The GAO Studies Consumer-Driven Health Care

This report is better than the EBRI report (reviewed here). It includes a literature review of 31 other studies, including most of the vendor reports I have used in the past. Oddly, this review also excludes the American Academy of Actuaries study. Then it digs deeper into the experience of two large employers, one public and one private, that adopted Health Reimbursement Arrangement (HRA) programs in 2003.

It compares the experience of the populations that chose the HRA with those that stayed in a PPO plan. It finds that the HRA choosers had substantially lower utilization in the two years before the HRA became available. But it also found that health care utilization started low for the HRA group, and got even lower after the switch.

Although GAO lists the financial structure of the PPO and HRA programs for the two employers, it doesn’t discuss the differences, or flesh out related information such as whether unused HRA balances roll over from year to year. These design features are critical. For instance, for the private employer, HRA enrollees pay $312 in premium and are exposed to a $2,500 deductible, of which the employer pays $750, leaving the worker exposed to $2,062 in annual costs. The PPO enrollees pay $624 in premium and have a $300 deductible, leaving them exposed to only $924 in annual costs. That is a big difference. I’m not sure why anybody would sign up for a program like this.

Unfortunately, we have a whole lot of numbers thrown around, but absolutely no increase in understanding.

Comments (14)

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  1. R. G. says:

    Probably both plans are a PPO. Who would pay $312 ($3,744/yr) more per month to drop the deductible just $2,200 per year ($2,500 – $300 = $$2,200)?

    Only someone spending somebody else’s money.

    The new HCTC (small employer tax credits) require employers to have a plan that costs less than the average state plan. That sounds like a higher deductible HSA plan to me. So small employers can only get the tax credit from the Obama administration if they have an HSA plan, go figure.

  2. Joe S. says:

    I suspect that the GAO doesn’t like HSAs any better than EBRI.

  3. R. G. says:

    Greg, you do know if you drop your health insurance to qualify for your state’s pre-existing plan that your effective date will be delayed as much as 6 long weeks should you have a heart attack, cancer or broken neck.

    Saving $4,000 a year in premium isn’t worth it. If you are still in your grace period I would Fed Ex your payment right away. Your old plan is grandfathered but a new plan after 5/2010 is not and subject to Obamacare mandates and rate increases.

    I bet that the NCPA’s group plan will soon have an unlimited lifetime max too. That’s what you get when you let your employer pick your health insurance. Welcome to the world of Obamacare via small employer group coverage and annual enrollments.

  4. Ken says:

    Haven’t we studied HSAs enough? Don’t we pretty well know what happens. People spend less. Their health doesn’t suffer. The way most employers set these up, there is actually more preventive care.

    Enough said.

  5. artk says:

    Actually, Ken, what we know about HSAs is companies pay less; healthy people pay less; sick upper income people do the same; sick lower income people do measurably worse. The main problem with all the high deductible plans is that they disadvantage the people who have the worst access problems and outcomes.

  6. R. G. says:

    Actually, artk, the HSA deductible in 2010 is $1,200 for single coverage that pays 100% thereafter, including Rx. That’s pretty small out-of-pocket that would be “hard” to duplicate with non-HSA coverage.

    Remember, sick people would prefer to pay their out-of-pocket with pre-taxed dollars too. There is no FICA tax on employer HSA deposits.

    So you are wrong about “sick lower income people do measurably worse,” with HSA coverage. You sound like an uninformed Democrat.

    Always remember that HSAs are the ultimate panacea.

  7. Linda Gorman says:

    The Cash & Counseling experiments show that low income sick people do better on HSA type arrangements as well. For one thing, they can use cash to actually access the services that Medicaid has promised them.

  8. Tom H. says:

    Even if the employer makes no contribution to the HSA, sick people are almost always better off than with a conventional PPO. The reason? By law, HSA plans limit the amount of out-of-pocket exposure and this limit is almost always below what you would pay with a conventional insurance plan.

    I don’t know why people like artk keep repeating nonsense. These myths never seem to go away.

  9. artk says:

    Tom, every health insurance policy I can remember having, regardless of its deductible, has had an out of pocket limitation. The problem is that every study has shown that lower income people sicker people have worse outcomes with high deductible policies than they have with low deductible. If you think about it, it make perfect sense, if you’re having trouble keeping up with rent and food, that doctors appointment that might prevent something more serious down the road is more difficult to justify. If you’re in a higher income group, you have more disposable income so the that doctors appointment isn’t a big deal.

  10. Art says:

    Comparing amounts and types of insurance coverage is meaningless, unless one has a base to compare between these amounts and plans.

    Until we have a “price list” as most other nations do or unless providers become not-for-profit, the type of insurance coverage and therefore comparisons between them are purely academic.

  11. R. G. says:

    artk, you said, “The problem is that every study has shown that lower income people sicker people have worse outcomes with high deductible policies than they have with low deductible. If you think about it, it make perfect sense, if you’re having trouble keeping up with rent and food, that doctors appointment that might prevent something more serious down the road is more difficult to justify.”

    Most HSA qualifying coverage has a “”ZERO”” deductible on preventative services!!

    Your petty gripe is over 5 years old. Get a current.

  12. Tom H. says:

    The limits on HSA exposure are typically lower than for the garden variety PPO plan. Also, The HSA plans are the only plans that have LIMITS SET BY FEDERAL LAW. It’s amazing to me that so many people (pundits) complain about HSA plans being bad for the poor and the sick when these plans come with more protection than any other plan!

    Also, the average employer contribution is $750 a year to the HSA account. That means that the poor person with the HSA enters the market with $750 in hand (and more in future years as balances grow and roll over), while the poor person with a PPO plan has to come up with the first $750 out of his own pocket.

  13. Erik Ramirez says:

    Here is a true comparrison:

    Two Anthem Small Group Plans (CA)

    Solutions 2500 PPO
    Deductible – $2,500 (2 member max)
    Copay Limit – $5,000 (2 member max)
    Office Visit – $25
    Hospital – 25%
    ER – $100 + 25%
    Rx – $10/$25/$50 $250 Brand deductible
    Cost – (24 employees-age banded) $10,695 per month
    Ave – $445.62 per employee

    Lumenos HSA 2500
    Deductible – $2,500/$5,000
    Copay Limit – $5,000/$10,000
    Office Visit – 20%
    Hospital – 20%
    ER – 20%
    Rx – $10/$30/$50 after dedcutible ($2,500)
    Cost – (24 employees-age banded) $11,756 per month
    Ave – $489.83 per employee

    What would you buy?

  14. artk says:

    Sure Erik, that’s simple. All I need to figure out which insurance deal is better are two or three weeks time of a couple of MBAs to run simulations with complete information on the health probabilities of me and my wife; drug prices; and provider prices. After all, the insurance companies have an army of MBAs and months to figure out pricing.

    The essential issue is that all those choices are no choice at all.