Pulse: Health: HMO 2.0

Remember when HMOs were going to control the spiraling cost of health care? It didn’t work. Health insurance premiums have nearly doubled since 2000, and workers’ out-of-pocket share of those premiums has jumped from 26 percent to 32 percent.

Well, get ready for the next great experiment in American health care — health savings accounts. The HSA will be sweeping into Philly big-time this fall as Jefferson Health System partners with UnitedHealthcare to roll out a consumer-directed plan for companies with up to 250 workers and a similar one for 19,000 of its own employees. Tom Knox, UnitedHealthcare CEO (and a candidate for mayor in 2007), says, “We believe this is the future — the HMO of 2005. More and more employers are going to be pushing HSAs because it cuts their costs.” Health savings accounts are popular with business, in part, because they shift the burden of health insurance onto the workers’ shoulders. At present, most firms offer them as one of several plans, but Aetna reports that as many as 15 percent of its subscribers use HSAs as their only health-care option — and those numbers are rising.     

The economics of HSAs can be confusing. In a traditional health-care plan, the monthly premiums are high, and deductibles are low. HSAs are just the opposite. For example, James Bridges, president of Communication Automation Corporation, a West Chester computer board design company, was spending $558 a month per single employee on premiums under his Blue Cross plan. When he switched to an Aetna HSA plan, the monthly premiums dropped to $262, plus an annual deductible per employee of $2,500. Because his expenses were nearly halved, he chose not only to cover the full premium, but also to fund the mandatory deductible that, by law, must be invested into a tax-free account. Whatever is unspent rolls over to the following year.

Those whose employers aren’t that generous may not find HSAs so advantageous. If your boss requires that you fund the lion’s share of the deductible plus contribute to the premiums, it could be a huge out-of-pocket expense. Moreover, if illness strikes, you could quickly exhaust your deductible and have to start all over next year.

The insurance industry is banking on these consumer-­directed plans to pare health-care costs, on the assumption that people use a system more efficiently when they’re writing the check. And since studies suggest that as much as 30 percent of care is unnecessary, that may well be true. But Dr. David Nash, a national health-care expert at Thomas Jefferson University Hospital, asks, “Does the average patient have the ability, time and intelligence to do smart shopping and make medical decisions?” Among the questions he raises: Can a patient determine what care is important? Most HSAs include some free routine prevention — Pap smear, mammogram, prostate exam. But when you’re footing the bill, you might decide to skip a colonoscopy or ignore that suspicious mole on your back — and wind up with a serious condition that could have been treated if detected early. How smart is it to save a few bucks by choosing a doc who charges $100 less to remove a gall bladder? What about training and experience? Nash points out, “We are three or more years away from having easily available data to help patients make decisions about price differences and outcomes.

“This concept makes sense for risk-takers and healthy, sophisticated consumers who can afford the high deductible,” he continues. Basically, you’re betting that you’ll stay healthy and won’t need to use the HSA account. But if you have a chronic condition, or have a heart attack or break a leg, you could be in big trouble. On the other hand, supporter David Simon, a VP and general counsel at Jefferson Health System, notes, “If HSAs achieve nothing more than keeping employers from dropping health coverage altogether” — as many are doing — “that’s good enough.”

Because the gamut of possibilities for cost-sharing is where HSAs get tricky, pay attention to how much you’ll have to contribute to the premium and the deductible, factor in your current health status, and then decide whether you want to play the odds.