Health Plans Bank More On CDH Rise

(used with permission 10-13-08)

CDHealthWire from Consumer Driven Market Report ©

October 13, 2008

Technical Opinion

A sudden excess of workers with expensive benefits in the U.S. workforce is combining with historic pressure on corporate profits, leading top-tier benefits consultants to predict as much as a 50% increase in CDH account enrollment in 2009. That compares with a 30% rate in 2007 and even higher in 2008, and could push the total national enrollment in HSAs and HRAs to almost 20 million Americans.

In effect, CDH plans are becoming the product of last resort, allowing many employers to offer some semblance of full coverage as benefits erode. Without accounts to go with them, many firms would offer only high-deductibles.

PPOs and HMOs with classic benefits are starting to actively promote HSAs, the lowest-priced product on the market and perhaps the only option left to keep their premiums affordable across their customer base. California brokers told CDMR this week that broker incentives to offer CDH plans are finally being implemented by the large traditional carriers for 2009, something they avoided in previous seasons.

The most-surprising change is coming from large employers. Previous surveys showed the percentage of large firms offering CDH accounts rising into the 20%-plus range, but then slowing as it reaches a 30% offer rate. The actual enrollment penetration is much lower. But that may be shifting. Many more large and mid-sized firms put out RFPs for January 2009 that included low-priced HSAs, and all signs are that both large and small employers are using HSA funding to incentivize workers.

For example, a United study of its CDH plans last month found that 86% of workers opened accounts when they the employer contributes, falling to 26% when there is no contribution. This could easily be turbocharged in a falling economy when low-income workers and small firms place even greater value HSA contributions, perhaps even seeing HSAs as a substitute for wages or retirement funding.

One side-effect which CDH accounts may have to live with is that small firms increasingly use HSAs as an excuse to offer a pure defined contribution, i.e. a high-deductible plan with no HSA funding. That’s sometimes seen as a rap on CDH accounts, but the alternative of course is no fund at all.

Politically, it will be difficult for enemies of CDH to argue against them. If HSAs/HRAs were repealed, employees would be forced into high-deductible plans alone with no employer contribution. Defenders, including employers, will argue that at a time of unaffordable premiums it makes no sense to eliminate the most-affordable health plan option on the market.

Copyright © 2008 Interpro Publications Inc., Washington D.C.