Report Examines the Pros and Cons of a New Health Benefit Option

Washington, D.C. — Employers searching for new health benefit options are considering personal health accounts combined with high deductible insurance in an effort to limit their spending, according to a new report released by the Alliance of Community Health Plans (ACHP).

“Defined Contribution Health Plans: An Analysis of the Pros and Cons of One Type of Defined Contribution Arrangement that Combines a Personal Health Account with High Deductible Insurance,” was prepared for ACHP by the research and consulting firm, Health Policy Alternatives, Inc.

“We thought it was important to look at this emerging product from the perspective of employers, employees and health plans,” said Jack Ebeler, president of ACHP. “Health insurance works by spreading risk among the healthy and those who are ill. We want to make sure that new products don’t adversely affect the risk pool, and allow us to continue to provide affordable, high-quality care to patients with chronic conditions.”

Acknowledging that there are a wide variety of defined contribution plans, the report focused on a model emerging in a number of markets. This model has the following features:

  • a fixed employer contribution;
  • a personal health account (PHA) funded on behalf of every employee by the employer that the employee can draw upon for health-related expenses. Most or all unspent funds may roll over from one year to the next;
  • high deductible (HD) insurance;
  • a coverage gap between amounts in the PHA and the insurance deductible;
  • a network of health care providers; and
  • an Internet-based system for tracking PHA expenditures and other data to facilitate employees’ health care purchasing decisions.

A growing number of insurers, including some of the largest multi-state carriers, as well as new “dot-com” vendors, have begun to market PHA/HD plans, but market penetration remains small. Sponsors of these plans include Definity Health, Destiny Health, HealthMarket, MyHealthBank, Vivius, and Lumenos. These companies act as an intermediary between the employer and employee, providing high deductible insurance, administering a personal health account, and providing a network of health care providers. Some either cover preventive care as part of the high deductible policy (excluding it from the deductible) or provide other forms of financial incentives for preventive care.

Founded in 1984, the Alliance of Community Health Plans (ACHP) includes 12 leading not-for-profit and provider-based health plans and provider organizations serving more than 12 million people throughout the United States. These plans work with approximately 90,000 physicians in local communities across our nation.

ACHP plans include: AvMed Health Plan, Miami, Florida; Fallon Community Health Plan Worcester, Massachusetts; Group Health Cooperative of South Central Wisconsin Madison, Wisconsin; Group Health Cooperative, Seattle, Washington; Health Alliance Medical Plans, Urbana, Illinois; Health Alliance Plan, Detroit, Michigan; HIP Health Plan New York, New York; HealthPartners, Minneapolis, Minnesota; Kaiser Foundation Health Plans and The Permanente Federation (multi-state); Oakland, California; M Plan, Indianapolis, Indiana; Univera Healthcare, Buffalo, New York.

The mission of ACHP is to promote the highest standards of health care quality and health improvement through collaborative learning, innovation and advocacy. ACHP and its members seek to transform health care so that it is safe, effective, patient-centered, timely, efficient and equitable.