Blues castrating HSAs: Savings magically disappear to prevent cannibalization

I was rereading a post by Greg Scandlen in his Consumer Power Report.  His Aug 1 edition uncovers one reason why the HSA promise is seen by some to be gaining adoption slowly: namely, the large comprehensive insurance companies that have purchased HSA innovators like Definity Health and Lumenos have very little reason to want to see them succeed.

I’ve attached the full article below, as I can’t figure out where to link it.  I hope Greg doesn’t mind.  I’ve been amazed to not see any airplay on this story through the blogosphere.

In short, the HSA account, involving significantly different risks and incentives for its purchaser is having the savings gutted via risk pooling.  Despite having set up very different pricing, incentives, account structures, and everything else, for some reason year over year premium increases are being pooled– lowering slightly the amount paid by the majority in PPOs, but in essence destroying the year over year savings seen in the HSA population.

Insurers are beginning to realize that its not just the one time decrease in premiums that make HSAs dangerous for their margins, but also the year over year decline in CAGR.  And this is in a system without transparent, shoppable prices or clear service differentials.

There is an upcoming battle coming between employers and brokers and insurers and the fallout will be interesting to watch…

Minnesota Blues Killing HSAs?

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A legislative staffer I deal with a lot sent me a link to a recent article by Steve Davis, the editor of Inside Consumer Directed Healthcare. In this case, he was writing in a sister publication, Health Plan Week. The story is about state and local government feeling besieged by rising health care costs. My contact was particularly interested in part of the story that cites Meeker County, Minnesota as experiencing rate increases of 16.8% this year and 17% last year, even though they had switched to an HSA program three years ago. The article concludes that, “the strategy has been ineffective to date at holding down rate hikes.” What’s going on here, my contact wondered.

The article mentions that the County got its coverage from Blue Cross Blue Shield of Minnesota. To understand the significance of that, you have to have read an earlier article in the Minneapolis Star Tribune by Chen May Yee. This story was widely noticed for highlighting the travails of a Josh Gruber who had been disappointed in the savings from his HSA, especially in light of the added work involved with the program.

Less noticed in the story was this quote, “Blue Cross confirms that premiums for its HSA-linked plans — the fastest-growing segment of the health-insurance market — are rising in tandem with older plans. Minnesota’s biggest health insurer explained that the new plans are still based on the old concept in insurance: pooling risk. HSA enrollees are pooled with those in traditional plans to fix next year’s premiums. “It’s not intuitive,” admitted Shawn Patterson, Blue Cross vice president of marketing. But the more people who sign on, the greater the likely impact on spending, he said”

So, HSA experience is pooled with the experience of every other type of program, and they all get the same rate increase – even though other studies confirm that trend for HSAs is about one-third of HMOs and PPOs. When Mr. Patterson says larger enrollment will have a greater impact on spending, he means only that people in HSAs will lower the cost increases for everybody, not that they will benefit from their own prudent use of services.

This is outrageous. There is a rationale for pooling different kinds of benefit designs together if one design is a tiny niche product that doesn’t have enough enrollment for “credible” experience. But that is not the case for HSAs, which the article describes as “the fastest growing segment of the insurance market.”

No. What all this says is that BCBS of Minnesota doesn’t want HSAs to grow because BCBS of Minnesota doesn’t get as much premium revenue from this product. They don’t want HSA holders to benefit from their reduced consumption. They want HMO and PPO enrollees to benefit from what HSA holders are doing.

SOURCE:
Health Plan Week.
Star Tribune.

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