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Report: Consumer Health Plans Could Slash MA’s High Premiums

Monday, December 17, 2012

 

Giving consumers more control over their healthcare spending could reduce the Commonwealth's highest-in-the-nation premiums by up to 28 percent, according to a new report from the Pioneer Institute.

In "Consumer Driven Health Care: A New Agenda for Cost Control in Massachusetts," Dr. Amy Lischko, a senior fellow at the Pioneer Institute and an associate professor at Tufts University School of Medicine, argues that consumer-driven health care (CDHC) plans can go a long way toward containing ever-rising costs and may even lead to healthier consumers in the process.

CDHC plans provide subscribers with health savings accounts (HSAs), which are funded through tax-advantaged contributions. Consumers can then use the money in their HSAs to pay for medical expenses. The accounts are paired with so-called "high-deductible health plans" with lower premiums.

Earlier this year, the Massachusetts legislature passed Chapter 224, a law that granted preference to alternative payment contracts and Accountable Care Organizations, in an effort to rein in healthcare costs. However, the Pioneer Institute argues in its report that such a supply-side approach leaves health care decisions largely outside consumers’ control.

“The new state health care law, formally known as Chapter 224, will not succeed unless consumers are engaged,” said Pioneer’s Director of Health Care Policy, Josh Archambault.

“Patients need to be value-seekers for routine care, rewarding medical professionals who provide lower cost, high-quality care. Otherwise, the government will be in the business of containing costs through informal – or perhaps formal – rationing of care.”

In her report, Lischko recommends combining Chapter 224 with efforts to contain costs on the demand-side as well through CDHCs. Drawing on a review of recent literature and interviews with brokers, employer groups, and insurers, Lischko provides a historical perspective on CDHC in Massachusetts, exploring how it can help constrain heath care costs and increase patient engagement in health care decision-making.

“I was surprised by the availability of information regarding costs and quality, and by how well these plans have adapted to trends in the marketplace to address consumers’ concerns about preventive care,” she said.

Lischko found that for patients, a CDHC can lower premium contributions by up to 28 percent, and subscribers often become more engaged in their own health care by increased use of preventative services. Employers also saw their premium contributions decrease by up to 20 percent in the first year and saved an average of $1,500 per employee.

State governments can benefit from utilizing CDHCs as well. Indiana first introduced HSAs for state employees in 2006, and 90 percent of the Hoosier State's government employees are now enrolled in a CDHC plan. The shift translated into $23 million in savings for the state, a 10.7 percent decrease, and $7-8 million in savings for all enrolled employees in 2010.

"Evidence from the private market, as well as public programs, has demonstrated savings of tens of millions of dollars a year," said Archambault.

"Critics of CDHC plans have stubbornly ignored changes that have been made over the years to address some early design issues with the products, and it is time for Massachusetts to incorporate consumer-driven features into our insurance marketplace to better engage patients in their health."

Only 3 percent of individuals under 65 with private insurance in Massachusetts were enrolled in a CDHC plan with an HSA in 2012, the lowest enrollment rate in New England. At 19.9 percent, participation in Vermont is among the highest in the nation. Connecticut is also near the top at 10.6 percent. Nine percent of private insurance enrollees in Maine use CDHC plans, and 7.5 percent of those in New Hampshire have HSAs.

To increase the Commonwealth's participation rate, Lischko recommends that the state's Group Insurance Commission be required to offer CDHC and HSA plans to state workers and that private employers should do the same.

“Managed care and capitation without consumer engagement was a dismal failure because consumers did not understand it, and fought against the very mechanisms that kept their premiums constrained,” said Lischko. “CDHC plans can complement Massachusetts’ approach to lowering costs.” 

 

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