Minnesotans still test driving consumer-driven health plans

Too much risk
Doug Campbell, with sons Owen and Dalton, dropped his Health Reimbursement Account because he says it exposed his family to too much financial risk.
MPR Photo/Lorna Benson

Blue Cross Blue Shield of Minnesota has sold the most consumer-driven plans to date. Product Manager Melinda Pederson says in 2006, 182,000 Blue Cross members had either a Health Reimbursement Account or a Health Savings Account. Pederson says that's an almost 50 percent increase in enrollees from the previous year.

"It's our fastest growing product line. And I think they're here to stay, because there is evidence showing that they're working to keep a lid on health care costs, but still have people do the right things for their health like preventative care," says Pederson.

HSAs and HRAs are paired with a high-deductible insurance policy that has one common aim. It's designed to make consumers more responsible health care spenders because more of their own money at stake.

Stephen Parente
University of Minnesota health economist Stephen Parente says for every person who drops out of consumer-driven health plans, more are signing up.
MPR Photo/Lorna Benson

But HRAs and HSAs have several differences, too. For one, employers own the savings account assets in an HRA, while employees own those assets in an HSA.

"We have two kinds of buyers," says Pederson. "One is, I'm a price-buyer only and I'm buying it because of the low premium. So I want to have the coverage. I particularly want to have catastrophic coverage. And then we have a more savvy buyer, perhaps likely they're self-employed and like the extra tax benefits they get with using the account."

Consumers can use pre-tax money to build up their account. If they don't need all of the money in their account for health care expenses, they can withdraw it, tax free, when they retire.

At Blue Cross, HSAs are out-pacing HRAs, accounting for 59 percent of the health plan's consumer-driven health plan sales last year. About one-third of those sales are to individuals who bought the plan without an employer's help.

So far, consumer-driven plans have been most popular with individuals and smaller employers.

HSAs and HRAs haven't faired as well among employees who have several options when it comes to choosing a health plan. And they've been even less appealing to families with young children.

For example, Doug Campbell and his two sons, Owen and Dalton, are covered by Doug's employer-based health insurance plan.

Campbell is a big believer in consumer-driven health plans. He signed up for an HRA as soon as his company offered it. But this year, he dumped the plan and went back to more traditional coverage. He says his HRA didn't save his family much money.

"To be honest with you I don't get it, because the HRA plan sounds like a terrific idea," he says.

Campbell would have saved only $300 on premiums if he had renewed his HRA this year. In exchange, his deductible would have been $1,000 higher than the deductible with his company's traditional plan.

"We're consumers. We make decisions that are best based on the current situation. You need to look forward and weigh the risks," says Campbell. "If the risks with your out-of-pocket deductible and out-of-pocket expenses is high and the premium discount is low, as a consumer it doesn't make sense anymore. It's a foolish risk."

Campbell is not alone in his reasoning.

University of Minnesota health economist Steve Parente says he has colleagues who were also in HRA plans, and then switched back to more traditional coverage. He says in some cases, turnover in employer-sponsored HSA plans has been even more pronounced.

"Folks in the HSA plans, maybe there was a 50 percent turnover in the HSA markets in some of the employers we've been seeing, which is huge really," says Parente. "I think part of it is that it wasn't quite what they were expecting. They saw, usually, that the alternative was priced not so differently -- and gave them less out-of-pocket exposure than what they felt they were getting in the HRA or HSA."

Parente says for every person who drops out of these plans, even more are signing up to take their place, so far. He predicts steady, moderate growth in consumer-driven plans over the next few years. Parente thinks the plans will become more appealing as traditional plans become more expensive.

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