Perhaps Employees Just Don't Want HSAs

I read an interesting article this morning whose focus is to tell the reader that health savings accounts (HSAs) would be more popular if people only understood them The article was based on research from Fidelity that shows that most eligible Americans (those enrolled in a high-deductible health plan (HDHP)) don't understand the benefits of HSAs. In fact, that part of that research is likely correct.

But, despite that research, I think the answer goes deeper than that.

Before digging in, let's review some of the key features of HSAs:

• The money in your HSA can be used to pay qualified medical expenses.
• Money in your HSA that is not used in a calendar year simply stays in the account, unlike in a Flexible Spending Account (FSA).
• The account is yours. It goes with you if you change employers, are unemployed, retire, or just don't feel like deferring anymore.
• You can generally defer to an HSA in a year that you participate in an HDHP.
• There is a triple tax benefit from HSAs: money goes in tax-free, assets grow tax-free, money coming out for qualified medical expenses comes out tax-free.

So, what's the problem then? Which of those bullets do people not understand?

In my opinion, it;s more than that. I've done exhaustive -- well maybe not exhaustive -- research by just talking to people about HDHPs and HSAs. I don't ask them to rattle off the benefits of them, but I do ask them why they don't choose to use them. Here are some typical answers.

• People don't like high-deductible health plans. When we consider that most Americans do not have enough in savings to get them through a 2-month work stoppage, they certainly don't want health insurance that may not cover them for the first one or two months of pay's worth of medical expenses.
• When we consider that a typical employee's paycheck is already being "raided" by federal income taxes, state income taxes, FICA taxes, health benefit costs, 401(k) deferrals, and other benefit costs, there may not be enough left over for the day-to-day costs of living let alone HSA deferrals.

HDHPs and HSAs were put into place as part of a move toward health consumerism. In other words, patients will be more conscious of how they spend their dollars if the money for other than catastrophic health expenses is coming out of their accounts.

Let's think about what has happened because of this. An HDHP participant gets an annoying cold. He doesn't seek medical treatment because he is being a "smart consumer" of health services. Wait, it's not just a cold. It's bronchitis or influenza and suddenly, the costs are higher and his condition has spread as he has infected family members. That's not a good outcome.

Here's another plausible scenario. Another HDHP participant watches his daughter limp off the field during a youth soccer game. Her keen home-grown injury detection skills don't think there is anything broken, so they just decide to ice down the injury because experience has told them that the cost of a medical examination of it might be several hundred to even a thousand dollars. Oops, the injury turns out to be more serious than anyone thought. Our heroine should have taken her daughter to the doctor because now there are complications.

I'm not saying that the Fidelity research was flat out wrong. But, there's something more than people not understanding the benefits of HSAs. My conclusion is this:

People don't want to understand the benefits of HSAs. If participation in an HDHP is an entrance requirement, your average participant just doesn't care about the possible benefits of a health savings account.

The HSA experiment is now almost 15 years old. The concept of health consumerism is far older than that. Theoretically, it works. Theory and reality don't always agree.

When Did We Stop Being Inquisitive?

I can still remember much of my childhood, so most of my readers should be able to remember theirs, as well. Childhood has its phases. There is the "no" phase which usually occurs somewhere around age 2 or 3 in which it doesn't matter what our parents say, we answer "no." A bit later on, there is the "why" phase in which in doesn't matter what our parents tell us to do, we ask "why?"

At the time, I'm certain that all of those whys were very annoying to our parents and for those of us who have been parents in our own right, they were annoying to us too.

Sometimes.

Sometimes, asking why is a good thing, perhaps not to the extent that a 5-year old might do it, but oftentimes asking why gives us perspective into what we really need to do.

This extends itself into the benefits world as well.

Let's consider a not particularly made up hypothetical situation. A client informs their consultant that they want to change their 401(k) plan to make it a safe harbor or to make target date funds their QDIA. Or, on a different topic, they say that they need to move to a high-deductible health plan. If we, as consultants don't ask, but the client chooses to volunteer some information, we might learn that they read about the increasing popularity of whichever of these that it was or they heard about them at a conference.

