How HSAs Bend the Cost Curve - Making the Case to Congress 

I had the honor of representing Mercer and the American Benefits Council at a hearing held by by the Joint Economic Committee yesterday. The topic was “The Potential for Health Savings Accounts to Engage Patients and Bend the Cost Curve,” and what follows is a brief summary of what I heard (through my employer-centric filter, of course).

Committee leaders Rep. Erik Paulsen (R) from MN and Sen. Martin Heinrich (D) from New Mexico, made opening remarks. Rep. Paulsen favors HSA-eligible CDHP plans because of their potential to build consumerism and manage costs, while Senator Heinrich holds the view that these plans only shift cost to the plan members and do little to bend the cost curve. He also expressed concern that consumers do not have the tools they need to make the best decisions and thinks we need to focus on the real drivers of health care costs.

Witnesses had five minutes to deliver prepared remarks. Dr. Scott Atlas from Stanford University, a prolific author on the topic of health care delivery, maintained that reducing the cost of care is the best way to broaden access and improve quality, but that insurance shields providers from competing on cost and quality. In his view, we should focus less on insurance and more on care – an interesting thought to ponder. He supports HSAs because they give patients incentives to make smart purchasing decisions but acknowledges that the lack of true pricing transparency is a barrier. He also stressed that the downward pressure on costs provided by account holders benefits all health care consumers.

Kevin McKechnie, executive director and founder of the American Bankers Association HSA Council. provided the committee with great background information and market statistics on HSAs. There 22 million HSAs nationwide, with $54 billion available to take care of future health care needs of an estimated 30-35 million Americans. He called for improvements too, and expansion of HSAs.

I shared data from Mercer’s National Survey of Employer-Sponsored Health Plans to demonstrate the rapid growth of CDHPs (enrollment has more than tripled since 2009, with 30% of all covered employees enrolled) and the cost savings they offer (among large employers, the average per-employee cost of HSA-eligible plans is 20% less than traditional PPO plans and even 6% less than PPOs with deductibles of $1,000 or more). I also shared a case study from a proprietary match analysis we conducted for a client that selected members with the same demographic and risk profile to compare cost, utilization and health risk over several years. Cost was lower for the HSA-eligible plan. In terms of utilization, there was little difference in the use of preventive care and annual physicals, but ER utilization was lower and fewer prescriptions were filled for HSA-eligible plan participants. Most interestingly, health risks worsened in the PPO population over the three-year period while the risk of the HSA-eligible plan was basically unchanged. Unfortunately I did not have time to talk about the decision support tools, point solutions, and other program features that contribute heavily to the success of a consumer-directed health plan.

Dr. Kavita Patel from the Brookings Institute, a practicing primary care physician at Johns Hopkins, shared the perspective of her patients, who are heavily influenced in their health care decision-making by the potential out of pocket expense because they must balance the health care they need with competing financial demands.

I was struck – and somewhat concerned – by the lack of differentiation in the discussion between HSA-eligible plans offered in the employer market and those in the individual market. In my opinion, these are very different in terms of their current state and future needs. On the other hand, I was encouraged by the strong interest across the board in greater price and quality transparency to help support HSA expansion, even if that might require legislation.

The good news, Congress is interested in improving HSAs – the House Ways and Means Committee held a similar hearing the day before – and bipartisan legislation sponsored by Rep. Paulsen and others would make a host of welcome reforms. Employers provide health benefits to 178 million Americans -- make sure your voice is heard.