HRAs are great, as long as they are used in a proper manner.
The premise behind the CDH acronym family (HRA, HDHP and HSA) was to change the patient's behavior from an inefficient "all you can eat buffet" mentality of health care consumption to a more efficient "use what you really need" attitude.
Certainly the HSA and traditional "front end" HRA paired with a no-co-pay plan accomplishes this (assuming a reasonable cost-sharing level in the deductible). However, what exactly does a higher deductible plan, with co-pays with a "back end" HRA, accomplish?
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For example, consider:
- Plan A: $2,000 deductible plan with a $25 co-pay 100 percent coinsurance plan;
- versus
- Plan B: $3,000 deductible plan with a $25 co-pay 100 percent coinsurance plan with a $1,000 HRA account for the last $1,000 in the deductible.
What is the material difference of these two plans to the individual consumer? Will the patient in plan B change his or her behavior? Will efficiencies be achieved? Are there any savings from efficient behavior due to the "consumerism" of the HRA?
The answer is "no". A person on plan A is going to act exactly the same as a person on plan B. Therefore we have done absolutely nothing for consumerism. What have we achieved? Well…the only material difference is that the employer is paying a lower premium as a result of taking a higher deductible and the employer is "self-funding" the last third of the deductible. You may then ask, what is wrong with lower premiums?
The issue arises with the introduction of the HRA in plan B. While the insurance companies are rating based upon the assumption of $3,000 deductible utilization, the actual utilization is more in line with a $2,000 deductible, as in plan A. Therefore, insurance company X has underpriced this policy.
This is insurance chaos. Consider the ramifications of plan B with a $3,000 HRA – utilization would be through the roof as there would be no deductible cost-sharing with the member! This would be the equivalent of a 100 percent plan with no deductible! Actuarial data would be completely useless and insurance premiums would rise as insurance companies would have to assume that the deductible plan a company purchases would likely be much lower than what they actuarially estimated.
I believe that this is why California is doing what they are doing.
Mark Bellman is vice president of UnitedHealthCare for Central Texas.
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