Consumer-Driven Healthcare

The Hospitalist. 2009 April;2009(04):

April 1, 2009 | The Hospitalist

Consumers can access HSA funds through a debit card, or they can pay for a service, then file for reimbursement.

An HSA should not be confused with a flexible spending account (FSA). Both are paid for by employees with pre-tax dollars; however, FSAs:

Carry no insurance requirements;
Are capped at $5,000 in annual contributions;
Do not pay interest on the account balance; and
Must be used—or forfeited—by the end of the plan year.

In contrast, an HSA:

Is funded by the employee or jointly by employer and employee (known as a health reimbursement account, or HRA);
Has insurance requirements on deductibles and out-of-pocket contributions;
Pays the provider directly and submits receipts to the account administrator;
Accumulates interest through a financial institution; and
Allows unused funds to be carried forward.

Easy Business Decision

Employers are jumping on the HDHP bandwagon, largely to shift more health insurance costs to employees. HDHPs allow consumers to save on upfront costs (e.g., premiums and routine medical expenses) while allowing them to partner with their physicians when deciding how and when they will spend their HSA dollars.

Allowing patients to be involved in the testing, medication, and length-of-stay decisions relative to their care is a reversal from the status quo. Physicians working with hospitalized patients aren’t used to patients questioning treatment or asking for a cost analysis of medications. Another way to think about working with patients who have nontraditional plans: If you were eating at a soup kitchen, you probably wouldn’t complain about having to eat off of paper plates. But if you were dining at a five-star restaurant, you’d freely complain to the maître d’ if your soup was cold or the salad limp.

The 2008 National Study of Employer-Sponsored Health Plans, conducted by international human resources consulting firm Mercer, reported consumer-directed health plans, coupled with either an HSA or an HRA, are offered by 45% of companies with 25,000 or more employees (up from 22% in 2005). Nine percent of companies with 10 to 499 employees offer consumer-directed health plans, up from 2% in 2005.

Mercer partner Blaine Bos notes that raising deductibles is the fallback for employers faced with medical cost increases they can’t—or won’t—absorb. “The introduction of HSAs may have changed employers’ thinking on just how high a deductible can go without causing employees to revolt,” Bos says in the survey analysis. He predicts bad economic times will accelerate consumer-directed health plan uptake in small and large firms because they deliver substantially lower costs than PPOs and HMOs. In 2008, CDHP costs averaged $6,207 per employee, compared with $7,815 for PPOs and $7,768 for HMOs.

Data from ehealthinsurance.com indicate consumers are taking full advantage of HDHPs: Fifteen percent choose the highest deductibles, 48% the mid-range, and 37% the lowest deductible.

How Hospitals Can Respond to High-Deductible Health Plans

HDHPs and accompanying HSAs and HRAs pose a number of financial issues for hospitals. An obvious challenge is that most HDHPs with an HSA/HRA component are backed by PPOs whose provider network agreement stipulates that hospitals can’t bill for deductibles in advance. Therefore, hospitals will have to bill the insurers, who will deny the claim if the patient hasn’t met his or her deductible. The hospital or physician will then have to pursue the patient or guarantor to collect. Payors without real-time claims adjudication tools may exacerbate this problem, leaving consumers and hospital billing departments without adequate information to resolve claims promptly. Other actions hospitals must consider as consumers shoulder higher healthcare costs:

Improve self-pay collection: Providers likely will need to secure upfront payment and charge interest on slow payers;
Offer payment plans: With the maximum HSA deductible at $5,800, some customers may ask providers to offer deferred payment;
Get ready now: HDHPs and HSA penetration could grow to 33% of patients by 2012, according to some healthcare experts;
Review your self-pay receivables: They will rise as HDHPs gain market share;
Offer an HSA at your own hospital: Employees will experience firsthand what healthcare cost-benefit decisions mean to consumers;
Redesign patient access, scheduling, registration, and billing to incorporate HDHPs, HSAs, and HRAs; and
Rethink your approach to each specific type of patient financial responsibility—co-pay, coinsurance, deductible, and out-of-pocket ceiling.—MP