There are several approaches that a consultant can take to that request. Sadly, the one that we often jump at is 'we can help you with that' as we salivate knowing that we just sold a new project. So, we're going to do what the client asked us to do not what the client needs us to do.

Let's suppose.

Let's suppose that we asked why.

Why do you want a safe harbor plan? Why do you want to use target date funds? Why do you want a high-deductible health plan (HDHP)?

Perhaps upon hearing the client's answer, we'll know that they are headed in the right direction. On the other hand, perhaps they are not. Because everyone else is doing it is not always a good reason.

Suppose we focus for a moment on the high-deductible health plan (I haven't written about health care for a while). When we ask why, the client tells us that her company's health care expenses have increased to rapidly and that they need to reduce that cost. Introducing an element of consumerism, she tells us, will make employees part of the buying and spending decisions and save the company money.

Strictly with respect to the health care plan, I expect that she is correct. In total, she may be correct. But, if cost is the issue, isn't it important that she understands the secondary and tertiary savings and costs?

Some data on HDHPs suggests that employees in those designs are more likely to skip certain medical procedures. In some cases, that's good. The procedure might not be necessary and not having it performed will save money at no personal risk to the employee. On the other hand, the procedure might truly be advisable. But, since the first $5,000 of cost may be borne by the employee, he may decided that is not money that he wants to spend. He chooses to forgo the procedure.

What are the non-primary effects of that decision? Here are a few potential ones:

• The employee should have had the procedure and develops a more severe condition later on that is far more expensive to treat.
• The employee, when that more expensive procedure becomes absolutely necessary, will be out of work for an extended period of time generating another significant cost to the company.
• The employee may become disgruntled with the employer because this new plan design "forced" him to not have his advisable procedure. Disgruntled employees are usually either less productive or they quit, or both.

These are all meaningful costs, but they are not ones that we can truly predict. We know that some of them will occur, but, in my opinion, the best that we can do is to model some scenarios and see where they might fall out. Perhaps understanding the full picture will help our client to better understand the decision she is considering.

But, we'll never know how to paint that picture if we're not inquisitive.

Don't forget to ask why.

In Network or Out of Network -- Courts Decide

It's been the same with every health plan that I can remember being in. There is always a communication to me that I am responsible for determining whether the provider that I choose to see is in network or not. Frankly, it's never seemed fair.

Consider that health care payers don't always update their websites with changes immediately. Doctor's offices don't want to be responsible for telling their patients in which networks they are participating providers. So, the easy way out is to put the burden on the insured who really has no good way to divine the answer.

Enter Killian v Concert Health Plan. This case was eventually argued en banc (for the lay people among us including me, that means that it was heard by all the judges of the Court) before the 7th Circuit Court of Appeals (housed in Chicago). The Court, as I read it, ruled for the plaintiffs. For plan participants, this is good news. For insurers and perhaps for plan sponsors, it's not as good.

The most important (to me) facts were as follows:

• Susan Killian was a cancer patient.
• She suffered from lung cancer which spread to her brain.
• The first hospital that she went to (in network) said they could not operate, but sought a second opinion.
• The second opinion was provided at Rush University Medical Center that thought they could successfully operate.
• She was admitted for successful brain surgery, but died a few months later.
• The Killians (Susan Killian was married to James) received only out of network reimbursement for services at Rush.

This seems fairly normal, doesn't it? Well, it would be, if not for this fact pattern:

• Mrs. Killian's insurance card had on it several toll-free numbers that insureds could call to ask questions about their coverage.
• Mr. Killian called one before Mrs. Killian's surgery.
• The representative said there was no information on the hospital (Rush), but to "go ahead with whatever had to be done."

The Court cited five points in combination in coming to its decision:

1. Mr. Killian did appear concerned/interested in whether the providers were in or out of network.
2. Mr. Killian did follow the instructions on Mrs. Killian's insurance card by calling one of the toll-free numbers and inquiring about the in versus out of network status
3. Mr. Killian informed a representative (at the toll-free number) that he was looking to determine whether the surgery would be paid for as in network
4. Mr. Killian was told by the representative at the toll-free number to "go ahead with whatever had to be done."
5. Mr. Killian acted as a reasonable person would in extrapolating from that that the services would be covered as in network.

