House Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions Hearing
Federal Information & News Dispatch, Inc. |
Chairman Roe, Ranking Member Andrews and the other members of this Committee, I would like to thank you for this opportunity to testify before the Subcommittee on Health, Employment, Labor and Pensions about the barriers to lower health care costs for workers and employers. My name is
I have had the distinct honor to serve our country in positions at the
Account-based health plans--health insurance plans paired with HSAs and HRAs--are the fastest growing product in the market for employer-based group health plans. There is no disputing the fact that the number of employers offering group health plan coverage to their employees has declined as the cost of providing coverage has increased. It is my opinion that account-based health plans have helped arrest this decline. That said, as employers wrestle with the decisions whether or not to continue sponsoring health insurance benefits, I am uncertain that even account-based health plans can overcome the new employer responsibilities and costs of complying with the Patient Protection and Affordable Care Act. I will touch on some of those issues during my testimony today.
Account-based health plans are approximately 10 years old, but have grown substantially over the past decade. Estimates vary, but account-based health plans now account for about 15 percent of all employer-sponsored health coverage.
The consulting firm
What is fueling this growth? Certainly one of the reasons is the dramatic increase in health insurance costs over the past decade. According to the 2011
Contrast that to the experience of employers who have account-based health plans. According to
Similarly, Aetna reported late last year that employers who switched to account-based health plans as their only plan option had saved
Finally,
This potential for reducing health care spending was recently confirmed when researchers at the
But account-based health plans are not just about saving money. It's also about how the money is saved--by changing how employees think about their health and taking action to improve it. I would like to take a few moments to clear up some common misperceptions about account-based health plans.
First, research is increasingly suggesting that lifestyle behaviors account for approximately three-quarters of health care spending in the U.S. This is likely to only get worse as diet, obesity, lack of exercise, and smoking take its toll on our bodies and our health care system. Fortunately, account-based health plans cover preventive care services and usually do so without applying a deductible or other out-of-pocket expense. In fact, preventive care was included in the original design of HSAs, long before the PPACA made it a requirement of all health plans. Data from Aetna,
Second, individuals enrolled in account-based health plans are more engaged in their health care. The most recent survey by EBRI suggests that enrollees in account-based health plans are more likely to: (1) check whether their plan would cover their care; (2) talk to their doctor about treatment options and costs; (3) talk to their doctor about prescription drug options and costs; (4) ask for a generic drug; (5) check the price of service before seeking care; (6) use an online cost-tracking tool; and (7) develop a budget to manage health care expenses. Similar findings have been reported by insurance carriers.
Third, HSA-qualified account-based health plans provide true catastrophic protection by virtue of their annual limits on out-of-pocket expenses. Under the PPACA, these limits will be applied to all plans starting in 2014, but account-based health plans already provide this protection and have been doing so since 2004. These limits apply both to medical and pharmacy expenses and therefore provide an extremely important benefit to people with chronic conditions and/or high annual health care expenses. Most people don't understand that their traditional pharmacy coverage likely does not have any limit on out-of-pocket prescription expenses.
