Risks and Benefits: Health on Account

Health-savings accounts, yoked to high-deductible insurance policies, are being touted as the next big thing in cost containment. But employees might think twice before taking on so much financial risk when it comes to their health care.

Enough already, some finance executives seem to be saying to the human-resource directors who report to them.

The executives are apparently sick to death of years of double-digit increases in health insurance. Indeed, the irritation seems to have spawned some corporate shakeups: According to a recent survey by Hewitt Associates, 7 percent of 500 major U.S. employers are moving responsibility for health-care strategy from the human resources department to finance and purchasing executives.

To be sure, the strategy shift at those employers might only be top-level. The finance and purchasing managers, for instance, aren’t exactly redesigning benefit plans, but “creating business plans about health care, defining how much health care [the corporation can afford], creating specific budgets for health care, and determining with HR how those budgets are achieved,” says Tom Beauregard, a Hewitt health-care consultant in Norwalk, Connecticut.

While the employers responding to the Hewitt study expect a 12 percent increase in health-benefit expenses this year, they say they can afford only 8 percent. A CFO might draw the line at the latter figure, says Beauregard, then send HR shopping for benefit designs that work within that limit.

Still, some finance execs might run out of patience with yet another premium increase and put the blame squarely on HR. If Dan Perrin were a CFO — in fact, he’s president of the HSA Coalition, a lobbying group that promotes health savings accounts — and employees from any other department continually came to him with double-digit expense hikes, “I would fire them,” he says.

Isn’t that akin to shooting the messenger for delivering bad news? Maybe so, Perrin suggests, but it could be an effective way to help cool down benefit-cost inflation. “If people in the health insurance industry found that their client was getting fired [because of the price hikes], they would come up with alternatives,” he believes.

The lobbyist, of course, has in mind one particular alternative — plans incorporating the new health-savings account (HSA) created under the Medicare law signed into law by President Bush in 2003.

Such plans are likely to fit neatly within the tightened cost structures that finance executives are sure to demand. One reason is that the tax-advantaged accounts must be offered in tandem with a high-deductible health plan (HDHP). Because employees are asked to shell out large amounts of their own money for care before coverage kicks in, HDHPs tend to be a lot cheaper than conventional health insurance. Further, employers can choose how much to contribute to the accounts — or they can choose not to contribute at all.

Largely because of its expense-limiting possibilities, the HSA-HDHP combo is the current darling of advocates who tout “defined-contribution” or “consumer-driven” health benefits as the next big thing after managed care. After a spurt of success in holding down health-benefit costs in the 1990s, health-maintenance organizations (HMOs), preferred provider organizations (PPOs), and other forms of managed care have flopped at the job in recent years. While the coverage for a high-deductible plan can be provided by an HMO or PPO, the key difference of the new plans is that they demand a hefty amount of cost-sharing by employees and individual users.

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