Health Savings Account Blog

At HSA for America, we strongly disagree with a letter written by Richard C. Oehling published Dec. 21 (http://independent.gmnews.com/news/2005/1221/Letters/025.html) warning against the dangers of a medical savings plan.

Health savings accounts (HSAs) are similar in structure to all other forms of property and casualty insurance normally purchased by individuals. Homeowners and auto insurance require the policyholder to cover minor expenses out of pocket until the deductible is reached after which the insurance covers all eligible costs. There is no reason why consumers should not pay for routing health costs out of pocket as well, even without a tax incentive. Traditional health coverage with a low — or even no — deductible is an accident of history that originated as a way to get around World War II-era wage controls. With so little out-of-pocket exposure, the system invites overuse and insensitivity to the cost of care.

In any given year, only a small percentage of the population incurs significant medical expenses. United Healthcare — which insures 29 million people nationwide — says in the most recent year, only 7 percent of its policyholders accounted for 63 percent of its claims costs. In the Medicare program, the sickest 5 percent of the beneficiaries account for 50 percent of the cost in a typical year.

Critics argue health savings accounts will only appeal to the healthy and the wealthy. However, the early experience with HSAs suggests otherwise. Besides, due to the unpredictability of life, one could be perfectly health today but have a heart attack or be diagnosed with cancer next month or be in a serious car accident or suffer an injury while participating in sports.

For the insurance industry, the potential for cost savings in enormous if millions of small claims for routine office visits and minor tests could be eliminated from their claims handling organizations. Cost saving is what makes it possible to offer a much lower premium for protection against catastrophic illness and more serious medical events. For hospitals, if more people had low-cost catastrophic insurance instead of no insurance at all, their bad debt and uncompensated care cost would be much lower than it is now.

We find it hard to imagine any intelligent person who felt sick would not go to the doctor because they did not want to pay $100 (or less) for an office visit out of pocket. Do they avoid changing the oil in their car because they have to pay for it out of pocket? Of course not. One thing clearly required for this system to work however, is vastly improved pricing transparency. If consumers are going to pay for medical costs themselves until the deductible is reached, they need to be assured they are paying at the insurance company negotiated contract rate and not the artificially high full list price.

Mr. Oehling makes it sound as though the choice is between health savings accounts (or MSAs) and traditional medical coverage with low deductibles. In the private sector however, where companies have to compete, make a profit, and are subject to the discipline of the marketplace, the choice is often between high deductible health insurance and no coverage at all. We understand the federal government cannot go out of business no matter how expensive and inefficient it is, but that is not the way the rest of the economy works.

Health savings accounts — coupled with pricing transparency from hospitals, surgical centers, imaging centers, labs, physicians and other medical providers — have enormous potential to bring down medical inflation by injecting competition into the system and making consumers more price and cost sensitive. We should do everything we can to encourage their adoption, not try to outlaw them.