HealthBiz: Trying to assess HSA success

By ELLEN BECK  |  Jan. 13, 2005 at 5:11 PM
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WASHINGTON, Jan. 13 (UPI) -- Health Savings Accounts have been law for about 13 months and the final regulations governing them are only about six months old, but there remains in Washington a burning need to know if this insurance option is going to be successful.

That issue percolated again this week as a Kaiser Family Foundation/Harvard School of Public Health study showed 53 percent of some 1,400 U.S. adults surveyed had never heard of HSAs, which were made law by the Medicare Modernization Act of 2003. Another survey, from human resources consultant Watson Wyatt Worldwide, found only 29 percent of 1,000 respondents had heard of HSAs and of those, only about a third "somewhat" understood such plans.

At the same time, America's Health Insurance Plans, the lobby group for the insurers, said their sign-up numbers show HSAs are "off to a fast start."

Which is it? Neither. It still is too early to tell long term what impact HSAs will have on the insurance industry -- whether they will, in fact, mark a turning point in how Americans obtain health insurance, moving away from depending on employers to provide the bulk of financing and decision-making regarding health coverage.

"So the jury is out on how this is going to play, either as a policy issue or as a market issue, because it's just too soon for most people to know," Robert Blendon, professor of health policy at Harvard, said at a news conference about the survey results.

Consumer ignorance is one factor, but another is the large-employer decision-making process. The companies typically draw up their health insurance benefit plans during the late summer or fall the year before the plans take effect -- meaning the August 2004 regulations missed the window of opportunity for many large companies, which were not able to include the option.

It will be at least another full year before any real decisions can be made about the popularity of HSAs and even longer before their full impact becomes apparent.

Karen Ignagni, president of AHIP, told reporters she was surprised by the Kaiser study results.

"Simply because if you look at the data, very clearly, there is an explanation why (people are unaware of HSAs)and I think that conclusion was drawn primarily because of the large-group market," Ignagni said.

AHIP drew information from its own members from June to September 2004, just after the final regulations took effect. As of last September, some 438,000 people had purchased HSAs from 29 health plans offering the option. As of this month, 75 plans are offering HSA options to employers and AHIP is recounting its numbers.

"This market is an emerging market off to a fast start," Ignagni said, adding she expected far higher enrollment numbers as more plans offer the option and the large employers are able to include it in benefit packages.

The 438,000 number might seem large, but U.S. Census Bureau statistics for 2003 show 243.3 million Americans have health insurance -- about 84.4 percent of the population. That number often is forgotten in reports showing 45 million Americans do not have insurance.

Additional numbers from both Kaiser/Harvard and AHIP add to the evidence that HSAs, which combine a high-deductible health plan with a tax-free savings account that can be drawn upon to meet the deductible, are just in their infancy.

About 30 percent of folks in the Kaiser/Harvard survey knew what HSAs were, but of that group only 4 percent were enrolled in one.

Another study question drew out whether people thought purchasing insurance would be easier or more difficult if their employer simply gave them a cash amount equal to what the company spent on their coverage, allowing them to buy their own coverage. It goes to the consumer choice issue: Which is better, having an employer-run benefit program or each person finding coverage on his or her own?

That implies people could choose any type of plan, better or worse than they had at work, or choose to purchase none at all -- a worry of HSA critics.

About 7 percent said doing it on their own would make it easier to get a good price for insurance, but 77 percent disagreed. About 4 percent said it would be easier to find or keep insurance if they were sick, while 70 percent disagreed.

Among respondents, 5 percent thought they could handle the administrative requirements of a health plan and 63 percent disagreed, while 14 percent said they thought they could find a plan that met their needs, compared to 27 percent who said they probably could not.

"So we want to alert you, that though in so many meetings we go to the employer is dead, it's dying, it's over, nobody wants it anymore -- people outside the Beltway just didn't get that e-mail yet," Blendon said, "and they're a bit more interested in the employer-based insurance system."

Picking through the AHIP numbers from September finds 346,000 of the 438,000 HSA enrollees were individuals who had purchased HSAs on their own, not through an employer. Of that group, 30 percent previously had not had healthcare coverage and about half were under age 40.

One Bush administration goal for HSAs was to help provide options for the uninsured, while critics have contended that people buying HSAs would be only the young and healthy, but these numbers are just too small to establish a trend so the jury is still out on this issue as well.


The mid-1990s provided a wild ride for hospitals, with the number of mergers peaking at 152 in 1996, then falling to 18 in 2002. Mergers and acquisitions combined totaled 310 in 1997, dropping to 132 in 2000 and 101 in 2002. By 2000, 57 percent of hospitals were part of systems.

Alison Cuellar of Columbia University in New York City and Paul Gertler at the University of California, Berkeley, began with that information and went on to analyze the impact of hospital consolidations in Arizona, Florida, Massachusetts and Wisconsin from 1995 to 2000. Their study is published in the journal Health Affairs.

They found hospitals consolidated as a response to managed care -- to band together to improve their clout at the payment rate negotiating table. That supports more recent studies that have shown the balance of negotiating power has shifted from insurers back toward hospitals.

For-profit hospitals were more likely to join a system than non-profits, and mergers were more likely in urban settings. Higher margins also were a factor -- hospitals that were financially strapped were less likely to join systems.

"A system, when you are seeking targets (for acquisition), you are looking for healthy hospitals," Cuellar said in response to a UPI HealthBiz question during a media briefing.

The researchers also said hospital consolidation resulted in the new system's ability to charge higher prices but that extra revenue did not translate into quality of care improvements.

Since the end of the study, things have changed.

"Now it's more one place is failing and is being picked up by another or merged with another," Lewis Redd, national health practice leader for the consultancy Capgemini, told HealthBiz.

Some of the for-profit chains are selling hospitals and the idea of forming integrated systems is not a driving force.

"That happened already and people are trying to make those work," Redd said. "So the ones that are left to be done are those that can't survive."


The Medicare Payment Advisory Commission this week recommended reducing Medicare payments to hospitals. This despite its own analysis that hospital Medicare margins overall have declined to a negative 1.9 percent over the past four years -- meaning hospitals are not paid enough to cover the costs of treating Medicare patients.

The American Hospital Association called the recommendation "misguided and disappointing" and asked Congress not to do it in light of rising labor, liability insurance and pharmaceutical costs.

The commission also recommend extending an 18-month moratorium on construction of new speciality or niche hospitals. The moratorium expires in June.


Pfizer pulled its U.S. advertising on Celebrex, the COX-2 inhibitor arthritis and pain drug, after a study found an increased risk of cardiovascular events. This week the Food and Drug Administration followed that up with a letter to the company stating five of Pfizer's ads for Celebrex and the next-generation Cox-2 Bextra "omit material facts, including the indication and risk information," as well as "make misleading safety, unsubstantiated superiority and unsubstantiated effectiveness claims."

FDA has told Pfizer to not to use such ads in the future and noted, "The seriousness of the violations concerning your promotion of Celebrex described above would generally have warranted a Warning Letter; however, in light of your recent agreement to a voluntary suspension on all consumer promotion for Celebrex, we do not feel that is appropriate at this time."



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