What the Court decided was that Mr. Killian may now pursue a claim against his deceased wife's health plan for breach of fiduciary duty. What Mr. Killian will actually do and how a court will rule on that matter is not clear, but this is the first case that I am personally aware of where the burden of determining in versus out of network status has been shifted somewhat by the Courts.

I'm not an attorney, so I'll leave the rest of the analysis to those with formal legal training. That said, as a health plan participant who has at times during his own lifetime been frustrated by the same determination, this feels like a step toward protection of plan participants who do act diligently.

CDHPs -- Perhaps I Was Always Correct

It's been more than one year since I wrote my not exactly seminal piece on Consumer Driven Health Plans (CDHPs). In it, I said that insureds forego lots of important medical care, not because they are making a well-considered consumer decision, but because they simply can't afford it. While I don't think anyone posted in the comment section of my blog, several experts told me privately how misguided my thoughts were. They told me how quality of care is increasing as consumers of medical care make wise choices.

Now we have a study published by the Rand Corporation working with researchers from Towers Watson and the University of Southern California. The way I read it, even if the quality of care, when care is sought, is improving, necessary preventive care is sought less often. In my opinion, it's because of one of these factors:

• Consumers can't afford to pay the costs.
• Consumers have experienced too many situations in CDHPs where they thought a particular test was covered by their plan as part of well care, but either it's not or it's not fully covered.
• Consumers have no idea if they can afford the costs, but dealing with the health plan's "Customer No Service" Department is just too painful.
• Their physician can't figure out whether the test is covered.

From the same study, reading from Figure 4, we see the following reductions in preventive care under CDHPs:

• 3.7% for Glucose Level
• 4.2% for Lipid Profile
• 4.9% for Cervical Cancer
• 2.8% for Mammogram
• 2.9% for Colorectal Cancer

I am not saying here that the CDHPs, in an of themselves cause these declines in preventive care, but there certainly does seem to be a correlation. Personally, I know that I am entitled to one physical per year under the employer-sponsored CDHP in which I participate. Frankly, I've been in a plan of that sort for most of the last 6 or 7 years. Of the tests listed above, some are fully covered by the plan, some are partially covered, and some don't seem to be covered at all. 

I don't recall which one it was, but for one of those tests, when I called the health plan, I was told that reasonable and customary (R&C) costs were covered. After they paid R&C costs, I was left with a $200+ bill.

Is my physician particularly expensive? I don't think so. He is an in-network provider. Am I in a particularly high cost of medical care geography? I'm pretty sure that's not the case. Did I do something wrong? Not that I can tell.

The good news is that I am in a pretty well-paid profession and I can afford my share of the costs of these tests. But, especially in a bad economy, many people can't. 

The evidence tells me that CDHPs are not working the way they are intended to. But, employer costs are coming down. So, we are probably stuck with these plans. Lucky us.

Another Survey Says

The benefits community in the US loves surveys. Large consulting firms love to do surveys. Presumably, their clients like this information, or at least someone thinks they do. The benefits news consolidators (you know, the publications that scour the internet for benefits news for a daily newsletter) love to tell us about these survey results.

This is all good. Or, at least, this could all be good. These surveys, though, have their problems.

• Questions are often poorly worded
• Possible answers either cover too much territory or not enough territory
• Press releases summarizing survey results seem to disassociate cause and effect
• Survey populations may not be unbiased
• Surveys inevitably are constructed to produce the findings that the surveyors think should be produced

Questions are often poorly worded

This is a no-brainer, but the world at-large doesn't seem to mind. I saw a survey question recently (the group had not been bifurcated yet into people who liked versus those who disliked their consumer-driven health plan (CDHP)) that asked "What do you like best about your consumer-driven health plan?" The possible answers were something like:

     a. my quality of care is higher
     b. it costs me less
     c. I can choose my own physician
     d. it promotes a culture of wellness

My immediate reaction is to ask where is e: none of the above? Let's look at the possible answers. Anybody who says that their quality of care is higher under a CDHP must be hallucinating. What would make it higher? If you can choose your own physician, why would they provide better care when you are in a CDHP than they would under a traditional health plan?

