Originally posted February 19, 2013 - scroll down for update]

The National Association of Alternative Benefit Consultants is the organization which sponsors my CBC designation. It's made up of, and run by, good folks, and does a good job of hunting up interesting ways for agents to expand their business. Sometimes, though, I just shake my head in bemusement at what they send out.

Case in point, a recent email with the provocative title "HSAs, HRAs - Alive & Well Under PPACA‏"

I'm going to elide over the HRA (Health Reimbursement Arrangement) for now - although that model has some interesting challenges under The ObamaTax, as well - and focus on Health Savings Accounts.

As we've written, HSA's are essentially outlawed under the 'Tax, because despite their built-in cost efficiency (or perhaps because of it), they fail to meet the minimum essential coverage requirements under the train wreck law. NAABC's email avers that "many employers will switch to CDHPs, either in the Exchanges or through ERISA plans to escape the regulations of the PPACA.  Even a one-deductible, 100% coinsurance plan will qualify under the "Bronze" level in the exchanges."

Their position relies on this statement from the IRS:

"Section ... directs that the limit on deductibles described ... for a health plan offered in the small group market be applied so as to not affect the actuarial value of any health plan. We interpret and implement this provision through our proposal ... by authorizing a health insurance issuer to make adjustments to its deductible to maintain the specified actuarial value for the applicable level of coverage required ... we propose that a plan may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without doing so.”

Which should clear up any confusion on that issue.

But of course it doesn't, any more than relying on the IRS hotlines during tax season. The agency goes on to "clarify" its position:

"We propose to use a ‘‘reasonableness’’ standard and request comment on what evidence or factors should be required from an issuer and considered in determining whether this standard is met with respect to health insurance coverage ... While it may be possible to develop plan designs to meet all of these constraints, we believe it could be difficult to develop plans with reasonable coinsurance or equivalent cost sharing rate" [emphasis added]

Talk about weasel words. Does any sane person really think it's a good idea to rely on the generosity and open-mindedness of the IRS? The NAABC seems to think so, because they end their email with this citation from the IRS regs themselves:

"A health plan’s annual deductible may exceed the annual deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage a ... without exceeding the annual deductible limit"

Uh-hunh.

So it seems that the IRS has left us a loophole through which we can drive our HSAs.

Or does it?