HSAs

The Looming Impact of Consumer Driven Plans On Healthcare Providers
by Mark Reynolds

The insurance industry’s short-term solution to rising premiums is to offer high deductible health plans (HDHPs) with health savings accounts (HSAs). But this short-term solution is creating a long-term problem. An HSA can be a successful funding mechanism for frugal employees when funded by employers. However, having employees fund their own HSAs is seldom a workable strategy because employees are either unwilling or unable to fund their own HSAs.

Brokers are responding by enrolling employers in an HSA compatible HDHP and implementing an HRA plan along with a HDHP. This trend in the industry is something most healthcare providers are hoping will become more widespread due to their current experience with patients having high deductible health plans and no funds in the bank to cover claims.

People continue to ask whether HSAs and HRAs are good for the healthcare industry. Shouldn’t we anticipate the short and long term effects to the market? How will employers and employees benefit? What effect will they have on healthcare providers? Are they good for brokers and carriers? The answers are alarming and they will continue to be over the next three to five years as we try to analyze the role we all play in the system. Healthcare providers are among the most affected. They want to be positive players in the industry without losing their financial bearings from patients who can’t afford rising out-of-pocket expenses brought on by high deductible health plans.

Problem: Part 1

Everyone in the country can outline the basic problems. Seven years of escalating premiums have forced employers, particularly small employers, to the brink of giving up their employer sponsored health plan. As premiums increase, employers are forced to reduce benefits, withhold more from employee’s payroll to cover the additional cost, or do both. This is a problem.

High deductibles are becoming more and more the industry norm. Employers are offering HDHPs in hopes of relieving some of the burden of rising premiums. Unfortunately, these plans come with higher out-of-pocket expenses for employees.

Premiums are certainly reduced when an employer enrolls employees in an HDHP, but how does this strategy affect employees, employers, and providers? Whether or not employees actually use the plan, their out-of-pocket costs go up. They see increased payroll contributions and out-of-pocket maximums, which can reach over $10,000 a year on the most popular of plans. Often, employees cannot afford higher deductibles and many forgo much needed care. Employers can no longer attract or retain good employees with their company’s medical plans.

Healthcare providers are experiencing unpaid medical claims, under-funded HSA accounts, and additional accounting expenses that come with trying to collect unpaid bills. Providers have to deal with illnesses that could have been prevented if the patient had gotten basic preventive care.

The Industry Response and Its Impact

Carriers and brokers have responded to these issues by offering HDHPs that can be implemented with or without HSAs, HRAs, or medical expense reimbursement plans. The impact of these industry responses varies greatly. HSAs actually create a bigger problem for employers, employees, and providers. The industry’s cure may actually make the patient sicker, if you pardon the metaphor.

Problem: Part 2

The provider issue may be a greater threat to future cost and accessibility than anything else. Traditional plans with coinsurance leave the patient with large out-of-pocket amounts. Also, carriers and brokers are implementing HSA plans in an attempt to lower cost, but then no one is funding the HSA.

We spoke to multiple providers and found many similarities. The following statements are taken from conversations with CEOs, CFOs, and COOs of healthcare providers in California. Names are withheld by request:
• 
Healthcare provider: We are seeing an alarming increase in patients with HDHPs who arrive for treatment, but have no money in their bank account or HSA to pay for the treatment.
• 
Healthcare provider: Our accounts receivables are increasing dramatically as we treat patients with HDHPs who have no funds to pay for the treatment. We are then forced to let the patients pay for the service over time. Many patients are unable to pay anything.
• 
Healthcare provider: It seems unfair for us to negotiate discounted fee arrangements with carriers only to have those carriers market plans that leave providers in the position of not getting reimbursed from the carrier or patient for services rendered. Carrier health plans that give the patient as much as $10,000 out-of-pocket put the burden of payment for services directly on the back of providers.
• 
Healthcare provider: We are forced to let patients with HDHPs get their service even when we know they will be unable to pay. We can’t turn patients away without looking like we are not serving the public. We negotiated our contracts with carriers in good faith, but then the carriers sell health plans leaving the member with huge out-of-pocket exposure.
Many of us in the insurance industry may not be sympathetic to the provider’s position, but we should be. Providers are not banking institutions and shouldn’t be expected to carry the burden of financing healthcare.

Help for Providers

A growing number of providers report that they do not have these problems with plans that include an HRA along with the HDHP. The billing department quickly realizes that the provider will be reimbursed for services when the employer shares the deductible. Here are some comments from providers:
• 
Healthcare provider: We started hearing from our billing and admin. departments that patients were arguing with admissions about their HDHPs. The patients were stating that their employer would pay for part of their deductible.
• 
Healthcare provider: We analyzed the benefits for these patients with HRAs and discovered that small employers were paying for a portion of the claims cost under the member’s high deductible. We were obviously pleased that reimbursement for services would come from the employer.
• 
Healthcare provider: Previously we only saw large employer groups providing benefits in this manner. Now small employers are enrolling their employees in plans with deductibles from $2,000 to as much as $5,000. They then help their employees by paying for a portion of the cost under the HDHP. Employers are taking on more risk in order to provide benefits to their employees
• 
Healthcare provider: It is unfortunate that employers must bare the brunt of the cost passed on by insurance carriers, but HRAs allow providers to treat patients and know a reasonable reimbursement will be paid.

Conclusion

The CFOs and CEOs of large provider organizations say that HRAs and medical expense reimbursement plans provide real solutions and they lower healthcare costs. Providers are impressed to see smaller employer groups step to the front in an effort to control cost while maintaining a high level of employee benefits.

Many experts predict that healthcare premiums will continue to rise by double digits. We cannot simply implement HDHPs and HSAs as the solution. It is our responsibility in the industry to offer a solution alongside the HDHPs that will alleviate some of the healthcare provider’s financial burden. Employers are also fed up with double-digit premium increases. It is time for the industry to accept the willingness of small employers to become active partners in creating and paying for today’s healthcare benefits.

The last thing we want is for providers to join employers in their frustration with health plans. Otherwise, our friends in the legislature may force the industry into change, which wouldn’t be a good solution for anyone.

Employers, employees, and healthcare providers are demonstrating their willingness to work toward creative solutions to the healthcare crisis. Isn’t it time for brokers and carriers to work with small employers and healthcare providers to solve these problems and ensure the solvency of the best healthcare system on the planet?
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Mark Reynolds is president of BEN-E-LECT. The company provides access to the solutions of Employer Driven Benefit Plans (EDHPs). BEN-E-LECT has been providing EDHPs and EDDPs since 1996. BEN-E-LECT’s corporate office is in Visalia, California. Mark can be reached at 559-250-2000.