If you say that it costs you less, I would ask you less than what. Yes, the premiums are lower than they would be in an HMO, for example. On the other hand, they are higher than they would be if you had no insurance at all. Isn't this like having a deductible on an automobile insurance policy? If you choose a higher deductible, your policy costs less. But, in the health care policy, you usually don't get to choose your deductible. And, in the case of high-deductible health plans (HDHP) which are typically the cornerstone of CDHPs, the deductible is typically higher than most people can effectively budget for.

If you say that you can choose your own physician under a CDHP, that is true, but can't you choose your own physician under any health plan? It's true that your care may not be covered by the plan, but for many people, if that is really the reason they are in a CDHP, I would say that they are quite misguided.

Do you really think that CDHPs promote a culture of wellness? If I were texting, I would reply "lol." According to a recent Aon Hewitt survey (oops, now I am citing a survey), 35% of participants in CDHPs are sacrificing medical care because they cannot afford their part of the cost under these plans and 28% are postponing it for financial reasons. FACT: that is not indicative of a culture of wellness.

Suppose I think the CDHP that I have been forced into just plain sucks. How do I answer this question?

Answers cover too much or not enough territory


In the last section, I managed to deal with answers that don't cover enough territory. Sometimes, they go the other way and cover too much.

I took a survey recently about automobiles. The survey asked me a series of questions. For each question, I was supposed to answer on a scale of 1-13, with 1 meaning I strongly disagreed and 13 meaning I strongly agreed. Come on, people, 1-13? Do they really think that ten minutes into a survey, I can rate things on that fine a scale. They asked me if I would consider buying a Lexus when I next purchase a vehicle. So, perhaps I went through a train of thought like this. Lexus makes a very good car. They are stylish, safe, high-performing, and dependable. They are also expensive. Would I consider buying one? Yes, I would probably consider it, but I really don't want to spend that much money on a car, so how strongly would I consider it? Hmm, is that a 5 or a 6 or a 7 or an 8 or a 9 or a 10? I don't know. If it was on a 1-5 scale, I could probably happily fill in the little button for a 3. But on a 1-13 scale, that would be equivalent to a 7 and I just don't know if I'm a 7 or not.

Press releases ignore cause and effect


I saw another survey (if I could find the actual survey again, I would cite it here) recently that said that fewer companies were funding (informally) their nonqualified deferred compensation (NQDC) plans. The headline said something about recent guidance on corporate-owned life insurance (COLI) being the reason for this. Hmm, the survey had no questions in it about why fewer companies were funding their NQDCs. And, further, I'm not sure what recent is, but I can't find any recent COLI guidance that would affect funding of NQDC plans. Perhaps the authors of the surevy had a bias?

Survey populations may not be unbiased


Suppose a large consulting firm does a survey. In my experience, they send the survey to a nice cross-section of large companies. Perhaps it looks something like the Fortune 200 plus all of that firms clients not in the Fortune 200 that generate at least $1 million in annual revenue for the firm. Of the companies surveyed, who do you think are the most likely to answer the survey? Could it be the consulting firm's large clients? Aren't they the ones most likely to actually open the survey? Who are least likely to answer the survey? Could it be the companies that have recently fired that large consulting firm?

Do you think that the results of this survey might be a little bit skewed? Do you care? I do.

Surveys inevitably are constructed to produce the findings that the surveyors think should be produced


Suppose you ran the health care consulting practice at a large consulting firm. Further suppose that you are a big proponent of consumerism. In fact, you have built your consulting firms health care consulting practice around CDHPs. You ask your survey group to do a survey around health care plans. You want to be able to make a bold statement in a press release that shows how wonderful CDHPs are and for all the reasons that you have been touting.

Do you think you will make sure that the questions have at least a small bias that will lead to your desired result? If the findings come back differently than you had hoped, do you think you will publish the results as is, or will you find a way to tweak the results? Will you tout the portion of the results that support your practice or will you be unbiased in how you release the survey results?

