High-deductible health plans and tax-sheltered healthcare spending accounts are supposed to make consumers more sensitive to the costs of healthcare. Although enrollment in such consumer-directed plans is growing, for now they represent a tiny component of employer-sponsored coverage, according to a study funded by the Robert Wood Johnson Foundation.
In contrast, HMO, PPO and point-of-service plans are finding ways to put more consumer skin in the game with tiered benefits, in which consumers' out-of-pocket costs reflect price differentials among providers and products or the quality and efficiency of provider networks.
Tiered benefits are far more common than healthcare reimbursement accounts (HRAs), according to a survey of 680 national and regional health plans conducted in early 2003.
The survey sought to measure the market penetration of consumer-directed health plans and the extent to which they promote more cost-conscious healthcare consumerism. Authors of the report are Meredith Rosenthal, assistant professor of health economics and policy at the Harvard School of Public Health, and Arnold Milstein, M.D., medical director of the Pacific Business Group on Health and a consultant with Mercer Human Resource Consulting, San Francisco.
The report was published in the August issue of HSR: Health Services Journal.
HRAs had an estimated 100,000 enrollees in 2002, but after a favorable IRS ruling, researchers counted 24 plans offering HRAs in which 466,039 people had enrolled in 2003.
In comparison, point-of-care tiered plans had about 1.55 million enrollees and premium-tiered plans had 488,753 enrollees, the authors said.
Only employers can contribute to HRAs, although employees control spending from the accounts. Unspent funds can be rolled over to the next calendar year for the employee's use. (Under flexible spending accounts, another tax-sheltered form of healthcare savings account, unspent contributions at year-end revert to the employer.) Almost invariably, HRAs are coupled with PPO plans, the researchers said.
The average employer contribution to an individual HRA in 2003 was $824 and the average deductible was $1,654 -- though the most frequently reported amounts were $1,000 and $1,500 respectively, according to the survey.
"While the rate of enrollment growth is substantial, HRA enrollees remain an exceedingly small percentage of the roughly 160 million people with employer-sponsored insurance," the report said.
In addition to healthcare spending accounts, tools to educate consumers to become better healthcare shoppers are key components of many plans' cost-containment strategies. For all plans surveyed, but particularly for HRAs, the available educational tools are "not . . . quite up to the task of mobilizing consumers to be successful in making more cost-efficient and health improving selections," the authors said.
The report did not cover another form of tax-sheltered spending account, health savings accounts, which received expanded tax breaks in the Medicare Modernization Act of 2003, which became effective Jan. 1 this year.