Consumer Driven Health Plans on Rise

By Elizabeth Suh



Beacon Journal medical writer



Tom O'Neill gambled that he will stay healthy again this year when he signed up in February for an increasingly popular health plan option.



Under the plan -- called a health reimbursement account -- the 51-year-old Hudson resident pays for the first $1,500 of his family's health care costs with money that his employer, Summa Health System, puts into an account before taxes. If O'Neill uses all the money in the account, he has to pay the next $1,000 in health care costs before his insurance kicks in. If he stays healthy and doesn't have to use all the money in the account, he can keep the leftover amount to spend on health care from year to year and upon retirement.



``I thought I'd take a chance... that I'm going to be healthy this year,'' O'Neill said, ``and that I'm going to make choices as to what health care I take advantage of during the course of the year.''



O'Neill, a vice president and chief financial officer for the hospital system, said he expects to have to dip into his account money. But his family's medical expenses so far have been covered by the $300 his plan provides for preventive services for each family member, such as his twice-yearly doctor checkups for high blood pressure.



Experts say more companies soon will offer employees such consumer-driven heath insurance plans -- high-deductible plans with health reimbursement accounts, or HRAs, and similar options known as health savings accounts, or HSAs. Both types shift costs to workers and offer them possibilities to save.



Rising costs



A survey released Tuesday by Mercer Human Resource Consulting found that employers anticipate the cost of health benefits rising almost 10 percent next year, and that they are shifting costs to employees. Partly as a result, experts say, consumers can expect to see a continued but slowing rise in premiums in the near future, although premiums still are rising faster than economic growth.



Health insurance premiums rose an average of 9.2 percent this year, the second consecutive year the rate of increase dropped, according to the just-released 2005 Annual Employer Health Benefits Survey by two nonprofit organizations, the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust.



The average worker paid $2,713 toward the premium for family coverage and $610 for single coverage, the survey found.



These premiums rose at about three times the growth in workers' wages and 2.5 times the rate of inflation, said study co-author Gary Claxton, a vice president at Kaiser.



``Health insurance will continue to become more expensive relative to what people get paid and relative to what other goods cost,'' he said, ``and that's a burden for lower-wage employees and for their employers.''



Insurance less common



Rising health insurance costs are causing some employers, particularly small businesses, to drop benefits. Sixty percent of businesses offered health insurance to workers in 2005, down from 69 percent in 2000, the Kaiser study found.



Those businesses continuing to offer benefits are shifting costs.



High-deductible health plans have premiums that can be 15 percent lower than the premiums of other plans. The insurance coverage usually kicks in after the employee pays at least$1,000 in medical expenses under individual coverage or $2,000 under family coverage.



The plans usually are coupled with HRAs and HSAs. Employers contribute money for health care costs into HRAs; employees can establish HSAs themselves, and both employers and employees can contribute to them.



The idea is that employers save on premiums and encourage employees to spend money on health care wisely. And employees can save money by being smart -- or healthy -- consumers.



More use of plans ahead



Less than 4 percent of employer-insured workers not in the federal government use HRAs or qualify for HSAs, according to the Kaiser study. But analysts expect that in the next five years, one quarter of insured people will opt for the accounts, said David Stacey, a senior consultant with the national consulting firm Hewitt.



Summa Health System began offering HRAs to employees for 2005. About 150 of its 3,500 insured employees chose to participate, said Kyle Klawitter, vice president of human resources.



``With the HRA, as employees use their, let's say, $1,000, they're very picky about how they use those dollars,'' she said. ``So they are very smart consumers of health care.''



Akron's FirstEnergy also offered HRAs to its employees for the first time in 2005. The 10 percent of the company's 9,000 eligible workers who signed up pay no share of their health insurance premiums, while employees who chose other options do.



Critics have warned that consumer-driven plans could translate into increased burdens on people to manage and pay for their health care.



But Summa's O'Neill is just the kind of person -- business-savvy and healthy -- who can benefit, experts say. He hopes to save most of the money in his HRA.



``Then I'm able to carry those dollars into a subsequent year,'' he said. ``But I'm also a realist to know that not every employee will end up with a favorable outcome.''