I don't need to answer those questions for you. You don't need to answer them either. We all know the reality.

These surveys ... they do have their problems.

Public Pensions Are Not the Problem

I hear it all the time: public pensions are a big problem. On TV, I hear that "we" just have a 401(k) plan, why should government workers have a pension plan? I'll answer that question and talk about the real problem that public pensions have been made to become.

Understand as I write this that I am a fiscal conservative by nature. While there is a place for some benefits that are more socialized than some others might think, I don't, for example, espouse that our employers, public or private, should be responsible for our entire welfare.

That having been said, let's consider a young potential worker, Kelly (I figured I would use an androgynous name because I haven't decided yet if I want to make Kelly male or female, or if I even care). Kelly is considering two job offers, one with a private employer and one with a public employer. This may not be an unusual scenario.

The private employer offers Kelly a nice package to start with. It includes all this:

• $60,000 base pay
• 2 weeks paid vacation and 10 paid holidays
• A consumer driven health plan (Kelly doesn't know what that means, but does know that it is a health plan) where the employer pays 75% of the total cost
• A 401(k) plan with a match of 50 cents on the dollar for the first 6% of pay that Kelly contributes

Assuming that she (I decided to make Kelly female) elects the health plan and defers at least 6% of her pay to her 401(k) plan, the total annual employer cost of the package being offered to Kelly is approximately $60,000 (base pay) + $4,615 (paid time off) + $4,500 (health plan) + $1,800 (401(k)) = $70,915.

The public employer offers Kelly a very different package. It includes all this:

• $50,000 base pay
• 3 weeks paid vacation and 15 paid holidays
• A traditional indemnity health plan for which the employer pays 90% of the total cost
• A defined benefit pension plan that if funded ratably over a full career for Kelly will cost the employer (on average) about 5% of pay

Again, assuming that she elects the health plan, the total annual employer cost of the package is about $45,000 (base pay) + $5,769 (paid time off) + $9,720 (health plan) + $2,500 (pension plan) = $67,989.

NOTE: I have taken fairly wild guesses on the costs of the health plan. They should not be used as representative of any particular plans nor should the be used as representative of the costs of any particular plans.

The values of the two packages are close enough that Kelly may have some career and lifestyle choices to make. But, we will leave Kelly for the moment as her career decision does not really matter to us.

The first thing that does matter, however, is that the two potential employers have similar costs of employment, however, they choose to allocate those costs very differently. The second thing that matters is the pension plan. Note that I said that the public employer was going to fund that benefit ratably over a full career. When this is done on a percentage of pay basis, it typically comes from an actuarial cost method known as (Individual) Entry Age Normal. In this case, the 5% of pay is what is known as the normal cost, or the annual cost of the benefits being allocated to the present year.

Wow, that was an earful. I'll slow down the technical stuff.

My point is that a public pension plan, at least in every jurisdiction of which I am aware, can be funded rationally. As part of that rational funding, the plan sponsor (whoever represents the sponsor) must first allow the plan's actuary to choose reasonable actuarial assumptions, including those for discount rate, salary increase rate, rates of termination, disability, retirement, and death, and any others that are appropriate to the plan and its population. Second, the plan must be funded using an actuarial cost method that takes into account future pay increases and is reasonable in its allocation of benefits to an employee's past service, current service, and future service with the employer. Third, regardless of the leeway allowed by the law, the sponsor must ensure that the plan is funded rationally every year. The cost is the cost. You don't take a year off from funding so that you can build a new skate park, especially since the mayor's son is a competitive skateboarder. 

The problem is that most public plan sponsors have not taken this approach. They have been neither reasonable nor rational. Much like the US government, especially under the last two presidents, public plan sponsors have taken the approach of running up obligations that perhaps could have been paid for as they were accrued, but were instead left for a future generation.

Therein lies the problem. The public pension is only its face.

Consumer Driven Health Care - Who Are Its Users?

