Healthonomics: How to Handle Health Savings Accounts

It’s safe to say that Susan Miller is knee-deep in health savings accounts (HSAs) and the high-deductible plans that by law must accompany them.

Miller is the administrator of Family Practice Associates in Lexington, Ky., which is not only seeing an increasing number of patients that have HSAs but also offers HSAs as an option to its own employees.

It’s been a mixed blessing, reports Miller.

“The physicians here really wanted to lower premium costs and give employees an opportunity to put aside more money on a pretax basis, and that has worked out great,” she says. “But as for patients coming in with health savings accounts? That has been far more difficult to administer.”

Miller continued. “We’ve built this huge mechanism around getting paid by managed care, and now we’re going to have to get paid by patients, which is very difficult when you’re not sure what to collect, and often have a patient who’s confused or doesn’t want to pay. It becomes far more confusing because their payment is based on how much of the deductible they have met, as well as what is allowable for their particular health plan.”

Unfortunately, none of this information is quick or easy to obtain.

A sea change

Established in 2001, health savings accounts allow consumers to put aside money on a tax-free basis to pay for their healthcare costs. By law, HSAs must be attached to a high-deductible health insurance plan. In theory, the patient uses his HSA to pay that deductible, as well as any other up-front healthcare costs, via a debit card. If not used in one particular calendar year, the saved funds can be rolled into the next year. Funds that are still there by the time the account holder is 65 can be rolled into a tax-free IRA, if the person chooses. (The HSA differs from the medical savings account, or MSA, in that the MSA is for the self-employed only.)

The maximum allowable tax-free yearly contribution in an HSA is $2,900 for individuals and $5,800 for families. And the catastrophic plans coupled with HSAs have deductibles between $1,100 and $5,500 for singles, and $2,200 and $11,000 for families. Blue Cross and Blue Shield and United Healthcare are big players in the high-deductible market. Currently, it’s estimated that about 7.2 million people in the U.S. have consumer-driven healthcare plans.

Samantha Rosman, a pediatrician who chairs AMA’s board of trustees’ task force for health-system reform, expressed concern that HSAs may be more appropriate for people with low yearly medical costs - a young, healthy person - than families or the chronically ill. Even so, she said the theory behind them is sound.

“We hear they are supposed to improve physician-patient communication on the costs and benefit of procedures, which I think has been taken out of doctors’ hands in managed-care plans,” says Rosman. “The doctor and patient can decide together whether [a given treatment] is an appropriate use of the patient’s money. Doctors are looking forward to that.”

HSAs fall under the umbrella term “consumer-driven healthcare,” which also includes health-reimbursement arrangements - basically HSAs funded by employers. Proponents of these options, in conjunction with a high-deductible plan, believe that they give consumers greater control over their health. In fact, a study conducted by management consulting firm McKinsey and Co. found that patients in such plans were twice as likely to ask about cost and three times as likely to choose a less expensive treatment option. In addition, chronic patients were 20 percent more likely to follow treatment regimens carefully.

Consumer-driven health plans also have the potential to save the patient and the insurance company money by cutting down on the use of expensive prescription drugs, says Bill West, an OB/GYN and founder and president of First HSA, a Reading, Pa.-based company that markets and administers HSA accounts. “When patients are paying for their own drugs, they’ll ask for the generic rather than a drug that costs $600 a month,” he said. “Patients [in managed care plans] don’t know what a drug costs; they’re shielded from it by a $20 copay. And often, other drugs are just as good.”

This saves everybody money, except the drug companies.

Chaos coming

Theoretically, that’s all a good thing, but while physicians make the transition from a patient population insured mainly by managed care to one with a mix of coverage types, there is some havoc to face.

The AMA recently surveyed its members, asking whether the advent of consumer-driven healthcare plans was making billing and collections processes more difficult and/or time-consuming. Sixty-five percent believed such plans will force them to increased collections efforts, while 61 percent believe their office will now need to make more of an effort to verify benefits and train staff to do so. The AMA, says Rosman, will soon create brochures to help physicians through the transition.

Although HSAs and high-deductible plans have been causing confusion and sometimes widespread panic in doctors’ offices lately, there are, thankfully, some fairly straightforward solutions, explains Cynthia Dunn, Cocoa Beach, Fla.-based senior consultant with the Medical Group Management Association.

One problem is that many insurance cards don’t say that the patient has a high-deductible plan or that an HSA is attached to it. Sometimes, even the patient doesn’t know; sometimes patients do know, but are unclear on what they are or how they work. The patient just hands you the card, on a busy day in your crowded office, and you must spend 15 minutes on the phone with her insurance plan trying to figure out, first of all, what type of insurance it is (high-deductible or otherwise, and after that, 80/20?), and then what is allowable (preventive services, or no?), and how much of the deductible the patient has met.

“The answer to all this,” says Dunn, “is preregistration, plain and simple. Have the patient fill out registration forms days in advance of the visit, which enables staff to check the nature of their insurance before they come in.”

