Continued: Health-savings plans may not live up to name

Josh Gruber is, in his words, "as aggressive and persistent as any consumer" when it comes to his health care.

When he needed a colonoscopy, he called his hospital first for a price estimate. He buys prescription drugs from Canada at half-price. The trim 63-year-old doesn't smoke.

So health savings accounts (HSAs), introduced in 2004, immediately held appeal. To rein in costs, pre-tax HSA dollars are used to pay high deductibles in insurance plans with low premiums.

The intent was to put the onus on people such as Gruber, who lives in St. Louis Park, to shop wisely for care. But his experience is a cautionary tale for those considering the new plans.

HSAs are poised to become as ubiquitous as the 401(k) retirement account, with major employers eyeing them as a way to cut health care costs.

Employers and insurers stand to reap considerable savings. But will consumers be able to make choices about their HSAs that ensure high-quality care and hold down costs?

In four years, Gruber says, he has cost his insurer, Blue Cross and Blue Shield of Minnesota, "not one penny," because his medical bills have never exceeded his deductible.

His reward? Premium increases of 15.1 percent in 2005, 6.9 percent in 2006 and 13.2 percent in 2007. This year, the premium would have gone up 14.5 percent if one of his sons hadn't dropped off the plan.

His situation is not unique. To the dismay of some early adopters, premiums have jumped by two figures almost every year since the new plans were offered -- no slower than increases in traditional plans.

"The premium is a bit less than the traditional plan," Gruber said, "but that's where the good news stops."

Blue Cross confirms that premiums for its HSA-linked plans -- the fastest-growing segment of the health-insurance market -- are rising in tandem with older plans.

Minnesota's biggest health insurer explained that the new plans are still based on the old concept in insurance: pooling risk. HSA enrollees are pooled with those in traditional plans to fix next year's premiums.

"It's not intuitive," admitted Shawn Patterson, Blue Cross vice president of marketing. But the more people who sign on, the greater the likely impact on spending, he said.

A rocky transition

Minnesota has been a national leader in these so-called consumer-directed plans, and every major health plan in the state now offers them.

Large employers, facing resistance from employees, have been slow to sign on. But in the next two or three years, benefits consultants say, many will offer them as an option or as the only choice as they strive to shave insurance costs. The University of Minnesota, Target and Wells Fargo already have made the shift. HSA-type plans are growing even as the level of enrollees in traditional plans is stagnant.

It's unclear whether the high deductible-low premium formula works better to hold down premiums in employer-sponsored HSA plans. Those are "all over the map," said Stephen Parente, a health economist at the University of Minnesota. Employers can have employees in traditional plans pay more to keep the HSA plans attractive, he noted.

But HSAs have taken off in the individual market, where Blue Cross is No. 1, followed by Medica and HealthPartners. HSA-linked plans now cover one-third of 180,000 individual enrollees for Blue Cross.

Marketing materials emphasize independence and choice -- notions not usually associated with insurance. Blue Cross' Options Blue is "a health plan that puts you in control," says the brochure. HealthPartners has a plan titled "Empower."

Premiums keep climbing

HSA plans do change patient behavior, proponents say. Enrollees are less likely to visit high-cost emergency rooms and more likely to seek preventive care, according to a Blue Cross study in the journal Benefits Quarterly that tracked hundreds of thousands of members from 2004 to 2006. But it didn't estimate savings, and Blue Cross officials concede that premium increases have not slowed.

As a result, "people get really disappointed," said Pam Lux, a Blue Cross spokesperson.

Blue Cross recently introduced "wellness credits" to reward those who stay in good health. Those who meet weight, cholesterol and blood pressure targets and don't smoke get credits toward their deductible. But that program is available only to some large employers, not the individual market.

Many say a dearth of good information makes it hard for people to shop for care.

Medica launched the Mainstreetmedica.com website last year, which lists price ranges at various facilities, after realizing HSA plans "haven't changed buying behavior as much as anticipated," said spokesman Larry Bussey. Medica has 10,000 enrollees in the individual market, and 70 percent have HSAs.

Pricing the plans has been a struggle for insurers, Parente said. Some started by dangling aggressively low premiums to get customers, then raised them when they couldn't make enough money. Enrollees then had to cough up more money or forgo insurance.

"The individual market is one where they can raise premiums, because [consumers] have no leverage," said William Boyles, publisher of Consumer Driven Market Report, a Washington-based trade publication.

Quest for coverage

Gruber found that out the hard way.

Six years ago, he retired as director of planning and allocation for the Minneapolis Jewish Federation, a kind of Jewish United Way.

Too young for Medicare, he went on his wife's health plan. She works for a small Twin Cities manufacturing firm that subsidizes her coverage but not that of dependents. She paid $50 a month. Gruber and their two young sons together cost $400 to $500.

Gruber looked for cheaper alternatives. On April 1, 2004, he signed himself and his sons up for MSA Blue, a Blue Cross plan for individuals. It cost $337.50 a month, with a $3,500 annual deductible. He also opened an HSA.

Blue Cross initially refused to insure Gruber, even though he ran marathons in his youth and still gets on the NordicTrack in his basement. It cited his medical history.

Gruber's doctor wrote to Blue Cross, explaining that his patient's idiopathic hypercalciuria, which can lead to kidney stones and osteoporosis, had been stabilized by prescription drugs. He noted a cardiac test returned a false positive.

Blue Cross then agreed to insure Gruber. (The insurer said it accepts 80 to 84 percent of people who apply for individual coverage.)

Recalling the near-miss is enough to rile Gruber, who now works part-time as a tax preparer for H&R Block.

He won't risk switching plans for fear of being rejected again: "They pick who they want to go to the dance with."

When it was time to renew in 2005, Gruber decided to upgrade to the newer Options Blue, because it included $300 for preventive care. Gruber's premium rose by 15.1 percent to $388.50. His deductible was $100 higher at $3,600. When he complained to Blue Cross, he got a letter citing reasons for the increases: medical inflation, the use of new, costly technologies and people using more medical services than ever before.

The next year, premiums rose 6.9 percent to $415.50 and the deductible rose to $3,800. In 2007, premiums leapt 13.2 percent to $470.50 with a deductible of $4,100.

This year, Gruber's premium would have gone up 14.5 percent if his older son had not opted out. Gruber's premium, which still covers his 13-year-old son, is down to $435.00. The deductible remains at $4,100.

Consumer crusader

Over four years, Gruber has grown disillusioned.

"Consumers are not calling the shots here," he said.

His expenses -- aside from the $300 in preventive care -- have all been out-of-pocket: $1,600 for a colonoscopy, $1,200 for an MRI on an aching shoulder. He takes a generic version of Fosamax for osteoporosis, paying $64 for a three-month supply from a mail-order pharmacy in Canada. If he bought it here, it would cost $184. He buys a diuretic for hypertension through a mail-order pharmacy recommended by his health plan -- $5 for a three-month supply.

Still the premiums climb.

Over the years, Gruber has sent multiple complaints to Blue Cross, with no noticeable effect. In February, he wrote to the Department of Commerce, demanding to know why it approved double-digit increases for a system that's supposed to keep costs down.

The department approved the increases because its mission is to keep insurers solvent by making sure they collect enough in premiums to meet their obligations, according to Bill Walsh, director of communications.

"I'm like the little kid trying to say the emperor has no clothes," Gruber said. "And the emperor can ignore you."

Chen May Yee • 612-673-7434