According to a report from the Employee Benefit Research Institute (EBRI), the times they are a-changin' (well, some guy named Bob Dylan said that first). Consumer-driven health plans (CDHPs) have been around for 10 years now. A recent EBRI study notes that in 2005, participants who enrolled in CDHP plans were more likely than those in non-CDHP plans to have income above $150,000. In 2010, more than half of those in CDHP had income between $50,000 and $100,000, but only about 1 in 7 had income over $100,000. Similarly, the study has found that participants who have more advanced education are more likely to be in CDHPs while those with only high school diplomas are more likely to be in non-CDHP plans.

What does this tell us? What should it tell us? Analyses that I have seen suggest that people who are more likely to know or understand what their choices are will enroll in CDHP plans. I disagree. Here is why. The study doesn't compare apples to apples. It doesn't say that each person in the study had a choice. It doesn't say that the choices were available on an equal basis.

Remember, companies often hire consultants to 'price' these plans for their participants. As the companies would often like to steer their employees to the CDHP plans, they instruct their consultants to price the options so that participants are more likely to choose the CDHP plans. Suppose a company offers only CDHP plans. In that case, even I can figure out that all employees who enroll in their company's health plan will be in a CDHP plan.

But, let's dig a bit deeper. Initially, when participants tended to have a choice, they looked at their options. One plan (the traditional) might have had a $500 deductible. The CDHP plan might have had a $3,000 deductible. Well, priced strategically, the $150,000 earner might say that all things considered (premiums plus medical expenses), the CDHP plan would likely cost them less. On the other hand, the $50,000 earner might say that they just can't afford the $3,000 deductible. 

Similar arguments can be made about education. Those with high levels of education are more likely to have higher income. 

The study also tells us that those in the CDHP plans generally have better health status and show better health behaviors than those in traditional plans. Again, is this the result of the CDHPs? Or, is it that those who are in excellent health are those less likely to have significant medical expenses and therefore more likely to opt for the lower premiums in the CDHP?

What the EBRI study doesn't look at are the medical care usage behaviors of those forced into CDHP plans. Anecdotal evidence suggests to me that many who are in CDHP plans against their will postpone medical coverage because they cannot afford it. Will the person who didn't go to the doctor in 2008 because they couldn't afford $2,500 out-of-pocket for the procedure they needed become a $100,000 patient in 2012? We don't know then answer to this, but people that I know tell me that either they or their friends have fallen into this category.

So, the people in the CDHP plans are who they are. Frankly, I don't think we really have a clue why.

Most Want to Change Jobs, But Most Are Not. What's Going On?

Almost every day lately, I see that some firm has done a survey to see what percentage of workers plan to change jobs over the next 3, 6, or 12 months. The answers are pretty consistent: while the majority of workers are unhappy with their current employers, the majority (presumably a different majority) do not plan to change jobs.

Why is this? First off, the job market is still horrible. Companies are still implementing layoffs. Companies that are hiring generally are not doing it across the board. And, perhaps it goes back to the old story about the devil you know being better than the one you don't.

Let's consider the unhappiness, though. Where is this coming from? I'm going to state up front that I am not a fan of the pay ratio comparisons that many (including last year's Dodd-Frank Act) have called for. The ratio of CEO pay to the average pay for everyone else, or to the median pay for everyone else is often not a useful comparison. And, when it's not useful, it's often misleading. But, let's face it, total compensation in the US for CEOs has risen faster than total compensation for most everyone else. In fact, when a CEO is credited for growing profitability, it may be partially (or more) because he or she has cut labor costs.

This creates a very interesting dynamic where the pay ratio that I mentioned in the last paragraph becomes more distorted at least in part because the CEO is doing what shareholders asked him to do. While not fitting any of the cutely named paradigms (Occam's Razor, Hobson's Choice, Morton's Fork), it seems to be a combination of all of them without necessarily having the characteristics of any one.

All this having been said, in virtually all of the surveys that I mentioned at the top of this post, the single biggest reason for dissatisfaction is compensation. The surveys don't ask whether compensation is cash or cash plus benefits, but I don't think it matters. The fact is that across-the-board pay (cash) raises have largely disappeared in recent years. Even during the booming economy (it's ok if you don't believe the economy was really booming then) of late 2002 through mid 2008, pay raises were far smaller than they had been at almost any time during my lifetime. But, in addition, benefits have been cut.