This can be done by phone, but it’s far less-time consuming if you can do it electronically, adds Dunn. Check your software. Even if you don’t have a big, expensive EMR system, your practice management software may be equipped to check eligibility on a patient after you type in her insurance information. Some systems even do an automatic eligibility check each night on every patient who has an appointment the following day, providing notes for staff in the morning.

If, however, you’re a primary-care physician seeing a slew of patients who just called that morning for an appointment and you’re unable to get their insurance info ahead of time, you may be able to do a real-time electronic eligibility interchange. More and more large payers are setting up systems that enable providers to sit down, type in a patient’s member number, and get eligibility info within three or four minutes - rather than spending 15 minutes on the phone.

Dunn adds that it’s of the utmost importance to train employees to master these techniques, as doing so can relieve a large part of the headache that comes with processing HSAs and high-deductible plans.

“These are things we should be doing anyway, but HSAs and high-deductible plans really make it necessary,” she says.

Collection mess

Rosman likens HSAs with their attendant high-deductible plans to old-fashioned indemnity plans. The common denominator: collecting fees from the patient at the time of service. But many practices aren’t set up to do that anymore.

And collection from patients with consumer-driven healthcare options can present unique
conundrums, to wit:

• Some high-deductible plans will tell patients not to pay the doctor upfront. Instead, the plan says it will eventually advise patients how much, if anything, they owe the doctor, and they can then pay that amount out of their HSA. This is a problem because, as Miller says, “The more time that elapses between the service and the bill, the less the likelihood that you’ll actually get paid.”

• If practices swing in the opposite direction, though, and simply collect the cost of the entire visit’s services from a patient who has an HSA, that can hurt them in the end, said Miller. “It’s costly and time consuming to later process a bill and cut that patient a check after the insurance company says you owe them a refund.”

• Sometimes patients come without an understanding of how their HSA works, and they are so unaccustomed to paying more than a copay at the doctor’s office that they balk when an actual bill is handed to them. And then staff needs to spend time explaining how it all works.

• Some patients have no intention of spending their HSA money at the doctor’s office. Yes, they get the concept, but no, they aren’t parting with the money. Instead, they view it as an IRA that no one is touching. “They may say, ‘I’m sorry – I don’t have any idea what you’re talking about,’ when you ask for their HSA card, or they may claim they left it at home,” Miller says.

• Although practice employees can check eligibility to discover what benefits a patient’s high-deductible plan allows, and how much of the deductible has been met, they can’t check the balance in a person’s HSA. So, if a patient opts for a costly procedure that’s not covered under their insurance plan, and their HSA doesn’t have enough money to cover it, the practice may have a hard time collecting it.

Dunn says practices can try to guard against these situations by deciding on strict policies and procedures on payment, and communicating them to patients as well as posting them very clearly in the office and on their Web site. Practices may also want to post prices for services online, so there is no ambiguity about that, suggests Dunn. Again, training is key. Make sure that your staff understands HSAs and high-deductible plans, and that they are not bashful about collecting.

For those patients who call rather than come in, Dunn suggests setting up e-visits, which allow established patients an encrypted online exchange with the doctor for a small fee - say, $25. That way, the practice is paid for its time, and the patient is happy too, having gotten the answers he wanted without paying too much.

More change afoot?

Consumer-driven health plans seem destined to alter the way practices handle billing, but they might also force a few other changes. For one thing, says Dunn, medical documentation is going to have to get better.

“If a patient who is paying for their own procedures opts out of a treatment, physicians, in order to protect themselves, will have to do a much better job documenting the discussions they had about that, outlining the reasons why they wanted [the procedure] done,” Dunn says.

Otherwise, potential lawsuit. As far as she knows, there haven’t yet been any suits as a result of such a situation, but Dunn says the possibility is definitely there.

Another change that’s expected as a result of HSAs’ and high-deductible plans’ presence in the market: increased EMR adoption. More and more practices, confounded by the mix of payers that now, again, includes patients, will need a good EMR system to keep it all straight and flowing in a way that keeps the practice profitable. “This will definitely push people toward electronic medical records,” Miller emphasizes.

And if Miller’s practice is any indication, HSA adoption is still quite low, appealing mostly to people who have no problem affording their healthcare and may just be looking for another way to invest. When her 50 employees and 10 physicians were offered HSAs in 2006, none of the staff opted for them - but all of the doctors did.

“The [staff] were really concerned that if they had a serious illness, they were not going to be able to put away enough money to cover the difference in that high deductible,” she says. “It was more of a risk than they were willing to take.”

The physicians, however, were psyched. “They saw it as a way to put away more money on a tax-free basis after maxing out their 401(k).”

Suz Redfearn, BA, is an award-winning healthcare writer living in Falls Church, Va., who for over 15 years has written for a variety of publications, including The Washington Post and Men’s Health. She can be reached via
editor@physicianspractice.com.

This article originally appeared in the February 2008 issue of Physicians Practice.