HRAs, Not HSAs, Are The Most Popular Consumer Driven Health Care Plans This Year

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Health Savings Accounts or "HSAs" are becoming very familiar to American consumers, but Health Reimbursement Arrangements or "HRAs" are the most popular consumer driven health plan -- and will realize even faster growth in 2005 and 2006.

Health Reimbursement Arrangements or HRAs will realize faster growth in 2005 and 2006 than HSAs, keeping them the most popular health insurance product, a new independent study is predicting.

"HRAs" are estimated to cover almost three million Americans by January 2006, up from 1.3 million one year earlier, according to Consumer Driven Market Report, an independent trade newsletter in Washington D.C. HSAs by contrast are estimated to cover less than two million.

"HSAs are definitely the wave of the consumer driven health care future, but large employers don't want to give up any of their options," the study authors note. "Right now HRAs are bigger, and are more popular than HSAs, HMOs or PPOs."

HRAs are not as widely-known to the public as HSAs, but are actually preferred by many large companies. Every recent industry study of patient satisfaction in HRAs shows they are the most popular health insurance product in terms of overall satisfaction and re-enrollment rates.

HSAs have not been measured yet to see if they are as popular with consumers as HRAs. But many industry experts say they could be more popular than existing insurance for millions of workers.

"Firms which sell HRA systems products report that the total increase in HRA enrollment by early 2006 could exceed one million," the study authors add. "However, we are restricting our estimate to 600,000 added, while awaiting more reports on actual employer implementations."

HRAs, created by a Treasury Department ruling in 2001 before HSAs, are basically the same as HSAs except that the employer funds and controls the account design, not the employee. Savings go only to paying future medical bills for workers, not to the employee's personal income like a 401k.

Many employers don't want to give up control, and don't want to give away all savings to employees.

A previous study of HRA enrollment in December put total enrollment at over 600,000 covered lives. The authors estimated in February that this actual verified number from companies would hit 1.3 million in the first quarter, then double during 2005 to hit 2.3 million in January 2006.

"We are now increasing that estimate for HRA enrollment for January 2006 to 2.9 million, or 600,000 more added lives in HRAs this year.

"The overriding factor on which we are basing this estimate is large employer support for the HRA model during the upcoming RFP season. Both anecdotal and undisclosed private reports are showing very strong employer backing for HRAs that are custom-designed to their workforce. Combined with historical benchmarks for adoption rates of existing HRA products, HRAs are simply rising at a faster pace among larger firms."

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William Boyles
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