Let me repeat that -- benefits have been cut. This doesn't mean that employers' cost for benefits has gone down. What is does mean is that the value to employees of those benefits has gone down significantly. Let's consider.

• Defined benefit plans continue to be frozen or terminated. The 'replacement' 401(k) plans are nowhere near as generous, on average.
• Health plans, over my working lifetime have gone from 'employer-pay-all' (or almost all) traditional indemnity plans to 'employee-pay-lots' non health insurance plans (the less cynical among us call them high-deductible health plans or consumer driven health plans). Employers can point to their costs having increased at rates far greater than inflation, but employees' costs have increased at rates that dwarf those absorbed by employers.
• Other benefit offerings have increased, but as often as not, those increases are at no direct cost to the employer. Yes, it is nice as an employee to be able to buy some useful benefit at negotiated group rates as compared to individual ones, but the amount that the employer is spending is at or near zero.

At the end of the day, pay for the rank-and-file is increasing (slowly), but purchasing power is lower. The only thing, in my opinion, that has helped to maintain purchasing power is highly available credit. But, as we all know, that seems to be on its way (if not already there) to being  a thing of the past. 

So, as the cost of daily life increases, the value of employment decreases and the value that goes to retirement decreases. Employees want to work longer, but employers seem to want them to work for shorter durations. Employees want more purchasing power, but employers provide them with less. But the grass doesn't seem to be any greener on the other side. So, of course employees want to leave, but the problem is that they can't find anyplace they want to go.

IMHO: On High-Deductible Health Plans

High-deductible health plans or HDHPs became all the rage earlier in this decade (yes, a decade begins in a year that ends in 1 and ends in a year that ends in 0). Many have called them consumer-driven health plans as the consumer has a higher financial incentive to choose as a financial buyer.

Their use was supposed to do lots of great things:

• Slow health care inflation
• Provide an incentive to stay healthier
• Generally slow the tide of chronic health conditions such as hypertension, high cholesterol, etc.

Now, understand that I am not a health care expert and I have not taken a formal survey, but I am a consumer of health care services and I do have a fairly large network of people that I talk with. I have been in an HDHP as often as not this decade. Many of my network have as well.

My strong opinion is that HDHPs lead to increases in health care inflation. Yes, you read that correctly. Here is my reasoning. Under HDHPs, initial care is paid for by the consumer, or the patient if you prefer. So, where patients used to go to see their physicians at an early sign of a problem, now they tend to delay. And, that delay, again in my opinion, allows conditions to fester making them worse, and more expensive to treat.

What evidence do I have? I have personal evidence, evidence from family, evidence from friends, and evidence from co-workers. In fact, I have yet to experience a single person from that group who likes being in an HDHP.

But, they do save employers money. How? Through significant redesign and re-packaging, larger percentages of total health care costs are being passed on to the employees and their families. Several companies on which I have seen real data are picking up the inflationary (not health care inflation, but general inflation which has been exceedingly small) costs of health care and passing on the other increases to employees. So, while employees get pay increases (some years) that barely keep up with inflation, their benefits costs increase far more rapidly. 

In technical terms from an employee standpoint: this ain't good (excuse my diversion into poor English).

What works? Again, this is not my area of expertise, but common sense should provide the answer. Give employees an incentive to engage in proper behaviors. While generally it is not permissible to charge higher health premiums in an employer-provided plan for higher-risk individuals (smokers being the exception), it is permissible to charge less for employees who are either lower-risk or who are taking appropriate steps to control their existing risks.

My evidence suggests that this works.

Just like a company saves money by having employees in tip-top physical condition, it also saves money by providing an incentive for those in less ideal physical condition to control their chronic conditions. For example, if an employee's blood pressure is 170/120, this is considered to be hypertensive. Perhaps there is nothing from a behavioral standpoint that the employee can do to control this. But, in most cases, medication can control that hypertension. It is in the employer's best interest that this employee take appropriate medication for that hypertension. To the extent that the employee does take steps to control the hypertension, he or she should be eligible for the appropriate discounts.

So, again, in my opinion, wellness works and HDHP doesn't.