INDIANAPOLIS – Indiana is leading the way in enrolling its employees in consumer-driven health plans that feature a health savings account, whether they like it or not.
More than 20,000 state employees – 85 percent – have signed on to this insurance plan, a fact that Gov. Mitch Daniels touted in his recent book.
State officials expect the number to rise further because health insurance enrollment is under way for 2012. But are employees choosing it because they enjoy the freedom and responsibility associated or because the alternative is cost-prohibitive?
“Would I rather have traditional insurance? Yes,” said Allen Superior Court Judge David Avery, who is on the state’s health plan as a state-paid trial judge. “But the alternative is not affordable for me.”
He said the health savings option is working well for him and his family largely because they don’t have a lot of medical issues.
“It is to me an acceptable substitute for the traditional medical plan,” Avery said. “If you can belong to the plan for a couple years without any major medical problems, then you can build up savings and you feel a little more secure.”
In traditional health plans, employees pay a significant premium out of their paycheck for health insurance while employers also pick up some of the cost.
Services are covered by the insurance plan with the employee paying small fees for a prescription or doctor visit or some percentage of the bill.
A consumer-driven health plan is different because it is a high-deductible plan in which the employees pay little in premiums from their paychecks.
Most of these plans work together with a health savings account, in which employers put in money to cover medical costs. Employees can also contribute to the account out of their paychecks before taxes.
Employees are responsible for the full cost of medical care until the deductible has been met.
Employees can use the HSA to offset these costs. The insurance split (typically 80 percent-20 percent) kicks in after deductible is met. Employees pay 20 percent until they reach the out-of-pocket maximum.
Daniels said in “Keeping the Republic” that health savings accounts empower employees to make decisions over their health care. They can choose their doctors, shop for good prices, and question whether procedures are needed.
He claimed the health savings accounts grew in popularity in Indiana because they cost both the employee and employer less money and were easier to manage than a traditional plan.
“It was a great surprise to learn that at 85 percent, our state government was not only the leader in HSA participation, but was almost the only one in the running,” Daniels said.
According to the National Conference of State Legislatures, a January 2011 survey showed that 23 states offer a high-deductible plan combined with a health savings account. But of the eight-largest state programs, only Florida offered an HSA.
Daniels theorizes that the reason health savings accounts haven’t caught on in the public sector is because government unions don’t like them.
Alan Baker, interim executive director for the American Public Health Association, said his organization has come out against the plans because they shift responsibility for health care from the employer to the employee.
“The whole logic of health insurance is to spread the risk over a large pool. This is the exact opposite,” he said, noting some people will skip treatment or preventive care because there is not enough money in their health savings account.
Baker also said that people underfund their accounts because they will lose the money at the end of the year.
Indiana’s model has been tweaked to address a few of Baker’s concerns. First, employees can roll over the money in their health savings accounts for use the next year.
In fact, as of June 1, Indiana’s state employees had a balance of $49 million in their HSAs.
State Budget Director Adam Horst said the state also covers preventive care. And they changed the program so that the state puts in half of its annual contribution on Jan. 1.
This has allayed fears by workers concerned about sickness early in the year with nothing in the account.
Indiana last year paid about $1,250 into each individual account; $2,500 for a family. Employees in one of two consumer-driven health plans paid between $94 and $350 in premiums for the year, compared with thousands in premiums under the traditional plan. That means more money in employees’ paychecks to spend as they choose, including putting some in their health savings account.
The state plans to reduce its contribution this year by about 10 percent even though a 2010 Mercer study on the state plan’s effectiveness said several times the state is not overfunding the accounts.
“The entire concept is to get some level of consumerism into health care,” Horst said. “Traditionally everything is paid by the employer so there is no incentive to shop for prices or be preventive or consider not going to ER if you don’t have to.”
He conceded the traditional plan has gotten expensive but said that’s not why most employees are switching.
“You give me money for my health savings account, I get low premiums and I control my own destiny. To me it’s a no-brainer.”
That 2010 analysis also showed those using the health savings accounts are making different health care choices.
For instance, they visit the emergency rooms less, make fewer trips to the doctor and rely on generic prescription drugs more.
Average annual claim costs for those state employees with health savings accounts are $3,399 or $7,682 – depending on which consumer-driven plan is chosen.
Those state employees on a traditional preferred-provider plan had claims of $12,317.
Rep. Tim Brown, R-Crawfordsville, said he is a fan of Indiana’s health savings account, which he says has worked for Indiana’s diverse employee population.
As an emergency room doctor, he sees that people make bad medical choices when they have no stake in the payment.
For example, he said one couple came into his ER 72 times last year.
They have government-funded Medicaid for insurance.
He conceded that health savings accounts are not appropriate for people with complex, chronic health needs. But for the majority, they save everyone money by changing behavior.
“Let’s be honest, people are driven by economics,” he said.
“Unless you have someone realizing the economic impact of some of their choices, they are not going to change their behavior much.”
