A growing number of small employers are beginning to offer their employees high-deductible consumer-driven health plans (CDHPs) as a way to keep premiums low and encourage workers to use their healthcare dollars wisely. However, a provision in the federal Affordable Care Act could endanger the future of CDHPs that are paired with health savings accounts and health reimbursement accounts.
Supporters of Health Saving Accounts (HSAs) are calling on the Centers for Medicare & Medicaid Services to modify minimum medical loss ratio requirements that insurers spend at least 80 percent of premiums on medical costs for individual and small-group policies and 85 percent for large-group policies. Individual and small-group CDHPs that have high deductibles are likely to not spend 80 percent of premiums on medical claims because oftentimes members will never reach a $5,000 deductible. For members that do reach the deductible, CDHPs often cover medical services at 100 percent. That means that if an employee reaches the deductible, claims costs for that year are typically higher than claims costs on traditional health plans. MLR regulations do not take this into account.
A recent report released by Milliman, an actuarial consulting firm, suggests that federal regulators should include HSA contributions in the Medical Loss Ratio (MLR) calculation since many employers contribute funds to those accounts that will be spent on medical expenses.
The report also finds that medical inflation could adversely affect high-deductible CDHPs more than lower-deductible plans. Affordable Care Act provisions could limit rate increases that are deemed unreasonable for high-deductible CDHPs and could require plans to issue rebates to members if they do not meet minimum MLR requirements.
Milliman actuaries predict that, without MLR modifications, it will likely be unfeasible for insurers to offer high-deductible HSAs. If Milliman's predictions are correct, then it's quite likely we will see fewer CDHPs offered in states where MLR waivers have not been approved. That, in turn, will chip away at affordable options that are especially attractive for young, healthy consumers, the very people that the CDHP risk pools need to survive.