After a year’s wait, UnitedHealthcare of New England has gotten the green light to offer its iPlan HSA products in Rhode Island, effective Sept. 1, finally making this popular type of “consumer-directed” health plans available to local employers.
United had sought to offer health savings accounts here last year, but the high-deductible health plans with which they must be coupled were illegal in Rhode Island, because federal law narrowly limits what they can cover before the deductible is met, and a new state law required an ineligible service – early intervention for special-needs children – to be exempt from deductibles.
United lobbied to change the law, but what CEO Stephen J. Farrell had hoped would be a “fast-tracked” process turned into a long debate over health care affordability and consumer protection. Ultimately, however, the law was changed to not only solve the immediate problem, but also to exempt tax-advantaged health plans in general from any future mandates.
Meanwhile, Blue Cross & Blue Shield of Rhode Island played catch-up, and while United is ahead of Blue Cross in this field, with more than 1 million consumer-driven plan enrollees nationwide, Blue Cross is now planning to launch its own HSAs on Oct. 1.
Signed into law by President Bush in 2003, HSAs are tax-free accounts used to pay for medical expenses. Unlike flexible spending accounts (FSAs), they can be funded by both workers and their employers, and they can be carried over from year to year.
To qualify for an HSA, a person must be enrolled in a high-deductible health plan, defined as a plan with at least a $1,000 deductible for individuals or $2,000 for families for 2005, with no drugs, chronic care or hospitalizations covered until the deductible is met – just basic preventive care.
Some Rhode Island employers already offer another kind of “consumer-directed” product, health reimbursement arrangements or HRAs, which also have high deductibles but don’t restrict services so narrowly. HSAs are viewed as more appealing to workers, however, because if they use health care sparingly, they get to keep the money they save.
But Rhode Island is known as a particularly conservative health care market – the 1990s HMO revolution, for example, never really took off here. So while United is eager to start selling its iPlan HSAs in the state, Joanne Bilotti, assistant vice president of marketing at Blue Cross, said her company is doing it just “to remain competitive in the marketplace.”
“We did some market research, and Rhode Island is not quite ready yet,” Bilotti said. Blue Cross hasn’t begun promoting its product yet – tentatively named HealthMate for HSAs – and it’s planning “more of a soft launch,” she said, with no “major advertising.” For now, they will be offered only to groups, but individual plans may be launched in January, she said.
Both Blue Cross and United said premiums for HSA plans will cost 30 to 40 percent less than their standard preferred-provider (PPO) plans, with the $1,000 minimum deductible yielding the smallest savings. National surveys have found that HSA plans are slightly cheaper than HMOs and much cheaper than PPOs, except PPOs with high, broad-based deductibles.
But that’s not the only benefit that United is touting. Farrell stressed that along with the lower premiums and tax advantage, the iPlan HSA products come with a full range of support services: health and wellness programs, a 24-hour nurse line, extensive Web resources, and, starting in January, the even broader resources of Definity, which United bought last year.
The idea is to not only save money through the higher deductibles, but also empower consumers to make smarter decisions by giving them expert advice and information.
“It’s really a marriage of a high-deductible plan, affordability, accessibility and education,” Farrell said. “It’s the whole package that delivers better results.”
At Benefits Unlimited, a major brokerage that plans to offer the iPlan HSAs as soon as they’re available, executive vice presidents Joel H. Cooper and Wayne Damato said they’re impressed with the package that United has put together, and with the ease of use.
Because United owns the bank that will administer its HSAs, the whole system is integrated, so a subscriber who goes to the doctor can just hand over a swipe card and have the proper amount deducted from his HSA – with the full benefit of United’s discounted rates.
Asked how popular they expect HSAs to be, Cooper said they’ve gotten “a ton of calls,” and they’re working with several Chambers of commerce to offer HSAs starting Oct. 1.
“Rhode Islanders are a little slower” to accept new health plans, Damato said, “but there’s no question that with small businesses in particular, this is going to grow pretty quickly.”
Still, both men said they expect employers to be cautious at first, and offer HSA plans just as another option, maybe even with fully funded accounts. Among the first to jump in, Cooper predicted, will be very small businesses – “the almost self-employed, with just one or two workers.”
