So when I told TCHB readers about Harris’ forecast for the year a few months back, it sounded like employers were confused by the consumer-directed health plan (CDHP) hype but somehow believed that it gave them a way out of paying for first dollar coverage, and was, following the death of managed care, the next big thing in terms of saving them money. My suspicion was that employers would try to slowly move employees to HRA/HSA based high-deductible health plans, and then gradually over time–particularly if the CHDPs didn’t produce their initially savings– gradually stop funding the HRA/HSA. This would be same thing as essentially only covering catastrophic insurance for their employees. Of course that essentially means reducing their benefits.
Well the latest KFF/Mercer poll, as reported in USA Today (hat tip to Don Mccane) suggests that in forecasting that this might be a gradual phenomenon, I actually gave employers too much credit (or too little depending on your viewpoint). The report says:
- Mercer’s survey of 991 employers found that 61% would set the individual annual deductible for an HSA plan at $1,000. But 17% chose $1,500, 11% said $2,000 and 10% were above $2,000. Don’t expect employers to pay that deductible: The Mercer study also found that 39% would not put any money into the savings accounts for workers, while 24% would put in $500 a year, leaving it up to the workers to fund the rest.
In other words, the CDHP translates into direct cost shifting. When you parse the press release from Mercer (access to the survey itself is coming later), it looks like the employers, who are interested in CHDPs with a high deductible plan, are looking at it as an alternative to asking employees to pay up to 50% of the premium for a normal plan. (There’s also a lot of high-fallooting rhetoric about providing a savings plan vehicle for employees to use for health spending in their retirement years, but I don’t think any employees are really buying the notion that employers will care about them in their retirement).
- Nearly half of large employers (48%) say that a likely motivation for offering an HSA would be to provide a savings vehicle for post-retirement medical coverage. Interestingly, significant portions of both those employers who currently offer retiree medical coverage and those who do not say they are interested in this use of HSAs (53% of retiree plan sponsors and 40% of non-sponsors). More than one-fourth of employers (26%) say they would offer the plan to provide a more affordable medical plan option for employees.
In fact, I think that Mercer (which is after all selling something) is a little too gung-ho about the ability that employers will have to force CDHP and their associated costs easily onto employees. The John Gabel study in Health Affairs a few weeks back suggested that the CDHP would have a modest impact. However, it’s clear that the cost-shifting direction is set, and that health care as an automatic employee benefit is at risk in the future.
The “free-marketers” behind the HSA movement, and their opponents who believe in some kind of community-rated tax-based social insurance system, will both take cheer from the apparent demise of the employer-based health insurance system. Both sides of that argument would like to see greater visibility to the tax-payer and/or the consumer as to what all this health care they are consuming actually costs. Employer-funded third party payment (of which Medicare is an extension, by the way) has been the cause of both healthcare cost inflation, the continued existence of the uninsured and all kinds of ridiculous anomalies and inefficiencies in the market-place. When health care is regarded as a freebie provided as a part of employment, all kind of bad things result. So theoretically the employee should be happy because they have for 50 years been giving up income in lieu of their health benefits–one reason that real wages in the US have been flat for 30 years.
But, and this is a major but, there is one set of actors here who severely disagree. To repeat a poll taken last year which I described here, when offered the choice 71% of employees wanted a combination of “health coverage & lower salary” compared to only 24% wanting a “higher salary & no health coverage”. In other words, health benefits as a part of employment are very popular amongst employees.
So if employers are going to try to cut benefits severely (and let’s face it they are unlikely to be adding increased wages in their stead) you can expect to see some very grumpy employees over the coming years. And even American corporations don’t necessarily want to make their employees that unhappy when it only saves them a modest amount of their payroll costs. So I think that Gabel is right and that the way this trend will play out is by no means automatic.