Consumer-driven healthcare – from 2004 and beyond

When the Treasury Department released their projections and estimates of Health Savings Account (HSA) growth in September 2006, the data came as little surprise to industry observers and market participants. The dramatic growth in the number of HSA accounts and account balances are yet further proof of the growing popularity of HSAs among those companies that have offered them and, most importantly, to the employees who use them. The estimate that there will be over 14 million account-holders by the year 2010 should not be lost on Washington policymakers, employers, market participants and, in particular, the most important market participant – those consumers using the accounts.

Congress has certainly taken note of the rapid growth of HSAs and the appeal that the ownership nature of the accounts has – as evidenced by the recent actions of Rep. Eric Cantor (R-VA) and his colleagues on the House Ways and Means Committee to expand the use of HSAs to include health reimbursement accounts and flexible spending accounts.

The Consumer Driven Healthcare Institute (CDHCI) supports the provisions in the Cantor bill and hopes that the provisions survive the lame-duck Congress after the November elections. As the Treasury Department documents suggest, even if there are no further changes in federal law, we can expect to see HSA growth explode to over 14 million accounts. CDHCI concurs with the Treasury Department estimates and our data suggests that growth could even be larger than predicted under current law. In addition, growth could be over 21 accounts if the provisions contained in the House bill are enacted into law.

The growth and popularity of HSAs among Fortune 500 employers is a significant trend to watch and take notice of. As more and more employees begin to use these accounts, consumer attitudes and familiarity of the many features of HSAs will begin to permeate the employer community.

The online tools that have been developed by the vast number of technology and solution providers that support the consumer-driven healthcare industry will certainly help in the adoption and long-term success of the plans. It is also important to note that small business owners and self-employed individuals are using the accounts in record number and many trade groups, including CDHCI, estimate that over 30 percent of new HSA account-holders were previously uninsured. The marketplace and insurers that sell the plans competively are actively marketing them to those who have lost coverage or are uninsured.

The November elections will, in all probability, change the policy-making dynamics when the 110th Congress convenes in January 2007. With the prospects of a Democratic-controlled congress, the provisions in current law will likely not be changed or expanded. The role of trade groups in Washington, like CDHCI, will be to educate key policy-makers and staff to understand the importance of current law and the market forces that HSAs have unleashed. It is important to make sure that employees and employers, large and small, are educated about how the accounts work and the benefits of having control over your own healthcare spending. In short, even with Democrats in control of both houses of Congress, the current law can remain intact through the education and diligence of trade groups in Washington.

One significant statistic that continues to demonstrate the power of HSAs and consumer-driven healthcare is the percentage of new market entrants that were previously uninsured. The ability of those without coverage to get coverage is an important fact that will allow the expansion of HSAs. In addition, the creation of Health Opportunity Accounts (HOAs) to Medicaid beneficiaries next year will also be an important component to expand the idea of consumer-driven healthcare to public programs and will allow Medicaid beneficiaries to transition to private markets rather than being uninsured. Insurance carriers are already beginning to roll out Medicare Medical Savings Accounts that were recently authorized on a demonstration basis by the Department of Health and Human Services and the Centers for Medicare and Medicaid Services.

One key policy question that will be looming on the minds of the new Congress and the Bush Administration will be potential changes, if any, related to HSAs. With an eye on the 2008 presidential elections, professional observers in Washington will likely conclude that limited action will occur on either expanding or curtailing the current law related to health savings accounts. However, all bets are off when discussing the policy dynamic after the 2008 elections, as healthcare costs and the issue of dealing with the uninsured are likely to become campaign issues once again. If our market-based system of healthcare finance is to survive, it is important for market participants and consumers to promote consumer-driven healthcare. If not, the likelihood of a form of government intervention in the marketplace will be closer to reality than at any time in the last 40 years, since the enactment of Medicare in 1965.

The policy choices that both the federal government and state leaders will be making in the next year will help to shape the future trends in consumer driven health care. Most importantly, the industry has made great strides in the last year to promote education and to provide online tools to assist consumers in getting basic information about shopping for healthcare services. The ability of the consumer to access important and basic market data is a critical component to meeting and even exceeding the projections of over 14 million accounts by 2010. Retail healthcare providers, like Minute Clinic, will help to give access and transparent pricing of routine healthcare services. CDHCI projects that we will see a rapid expansion of retail-based healthcare services to meet a growing demand by consumers.

The future trends in consumer-driven healthcare will ultimately be as a result of the efforts of the new industry that has grown since 2004. Regardless of the political changes that have occurred in Washington, the growth will continue. The responsibility of the industry and CDHCI is to promote the many advantages of HSAs and consumer-driven healthcare and to make certain that employers and employees have the education and tools to make informed decisions as active consumers.

David Randall is Executive Director of The Consumer Driven Health Care Institute (CDHCI) based in Washington, DC. For more information please contact: (202) 558-2304, info@cdhci.org or visit: www.cdhci.org