CDH News…HSAs having slow 3rd Quarter

Used with permission


CDHealthWire  For readers of Consumer Driven Market Report


November 24, 2008

ABIA Calls For End To State Solvency Regs

The American Bankers Insurance Association told the National Council of Insurance Legislators last week that the U.S. economic crisis cries out for the end of state-level insurance solvency regulation. “To suggest that the states can appropriately police insurance companies with worldwide operations, when other nations are loudly suggesting a global systemic risk regulator, is naïve,” said Kevin McKechnie, who is the Executive Director of ABIA. “Clearly, solvency is a federal question.” ABIA and a list of large life insurers and banks are arguing strongly for an optional federal charter bill where large multi-state and multi-national banks would be able to receive unified solvency standards. Right now a bank with branches in 100 countries must also meet solvency standards written by non-elected insurance regulators in dozens of U.S. states. The health insurance groups by the way told us they not have a position on the bill because national insurers support it, but local plans and state regulators may not.



High Deductibles Penetrating PPO Markets

The average individual deductible for a PPO just hit $1,000 nationwide, and even large employers have hit $800, according to a bombshell Mercer annual survey released today. This means that the average American will have a high-enough deductible in 2009 to quality for an HSA – in fact, HSAs may soon be viewed as a lower-deductible product than PPOs. CDHP cost averaged $6,207 per employee, compared to $7,815 for PPOs and $7,768 for HMOs. Of the two types of CDHPs, HSA-based plans were less expensive than HRA-based plans ($6,027 compared to $6,420).




EBRI Finds 10 Million Are In CDH Accounts

The Employee Benefits Research Institute in DC found last week that there are 9.8 million “adults aged 21-64” in an HRA or HSA-eligible health plan combined representing 6.6% of the insured adult population. This is the first time that a major research organization has provided CDH enrollment data close to matching what the private markets actually report, and if you add back the children is somewhat higher than our own estimates for 2008.

 EBRI documents that CDH plans should have lower premiums (although it doesn’t say that): There was no significant variation across plan types in the frequency with which people with chronic conditions followed their treatment regimens, and there was no difference in the percentage of people who avoided, skipped or delayed health care between traditional and CDH plans – in fact last year’s difference disappeared because traditional plans are experiencing access problems due to higher cost-sharing.

 The annual survey is much more objective than in years past, and adds considerable new data in several areas such as the fact that CDH enrollees have more choice of plan and the same satisfaction with quality as traditional enrollees. Also, it seems clear that CD health plans are not achieving any particular visibility from U.S. consumers as a distinct product – something that critics often view as a setback, but many plans themselves view as a sign that CDH is not far from a mainstream product. It also suggests that surveys may under-report enrollment since a large portion of respondents do not see even CDH plans as a separate product.  


Bottom Line: It is commendable that EBRI has become once again the most reliable source of CDH account estimates which are based on surveys.



Slow 3Q Growth In HSA Accounts

A seasonal third quarter slowdown in HSA account growth is reflected in spot survey of several of the largest bank custodians, with little if any growth in account formation and only a modest increase in HSA assets due to contributions. This includes the July-September period when health insurance sales are traditionally slowest, and few employers or individuals are shopping for coverage. Everything starts to pick up in the fourth quarter when employees are offered new health plans and individuals start to look over ways to change to lower premiums. Contributions to HSAs also start to increase as tax planning causes year-end asset sales among other reasons. The first and second quarter always show the biggest growth in deposits for banks and the biggest increase in CDH enrollment for health insurers.





Rumor Flies That Carriers Jack HSA Premiums

A comment during an investors conference by United and Wellpoint execs that HSA premiums are being increased due to higher utilization sparked a flurry of concern among HSA supporters, but we have not been able to find any evidence that it is happening or is justified.  A certain small percentage of HSAs – those where the employer eliminates the ‘doughnut hole’ or the HSA savings exceed the maximum out-of-pocket costs – could in theory attract a sicker population into HSAs just like HMOs have done in California.  Freestanding HRAs – where the carrier thinks it is selling a high-deductible plan but is really selling a wraparound with not cost-sharing — could also hike risk for hidden costs. The latest Mercer report has another justification: it suggests that PPO are becoming so skimpy that many HSAs may look rich by comparison, again raising the specter of HSAs attracting bad risks who are seeking no out-of-pocket costs. But given that only half of HSAs even fund the deductible, and the max out-of-pocket cost is typically $10,000, across-the-board increases in HSA premiums are unlikely. There is one bright side: the conclusion that HSAs are too rich sounds nice on Capitol Hill and plays well with large employers worried over “high” deductibles.