HEALTH PLANS.

Byline: Tim Christie The Register-Guard

Faced with ever-rising health insurance premiums, Eugene car dealer Ron Pappel decided to see if he could save himself and his four employees money by switching from traditional managed-care type insurance to a high deductible plan with health savings accounts.

Pappel, owner of Executive Auto Sales, said health savings accounts were attractive because of the upfront savings in premium costs. But he quickly learned they hold potential pitfalls as well.

In March, Pappel, an otherwise healthy 43-year-old, underwent sinus surgery. He hadn't had his health savings account long enough to build up any kind of reserve, and as a result, expects to spend $4,000 to $6,000 out of pocket for the surgery.

"People need to be aware of that high deductible," he said. "You've got to be prepared to write a check."

It's an issue that consumers can be expected to confront more often as employers and insurers, faced with skyrocketing costs, look for ways to plug consumers into the cost equation of health care.

More and more employers have begun offering "consumer-driven" or "consumer-directed" health plans, which combine high deductibles with health savings accounts. Consumers use funds from the accounts - contributed by employers, by themselves or both - to pay the deductibles.

What's driving the trend is a seemingly inexorable rise in health care costs. From 2001 to 2004, insurance premiums increased nearly 60 percent, according to the most recent annual survey of employers by the Kaiser Family Foundation.

"The cost increases are unsustainable and causing a lot of extreme problems for employers and purchasers of care," said Judith Hibbard, professor of health policy at the University of Oregon. "There aren't a lot of options in their bag of tricks, so people are grabbing onto this in the hopes it will be an answer."

Such plans must have an annual deductible of at least $1,000, or $2,000 for families, according to the Office for Oregon Health Policy and Research. The tax-free savings accounts can be set up by employers or individuals, and are owned by individuals, even when employers establish and contribute to them. Interest earned is not taxed, and funds that are not used carry over to the following year.

About 27 percent of employers surveyed by the Kaiser Family Foundation last year, representing 40 percent of covered workers, said they were "very likely" or "somewhat likely" to offer this type of plan in the next two years.

PacificSource Health Plans, a Eugene-based insurer, has seen a "strong, steady increase" in high-deductible health plans since the introduction of health savings accounts last June, spokeswoman Colleen Thompson said.

The company works with 335 employers offering high-deductible health plans that qualify for health savings accounts, she said. Most are smaller employers, with fewer than 50 workers, many of which don't fund health savings accounts, leaving it their employees to contribute.

The trend toward consumer-driven health plans will educate health consumers on the real cost of care, Thompson said.

"I wouldn't necessarily say it's a good thing or bad thing for consumers," she said. "It will help people realize paying more for health care doesn't necessarily mean you're getting better health care," she said.

About 40 clients of Pacific Benefit Consultants in Eugene have begun to offer health savings account style plans to their workers, said Jeff Miller, vice president of employee benefits.

In fact, shareholder-employees of Pacific Benefit Consultants voted to go with health savings accounts this year. Regular employees of the firm decided to stick with a more traditional plan.

Under the health savings account plan, shareholders have to spend $2,000 of the cost of nonpreventive care before any benefits kick in. After the deductible is paid, then they pay 20 percent out of pocket. Preventive care, such as routine checkups, is completely covered.

Health savings accounts can be a good deal for employees, Miller said. "They put people in touch with the true cost of medical procedures."

But there's also more risk, particularly for people who have children or medical problems. "If a major deductible expense could be harmful to them, then a health savings account doesn't sound too good," he said.

But, after a year or two with such an account, a person can save enough money to cover larger medical expenses, he said.

"I think it will take off in some sectors, but it's not for everybody," he said.

Oregon's largest insurer, Regence BlueCross BlueShield of Oregon, has bought into the consumer-driven movement in a big way.

As of January, the company, which insures 1.1 million people in Oregon and southwest Washington, has included at least some consumer-driven elements in all its plans, president Dr. Bart McMullan said.

"I think people assuming greater financial responsibility for their own health care is the future, whether you call it consumer-directed health plans or something else," he said. "That connection is absolutely going to happen. It's necessary to effect the rising rate of health care costs and to get better clinical outcomes. It's not just a cost shift."

Twenty years ago, cost was a regular part of the conversation between doctors and patients, McMullen said.

Under the managed care model, where "everything cost $10, nobody cares about what anything cost and why should they?" he said. "No one hardly ever talked about options other than what somebody wanted."

At the same time, the number of medical options available exploded, with wide-ranging costs, he said.

Consumer-driven health care can be more affordable and produce better outcomes for patients, he said.

"It's not appropriate to think the most expensive treatment is the best," he said.

A visit to the doctor for a headache could result in treatment costing $150 or $3,000, he said. Likewise, one doctor may tell a runner complaining of a sprained knee simply to rest; another may order up a $1,000 MRI, often at the patient's request. In either case, the patient's outcome is the same, he said.

Consumer-driven health is not just about having the patient assume financial accountability, he said. It's changing the health care decision-making process, so pharmacists, doctors and hospitals are all talking about different options. Using evidence-based guidelines for determining the most effective treatments and drugs is a key piece of the puzzle as well, McMullen said.

"If consumers want access to health care they can afford, this is one way of keeping the rate of rising premiums under some kind of control by connecting everyone in terms of accountability and transparency in options and cost and clinical outcomes," he said. "The alternative is that premiums go up 20 percent a year and now what happens? People can't afford premiums at all."

Not everyone is sold on this health-care trend, however.

"To us, that's a troubling trend," said Earl Lui, a senior attorney in the San Francisco office of Consumer's Union, the nonprofit publisher of Consumer Reports magazine.

Health savings accounts tend to attract younger, healthier people, splitting them off from the larger risk pool, he said. "The danger is, it undermines the whole idea of social insurance, that we're all in it together."

The question facing health care is similar to the debate over the future of Social Security, Lui said.

"Should people be out as individuals in the marketplace or should we all share the risk?" he said. "The question is, how much risk do we want people to bear in our society?"

Lui also cited studies that show when people have to pay more for health care, they use it less, delaying trips to the doctor.

"The whole point of having health insurance is to catch problems early and not wait until you go to the ER or get really sick," he said.

CAPTION(S):

Ron Pappel, owner of Executive Auto Sales, put he and his four employees on Health Savings Accounts and quickly learned the potential pitfalls. He didn't have enough money for sinus surgery built up in his account and will have to pay between $4,000 to $6,000.