Employee Benefits
A ‘Model’ HSAAlegent Health Care’s consumer-driven plan rewards its staff for healthy behaviors and cuts costs
Health savings accounts are still hotly debated nearly four years after Congress made them widely available. HSAs and high-deductible plans, their many critics say, won’t cure what ails U.S. health care and they entail risks for employees and some compromises for employers.
No such controversy rages at Alegent Health. While the jury may still be out on HSAs’ merits nationwide, the Omaha, Neb., system says its experience since introducing them in January 2006 shows the concept can really click for all sides under the right conditions.
Alegent’s approach, relying on an intensive effort to educate employees and a generous package of incentives, has succeeded in getting 88 percent of those who are enrolled in one of its plans to choose the consumer-driven care options such as HSAs.
That has resulted in lower costs than the not-for-profit system would otherwise have incurred and—even more important, says CEO Wayne Sensor—healthier and ultimately more productive employees. “When consumers truly understand the value of the health care they receive and when they are empowered to make good decisions, everyone benefits,” he says. “We believe our experience with consumer-driven care can serve as a model for others and lead to positive changes in the health care system.”
Such success stories have been slow to emerge, partly because many employers remain hesitant to offer them in the face of skepticism by many experts and consumers. Enrollment in HSAs was virtually unchanged in 2006 from the previous year, according to a survey by the Employee Benefit Research Institute and the Commonwealth Fund, defying expectations of significant growth. They remain fairly uncommon among hospitals, and only 7 percent of all employers nationally offered them as of last year.
“The biggest concern about these plans is whether they encourage people to get the health care that they need—particularly people with chronic health conditions or those who should get screenings from conditions that might develop into chronic conditions later on,” says Sara Collins, assistant vice president of The Commonwealth Fund.
The survey found that people enrolled in HSA-eligible plans were more dissatisfied with many aspects of their health care and far more likely to delay or avoid getting needed care, or to skip medications, because of the out-of-pocket costs. Another report last year, by the U.S. Government Accountability Office, says only about 55 percent of people who had HSAs put any money in them.
“Proponents of the plans have seen them as a way to engage people more directly in their health care, and that certainly is an important goal,” says Collins. “But the incentives don’t seem to be in the right place on these plans.”
Incentives aren’t lacking at Alegent. The health care system, which has nine acute care hospitals in Nebraska and southwestern Iowa, has given its staff $100 rebates just for participating in the program, a total outlay of $700,000.
Perhaps more impressively, it also paid out $502,000 to the 8,500 employees during the first year in incentives for healthy behavior—not just participating in weight loss and smoking cessation programs but using a health coaching option to manage chronic conditions such as asthma, diabetes and heart disease.
As a result, Alegent spent a hefty 7 percent of its health care dollars on prevention, or nearly triple the nationwide average of 2.8 percent. Sensor says covering 100 percent of the costs for preventive care, as well as providing catastrophic coverage, is necessary for the plans to succeed.
Getting the Word Out
Making sure employees know exactly what they would get out of the process also was a key part of the strategy. Alegent did everything from standard mailings to Web-based conference calls to one-on-one meetings and evening seminars with spouses present. It budgeted $140,000 to support the plan’s rollout, which included printed materials, online content development, consulting fees and managing communications.
All told, 57 employee meetings and eight benefits fairs were held to explain the new options. That helped ensure impressive participation in the consumer-directed plans—two HSAs and two health reimbursement accounts—even though a traditional preferred provider option remains in place.
“If you simply put HSAs and high-deductibles out there as an option and you don’t enhance those tools with these elements—preventive care, incentives for making the right care and education on how to use them—I wouldn’t be surprised at all if you didn’t get the results that you expect,” Sensor says. “The richness is in the plan design, not just in the deductible, and in communicating to the workforce.”
Matt Hazen says the more Alegent explains consumer-directed coverage, the more it will be accepted. “Initially, it puts fear into people that it’s a high-deductible plan and ‘I’m going to be out a lot of money if something happens to me,’ ” he says. But Hazen, who is Alegent’s director of business development, figures he has saved at least $2,000 a year in monthly premiums for his family’s HSA coverage while setting aside tax-advantaged money that can be used later.
Dina Maas appreciated the abundance of available information, particularly the online examples of what the financial impact would be for different types of employees. But she and her husband were primarily persuaded by the significantly lower premiums. “If usually all you ever use for health care is your checkup, it just sort of seemed like a no-brainer,” says Maas, the coordinator of corporate communications.
Employees have squirreled away much of the money they saved on premiums to cover future health care expenses. At the end of the first year, employees had $971,500 set aside in their HSAs, while carryover savings in the HRAs totaled $915,500.
The Net Result
Alegent’s cost picture also brightened—and in a big way. The organization budgeted for a 5.8 percent rise in health care costs last year, figuring the HSAs would reduce the annual increases of 8 percent to 14 percent incurred over the previous several years. As it turned out, costs rose just 1 percent.
Spending less on incentives could have resulted in a net reduction in costs, but Sensor says the aim always was to slow the growth of future cost increases, not to save money. “The consumer-driven plans were about employee health—and not our pocketbooks,” he says.
Legacy Benefits and Insurance Services, Roseville, Calif., a benefits consulting company, notes that plans backed by HSAs can provide real pluses for employers: lower premiums, greater control over their health benefit costs and flexibility on contributing into employees’ HSAs each year. But, they appeal more to healthier employees and higher-income employees who can afford the out-of-pocket costs.
Legacy warns that adding a high-deductible health plan “could backfire as a cost-cutting strategy.” But for Alegent Health, the plans have paid off in numerous ways.—Dave Carpenter is a writer in Chicago.
This article 1st appeared in the September 2007 issue of HHN Magazine.
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