« December 2005 | Main | February 2006 »
January 31, 2006
Congressman Chris Cannon predicts Health Savings Accounts will revolutionize Healthcare
U.S. Rep. Chris Cannon said his priorities for a hopeful sixth term involve the same issues as when he first claimed Utah's 3rd District seat in 1997: health care, school trust lands and telecommunications.
Noting his past role in establishing health savings accounts, Cannon expects the near future will present Congress with revolutionary issues in the healthcare industry.
"This year is truly going to be a transformation in medicine," he said last Thursday at his campaign kickoff luncheon in Provo. "It's going to change the way you deal with your doctor."
He is working on legislation to encourage the sharing of medical technology and breakthroughs to help save more lives, and he also has supported appropriations for medical research. Cannon, who lost a daughter to a rare cancer, also is a member of the House cancer caucus.
Another pet cause is telecommunications. He favors legislation that will spur Internet growth and increase access, as well as keep e-commerce free to consumers.
We applaud the work congressman Cannon is doing with Health Savings Accounts. Hopefully his sixth term will help create even more advantages for Health Savings Account holders.
Posted by Wiley Long at 08:17 AM | Comments (0)
January 30, 2006
Bush to focus on Health Savings Accounts
The White House has been dropping hints that the president will make health-care reform the centerpiece of his State of the Union address. Michael F. Cannon, director of health policy studies at the Cato Institute, has written the following health policy "wish list" for the State of the Union:
- Propose "large health savings accounts (HSAs)." Federal tax laws encourage workers to surrender control over their health care to their employer. Among other things, that means that most people lose their health insurance when they leave a job.
- Push hard for interstate commerce in health insurance. A big reason that health insurance is so expensive is over-regulation by the states and the fact that each state forbids you to buy insurance from carriers in another state. The Congressional Budget Office estimates some state regulations increase insurance premiums by as much as 15 percent.
- Avoid further expansions of federal power. The president should explain that markets will deliver conveniences like electronic medical records and price and quality information just as soon as government stops monkeying with market incentives. And he should explain that expanding federal power at the expense of states is improper, because it limits individual freedom and the states' ability to experiment.
- Clean up the Medicare mess. It would be nice for the president to acknowledge that the Medicare drug program that took effect this month was a huge mistake. Though the intent was to expand coverage, so far the program has caused many to lose the coverage they had, including some of the poorest and sickest seniors.
The Bush administration's health care record so far has been inconsistent, says Cannon. It's high time for the administration to straighten up and fly right by removing government influence over the health care sector.
With the use of health savings accounts, the president has a chance to do just that.
Posted by Wiley Long at 09:24 AM | Comments (0)
January 29, 2006
Health Savings Accounts Triple in 10 Months
At least three million consumers currently receive health coverage through high-deductible health insurance plans offered in conjunction with a health saving account, according to preliminary results of a new study by America's Health Insurance Plans (AHIP).
"Health Savings Accounts are a remarkable success story and they are proving to be especially attractive to many individuals and families who might not otherwise be able to afford coverage," said AHIP president and CEO Karen Ignagni.
According to the study, enrollment in the new insurance policies eligible for Health Savings Accounts has roughly tripled since last March when a similar AHIP survey found that 1,031,000 people were covered by a Health Savings Plan.
Ignagni went on to say "Consumers and employers have quickly embraced HSAs as a valued option in the suite of products offered by health insurance plans."
The study is based on aggregated responses from AHIP member companies, which represent nearly all the health insurance plans offering HSA-eligible health insurance plans. The preliminary findings also show that the market for HSAs is becoming broader, with companies offering HSAs in more markets and to a wider array of large group, small group and individual customers.
Employers and individuals can contribute pre-tax dollars into an HSA for future medical expenses. The account funds belong to the individual and unused contributions can roll over tax-free from year to year.
For 2006, the maximum annual contribution for self-only coverage (whether individual or through an employer) is equal to the consumer's insurance plan deductible or $2,700, whichever is less. For family coverage, the maximum is equal to the insurance plan's family deductible or $5,450, whichever is less.
For more information about Health Savings Accounts and how they work, please visit our HSA Information page.
