Fallout Featured

9:51am EDT August 20, 2004
As carriers prepare for the first wave of enrollees in HSA plans, critics are mounting attacks. Although HSA plans have technically been available since January of this year, delays in definitions and additional language have pushed the primary implementation by carriers and employers to January 2005.

Most, if not all, of the concerns of naysayers are valid. But despite these concerns, HSA plans are going to take over as the core medical benefit within the next five years. Trends in health care costs have slowed but are still multiples of general inflation. Economists are still predicting high inflation on health care costs through the rest of the decade.

Employees won't like HSA plans because they are simply a shift in expense to the employee or patient. HSA medical plans require the first $1,000 of expenses to be paid by the member. The HSA account provides wonderful tax advantages, but a tax advantage doesn't make it free.

Employees will feel the financial burden the first time they seek medical attention. Instead of a co-pay, they could be faced with hundreds of dollars of expenses. The effect on the employee will be multifaceted. They will only seek medical attention when they feel it justifies the substantial expense. They may also drop coverage when they look back on the year and see that for their contribution, they didn't get a return from their investment.

If a person has one office visit and pays a co-pay, with the balance paid by the plan, the employee feels a return. It may not be a good return, but is one nonetheless. However, when the employee has the HSA $1,000 deductible, no co-pay plan, he or she could pay $999 out-of-pocket and get zero return. Employees will question why they have coverage at all.

Health care providers are not going to like HSA plans, either, because of the lower utilization and higher bad debt exposure. When HMOs and managed care plans first came on the scene, one of the lures to join as a provider was reduced bad debt. An employee can afford a co-pay, and the balance was coming from a more reliable source. Now providers are going to see more bounced checks and uncollected fees.

Once again, providers will be caught in the middle, trying to keep their fees down while expenses continue to mount. Doctors are going to eventually require payment before services are performed versus after.

Insurance carriers are not too anxious, either. Because all carriers can and will provide similar plans, there will not be any real marketing advantages to offering an HSA plan. Carriers make margins off of premiums. HSA plans with high deductibles and no co-pays are priced lower than current common plans. Unless margins are increased with the HSA plans, the end results will be lower profits for the carriers.

Employers will also taste the bitter aspects of HSA plans. Employee complaints will increase, with the employer as the sounding board. The HSA may not lower the employer's expense but it may maintain it.

If everyone is against HSAs, why are they being introduced and why are they inevitable? The reality is, affordability is the No. 1 priority. Employers and employees cannot afford to stay with current plans. Premiums are just too expensive.

Every generation is famous for something that their grandchildren will be fascinated with. Our generation will be the 20- to 30-year period out of the entire history of health insurance in which the consumer was removed from the process.

Would that be the golden era? Maybe not. With the greatest health care system in the world, more Americans are morbidly overweight and unhealthy.

HSAs are most definitely coming, and hopefully with them, a return to healthier and happier Americans. BRUCE BISHOP (bruce@kybabenefits.com) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.