Employers adopt consumer-driven health plans


Published: Thursday, December 1, 2005 at 6:01 a.m.
Last Modified: Thursday, December 1, 2005 at 12:59 a.m.
The Banta Corp. is hardly unique in its struggle with health care costs rising at double-digit rates, but is taking a highly unusual step to contain them.
Beginning next year, the Menasha, Wis.-based provider of printing and supply chain management services will only offer consumer driven health plans to its 5,000 U.S., nonunion employees.
Banta began offering consumer driven plans in 2004 and by this year around 70 percent of employees had enrolled in one. As a result, its health care costs rose were slated to rise around 8 percent, down from anywhere from 12 percent to 15 percent in past years.
''We had tried a lot of cost shifting to employees but there is only so much of that you can do,'' said Stacy Ryan, Banta's benefit manager. ''It was a no-brainer (to switch to consumer driven plans.) We would save money.''
Consumer driven plans provide employees with a set amount of money to pay for medical expenses. After the fund is exhausted, a deductible applies and when it's met, a traditional plan kicks in. These plans have high deductibles, which make them are cheaper for employers to purchase and employees pay lower premiums.
But the plans, heralded as an antidote for skyrocketing health costs when they arrived on the scene a few years ago, haven't gained traction as expected. They do seem to save money and big employers have embraced them, but they can be too expensive or confusing for some companies.
''A lot of the hype around them as been overblown,'' said Blaine Bos, a consultant at Mercer Health & Benefits LLC. ''Consumer driven plans are not an easy concept.''
The theory behind the plans is that if employees have to spend more of their own money, they will become better consumers, for example, using more generic drugs and making fewer trips to the ER.
''You want employees to think about what they are spending,'' said Robin Downey, head of product development at Aetna Inc. ''This gives them skin in the game.''
There are two types of consumer driven plans: Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs). One major difference is that in an HRA the employer must fund the pool of money initially used for expenses. In an HSA, the money can come from either the employer, the employee or some combination of the two. Individuals fund the pool with pretax dollars.
Since the employer doesn't have to contribute money to the fund, some had hoped HSAs would be adopted by companies that find health care unaffordable.
But adoption has been slow. Two percent of employers offered consumer-driven plans this year, up from 1 percent in 2004, according to Mercer. Very large companies are embracing the idea, however. Among employers with more than 20,000 workers, 22 percent offered them to employees this year, up from 12 percent in 2004.
''We still don't think that small employers see enough savings for them,'' said Bos.
Larger employers are the early adopters because explaining consumer driven plans to employees takes a significant amount of time and effort, Bos said.
''There is a huge communication effort around these plans,'' Bos said. ''They (small companies) don't have the staff or money for that.''
Lorne Fisher purchased an HSA for his two-person public relations and marketing firm and was very disappointed. He found using the plan confusing. Expenses Fisher thought would be applied to his deductible weren't, so the traditional insurance plan never kicked in, making his out-of-pocket expenses much greater than he thought.
''I thought it was cheap but when the rubber met the road it wasn't that cheap,'' said Fisher, noting he didn't think any tax savings he received compensated for the higher than expected expenses.
Now that he has three employees he can qualify for a more traditional plan so he will be changing.
''I'd rather pay more for a simple plan,'' Fisher said.
Supporters say consumer driven plans will become increasingly common because they show some savings and there are no other radical ideas on the horizon. Opponents worry they may hurt low-income workers or individuals with significant health expenses who will struggle with high deductibles and may put off necessary care as a result.
The total cost per employee for a consumer driven plan annually is $5,480 compared with $6,480 for a preferred provider organization - a form of traditional insurance - according to Mercer. The premium for a single person in a company with more than 500 employees in a PPO would be $78 monthly compared to $47 for a consumer driven plan.
Mercer found that costs rose 4.7 percent in consumer driven plans compared to 6.3 percent in PPOs.
Large health insurers are betting on consumer driven plans by purchasing companies that specialize on such plans. Earlier this year, Wellpoint Inc. purchased Lumenos, and last year, UnitedHealth Group Inc. bought Definity Health Corp., after purchasing HSA provider Golden Rule Financial Corp. in 2003.
''There is just so much more interest in consumer driven plans,'' said John Watts, president and CEO of National Accounts at Wellpoint.
Right now Wellpoint has 430,000 members in its consumer driven plans and Watts projected the company would add at least 80,000 next year.
Robin Vogel liked her consumer driven plan even though some medical issues meant she used the fund provided by her employer and ate through her $750 deductible. She found the plan simple to use because she got a debit card to pay for expenses covered by the employer-funded pool.
''There are no forms,'' said Vogel, a supervisor at The Baylor Health Care System in Dallas. ''I was very pleased with it.''
Baylor is switching all of its employees to consumer driven plans next year. Lou Anne Lane, acting vice president of human resources, said the two other plans offered were registering double-digit percentage rate increases, compared to single digits at the consumer driven plan.
''We wanted affordable health care,'' Lane said. ''We felt these plans are the future.''

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