Fourth, covered benefits and services are generally identical to traditional plans, not "skimpier" as some critics believe. What is different is the amount of covered benefits paid by the account-based health plan. So while the exact same benefits may be covered by each plan, the account-based health plan may only cover 60 or 70 percent of the cost of covered benefits, whereas a traditional HMO or PPO plan may cover 80 or 90 percent of the cost of covered benefits, on average. However, the difference in out-of-pocket costs for covered benefits is typically offset almost dollar-for-dollar by a difference in premiums. For example, a plan with a higher deductible (by
Fifth, even though individuals enrolled in account-based health plans typically have higher out-of-pocket expenses, they still receive the benefit of the discounted prices for medical services negotiated by their insurance plan. For example, a patient may have an office visit with his or her personal physician. While the physician may charge <money>$150 for each office visit, he usually accepts a discounted fee of
Sixth, there is a growing industry of companies providing complementary information and services to help people manage their medical care and health care finances. Companies like Compass, Medibid, BidRx,
Finally, even though individuals enrolled in account-based health plans are typically subject to higher up-front deductibles, most employers are providing a contribution of funds to the associated HSA or HRA which helps lessen the sting of the deductible. Data from the most recent
Why isn't every company offering account-based health plans? They may have to if the so-called "Cadillac plan" tax in PPACA goes into effect in 2018. I believe that companies have few other options as effective as account-based health plans to keep their costs below the thresholds where the excise tax will affect them (
The one exception is the
In the 22 other states where enrollment in account-based health plans is voluntary, only 2 percent of government employees have signed up. Last year,
Barriers to Future Growth
For larger employers, cost pressures will continue under the PPACA as the "Cadillac plan" tax looms in 2018. However, other issues are or will create challenges much sooner than 2018. For example, employees with HSAs, HRAs, and even Flexible Spending Accounts (FSAs) must obtain a prescription from their doctor to seek reimbursement for over-the-counter medicines. The irony is that these medications have been approved by the
In 2014, the PPACA will require employer-based health plans to limit their plan deductibles to no more than
Also in 2014, the PPACA will require employer-based health plans to provide a minimum actuarial value of at least 60 percent. This means the plan must be designed to pay at least 60 percent of the cost of the benefits covered by the plan, and the employee/patient must pay the remaining 40 percent. While this sounds reasonable, recent guidance issued by the
Here is an example of how this could happen. Consider an employer that is providing coverage through a traditional PPO group health plan at a cost of
In its comment letter to HHS dated
"This adjustment . . . could have the effect of discouraging employers from contributing to HSAs/HRAs. For a given amount of employer spending toward health insurance, a higher [actuarial value] likely would be achieved by devoting more of those dollars directly toward a health insurance program than to an HSA/HRA. To the extent that HSAs encourage plan enrollees to seek cost-effective care, discouraging this option may run counter to goals of achieving more effective use of health care dollars."
Likewise, in its 2008 report analyzing major health insurance proposals, the
"the actuarial value of consumer-directed plans would include the expected value of any contributions that an insurer or employer sponsoring the plan would make to an enrollee's account--so that contribution could be set to make the overall actuarial value of the consumer-directed plan equal to the value of a conventional health plan."
I agree completely with the Academy and CBO. I believe that employer contributions to HSAs should be valued at the full amount of the contribution, not "adjusted." In addition, employee contributions made through payroll deduction should be counted as well and in full (not "adjusted"). Currently, the guidance does not provide any credit for employee contributions.
Another issue that will impact the availability of account-based health plans to some companies is the new minimum medical loss ratio (MLR) requirements under the PPACA. This issue impacts plans sold by insurance carriers to small and medium-size companies. Unfortunately, the MLR regulations do not take into account HSA or HRA contributions, thus making it extremely challenging for account-based health plans to meet requirements they were not designed to meet. I have been seeking changes to the regulations to reflect the unique circumstances of account-based health plans, but no changes have been made so far.
In closing, we should all keep in mind that premiums paid by employers for workers' health benefits are another form of compensation in lieu of wages earned by employees. Strategies like account-based health plans that reduce employer health benefit costs free up money that companies can use to stimulate the economy by raising wages, creating jobs, or making critical investments for the future. We also need to ensure that workers will be permitted to keep the coverage they have as was promised throughout the health reform debate.
Mr. Chairman and members of the Subcommittee, I appreciate the opportunity to provide this testimony today. I look forward to the opportunity to discuss these issues in greater detail with you. I would be pleased to answer any questions you have.
Thank you.
Read this original document at: http://edworkforce.house.gov/UploadedFiles/05.31.12_ramthun.pdf
Copyright: | (c) 2010 Federal Information & News Dispatch, Inc. |
Wordcount: | 3058 |
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News