WASHINGTON – While health savings accounts and other forms of tax-deferred, consumer-driven health care financing options have captured the fancy of many policy makers, such options have met with a lukewarm welcome among American employers and the people who work for them.
According to data from Forrester Research Inc., an independent technology and market research company, between 8 million and 9 million Americans were enrolled in a health savings account (HSA) or other tax-deferred plan as of June 2007, with 4.5 million new enrollees in 2007 alone. But consumer awareness of these options is still very low. A recent study by the Visa Corporation indicated that only 35% of all Americans have even heard of HSAs, and only 14% expressed any interest in starting one.
That is likely to change as HSAs prove their worth, Elizabeth Bierbower, vice president of product innovation for Humana Inc., said at the fifth annual World Health Care Congress.
She pointed out that 5 years after the introduction of health maintenance organizations (HMOs), combined enrollment in existing plans was only 5.5 million. That changed quickly, once major employers became convinced–for better or for worse–that HMOs would save them money. Ms. Bierbower predicted a similar trajectory for HSAs.
Diamond Management & Technology Consultants, an industry consulting company, projects that by 2010 employees and their employers will have put over $75 billion in assets into HSAs. Last year, employer contributions to HSAs already were up over 50% from the previous year.
Some companies are taking a very proactive role in pushing HSAs, especially for lower and middle-income workers. Ms. Bierbower said Humana has been a strong HSA advocate for its employees. For those making under $50,000 annually, Humana will contribute $6 for every $1 an employee contributes to an HSA. “We try to encourage long-term thinking.”
That, she said, is something grossly lacking in this country. People are simply not saving money, especially for health care needs, and they're in for a rude awakening as they reach retirement age. “People do not understand that Medicare does not cover everything.”
Many baby boomers and Gen Xers will not be able to retire comfortably because they have not saved any money to do so. According to research from the Employee Benefit Research Institute, a majority of near retirees has already spent 95% of their preretirement income. The majority of workers aged 45-55 years have less than $50,000 in savings.
With copayments, pharmacy costs, and out-of-pocket expenses on the rise, even people with relatively generous health plans are finding that they still come up short. A Kaiser Family Foundation survey in 2006 showed that 29% of families reported that one or more members had difficulty paying medical bills.
Doctors, said Ms. Bierbower, often bear the brunt of Americans' lack of planning for health care expenses. In a Humana survey of consumer attitudes, researchers found that many Americans are quite willing to leave their physicians holding the bag, in the form of unpaid bills. “They tell us that health care providers are the last ones they will pay. They say things like, 'We know the doctor will take $10 a month.' They perceive that doctors are rich and don't really need the money.”
Advocates of HSAs and other forms of consumer-driven coverage say that one of the primary virtues of these plans is that they push end-users of services to become more cost conscious, and presumably more judicious, in their health care choices. In practice, this seems to be borne out.
A McKinsey survey showed that people enrolled in HSAs or other consumer-driven plans were 50% more likely to ask about overall costs of health care services, and 100% more likely to ask about drug costs, compared with people in traditional health care plans.
Similarly, a Blue Cross Blue Shield Association study showed that 33% of HSA enrollees asked about prescription costs, compared with only 18% of enrollees in traditional plans. Twenty percent of those in HSAs asked about the costs of physician visits, versus 14% of those who have traditional insurance.