I’ve decided not to renew my coverage when the bill comes in for the 4th quarter. I currently pay $320/mo for a $2,500- deductible BCBS plan. I have an HSA and have saved up a fair amount of money in it. Pretty good deal. So why drop it?

1. I have never even come close to meeting my deductible. Everything I have done since HSAs became available has been paid for from my HSA. In fact, never in my life have I ever incurred more than $2,500 in medical expenses in one year. The odds are that will not change, even though I am getting older.

2. I expect a pretty substantial increase in my premiums in my next bill, but it doesn’t really matter. I would make the same decision anyway.

3. If I guess wrong and my health does change, I will be able to sign up for the new federal risk pool -- but ONLY after I have been uninsured for six months. I might as well get started on that six- month qualifying period now while I am still healthy.

4. There is no penalty for doing this. The federal risk pool is not allowed to charge me more than standard rates.

5. Meanwhile I will be able to save $4,000 a year on insurance premiums, which is no small matter these days that I am semi-retired.

6. I will not be able to contribute additional money to my HSA, but my income is low enough now that there is virtually no tax advantage to making an HSA contribution. My main tax issue today is the payroll tax, and the HSA has no effect on that.

So, I am joining the ranks of the uninsured. Thank you, Mr. Obama. Greg Scandlen

“What Do We Really Know About Consumer Driven Health Plans?”

We promised last time to circle back to the latest EBRI study of CD Health programs. It gets tiresome to review these EBRI studies, especially when they selectively use information to make a political point. In this case, EBRI wanted to conclude that CD Health is no big whoop, which is probably an improvement over previous work that wanted to conclude CD Health is a bad idea.

This version is an improvement in part because it at least gives a nod to some of the information coming from vendors. But this too is selective. For example, the paper concludes, “The studies agree that the use of preventive services did not change (upward or downward) as a result of the CDHP.” Sounds definitive, eh? But “the studies” examined are only three and they are pretty limited. One looked only at cancer screening among a population from 2001 to 2005. Another looked at only four employers. The final one was based on Aetna data with a large population base, but EBRI says it supports using an HRA instead of an HSA because “the findings support the case for cost sharing that varies with the effect of the use of the services on future costs and health.” Why variable cost-sharing should work better with an HRA instead of an HSA escapes me, and EBRI doesn’t explain the thought. It is just one example of little toss-in digs that pepper the paper.

Omitted from consideration is a wealth of information from vendors like Blue Cross Blue Shield, CIGNA, and others that indicate substantial improvement in patient behavior with a CD Health plan. Now, granted these vendor reports are rarely published in peer- reviewed publications, but if the purpose of this paper is to compile “what we know about consumer-driven health plans,” one might think it would be worth including such information anyway.

Similarly, this paper omits any mention of one of the most rigorous studies done on the topic -- the American Academy of Actuaries’ “Emerging Data on Consumer- Driven Health Plans,” published just a year ago. This paper was peer-reviewed by 33 actuaries who are named in the paper. On prevention, the AAA paper concluded, “All of the studies reviewed reported a significant increase in preventive services for CDH participants.” How EBRI can ignore such a finding is beyond me, and suggests that it is driven more by a political agenda than any effort to establish a real understanding.

The prevention section is a small part of the EBRI paper, but similar problems crop up throughout. Another example is the continued inclusion of a couple of studies that looked at Humana’s original experiment with HRAs in 2001. The Humana design of this product was just awful and the company had concluded it was a failure and completely redesigned the product even before the researchers wrote their papers. As I recall, there was no rollover allowed and cost-sharing applied to only a limited number of services. To continue to use this research as an example of the problems with CD Health is simply dishonest. If anything, Humana’s experience should be used as an example of how real markets work. Something is tried out and evaluated. If it doesn’t work well, it is pulled back and remodeled based on what has been learned.

But so it goes in this era of political agendas trumping any honest attempt to understand and learn. SOURCE: EBRI; American Academy of Actuaries

“Consumer Directed Health Plans”

The GAO also released a report recently. This one is better than the EBRI report. It includes a literature review of 31 other studies, including most of the vendor reports I have used in the past. Oddly, this review also excludes the American Academy of Actuaries study. Then it digs deeper into the experience of two large employers, one public and one private, that adopted HRA programs in 2003.

It compares the experience of the populations that chose the HRA with those that stayed in a PPO plan. It finds that the HRA choosers had substantially lower utilization in the two years before the HRA became available. But it also found:

For the public and private employers we reviewed, health care spending and utilization of health care services for the HRA groups generally increased by a smaller amount or decreased compared with the PPO groups, from the period before to the period after switching. Additionally, the majority of the studies we reviewed that examined total or medical spending and controlled for differences in health status or other characteristics of enrollees reported lower spending among enrollees in HRAs and other CDHPs relative to traditional plans.

Health care utilization started low for the HRA group, and got even lower after the switch.

Still, the GAO study is frustrating because it doesn’t look at a lot of issues that are worth pursuing. In the employers examined, the selection effect is very strong, much more so than most of the other experience I have seen. The HRA choosers were substantially healthier than the PPO choosers, but why? Other than some very simple demographics (age, income, gender) GAO doesn’t really explore the reasons.

We have long maintained that “early adopters” of any product or service are likely to be younger and better-educated than the rest of the population, but very few studies bother to control for educational level. It is impossible to draw conclusions without such a control. It would be very worth knowing if people with college degrees who choose an HRA are healthier than people with college degrees who do not. But we cannot tell here who the HRA choosers are being compared to. If one group is made up of college graduates and the other is all high school drop-outs, the comparative health status would be completely unremarkable.

It also would be worth knowing how committed these two employers were to educating workers about the new program. We have seen over and over again that employers who take the time to educate employees about the new program have better results than those who do not. GAO doesn’t even reveal what proportion of the work force chose the new HRA program. Was it 50 percent or 5 percent? They don’t say.

Finally, although GAO lists the financial structure of the PPO and HRA programs for the two employers, it doesn’t discuss the differences or flesh out related information such as whether unused HRA balances roll over from year to year. These design features are critical. For instance, for the private employer, HRA enrollees pay $312 in premium and are exposed to a $2,500 deductible, of which the employer pays $750, leaving the worker exposed to $2,062 in annual costs. The PPO enrollees pay $624 in premium and have a $300 deductible, leaving them exposed to only $924 in annual costs. That is a big difference. I’m not sure why anybody would sign up for a program like this.

So, once again we have a whole lot of numbers thrown around, but absolutely no increase in understanding. Sad. SOURCE: GAO; GAO Highlights