Posted by Wiley Long at 10:27 AM | Comments (2)
January 28, 2006
Baby Boomers Are Embracing Health Savings Accounts
While less than five percent of U.S. consumers have a Health Savings Account, Baby Boomers, by contrast, are embracing the product in comparatively high numbers. In fact, according to recent findings from the 2005 Insurance Audit, 56 percent of householders with an Health Savings Account are between the ages of 40-60 years old.
By comparison, just under 35 percent of the respondent households with a Health Savings Account (HSA) are under 40 years old. Overall, 4.4 percent of the entire survey household sample of 35,000 said they had a group HSA, but the numbers are expected to continue moving upward as HSAs are increasingly offered on a broader scale through corporate group plans.
Overall, enrollment in Health Savings Accounts is also growing, but at a measured pace.
The Insurance Audit survey, which is administered by Integras, Claritas' advanced analytical services division, is designed to generate a national representative sample of United States households' insurance behavior. Data includes the following insurance categories: automobile, residential, life, health and insurance attitudes.
"HSAs provide consumers an excellent way to save on overall medical expenses, as well as future medical expenses," said Integras Consultant Noel Schoonover. "The ability of baby boomers to begin saving now for their health expenses during retirement will also save Medicare money in the future and help ensure Medicare's future financial vitality," he added.
Other notable findings included:
- Nearly 40 percent of households with an HSA are concerned about their long term care needs compared to 32.1 percent of the total households surveyed.
- Nearly 45 percent of households with HSAs are concerned about earning an income if they become disabled compared to 33.1 percent of all households surveyed.
- Over 50 percent of households with an HSA are concerned about outliving their retirement savings compared to 44.2 percent of the total households surveyed.
Obviously, people with a Health Savings Account are concerned about their health and wealth. At HSA for America, we realize getting more individuals and families to be proactive about their health care will benefit their health, their wealth, and the overall health care system. Spread the word about Health Savings Accounts!
Posted by Wiley Long at 10:25 AM | Comments (0)
January 27, 2006
Encourage adoption of Health Savings Accounts, don't 'Outlaw' them
Health insurance costs have been increasing far faster than the rate of inflation for a number of years now. More and more employers are finding they can no longer afford to offer health insurance to their employees or are forced to raise employee contributions to the point where the insurance is not affordable, especially for lower-paid workers.
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.
Posted by Wiley Long at 10:30 AM | Comments (0)
January 26, 2006
Heath Savings Account Plan "Cost Growth" Significantly Slower Than Other Plans
The cost of health plans that encourage members to be better health care consumers grew at a significantly slower rate in 2005 than other types of plans, U.S. employers reported in a survey released today by the Deloitte Center for Health Solutions.
The cost of consumer-driven health plans -- such as health savings accounts or health reimbursement arrangements -- increased by an average of 2.8 percent from 2004 to 2005, according to the survey of 152 major U.S. employers.
That compares to an 8 percent increase in total premiums for health maintenance organizations, an 8.5 percent increase for point-of-service plans and a 7.2 percent increase for preferred provider organizations. Traditional or indemnity plan costs increased 6.4 percent last year, according to the survey. The average for all types of plans was 7.3 percent.
"Employers are increasingly turning to consumer-driven health plans to reduce costs and help workers and their families make better health care decisions," said Tommy G. Thompson, the independent chairman of the Deloitte Center for Health Solutions. "Not only do companies protect their bottom lines, they help make employees better health consumers."
The survey also found that businesses are projecting similar rates of cost growth in 2006, including 2.6 percent for consumer-driven health plans, 7.4 percent for health maintenance organizations, 7.3 percent for point-of-service plans, 7.5 percent for preferred provider organizations, and 6.6 percent for traditional or indemnity plans. The average for all types of plans is projected to be 7.1 percent.
Not surprisingly, 40 percent employers said consumer-driven health plans offer "the most effective approach for managing costs and maintaining quality care," while 35 percent said preferred provider organizations were the most effective. Eighteen percent selected health maintenance organizations, 6 percent said point-of-service plans, and just 1 percent said traditional or indemnity plans.
Consumer-driven health plans combine discounts inherent in managed care programs with incentives to encourage members to become better consumers of health care. Typically, these plans are designed using accounts -- tax-advantaged health savings accounts or health reimbursement arrangements -- that often include some level of employer contribution, in combination with front end deductibles. They also provide the member with tools that provide clinical, cost and quality information so they can make personal health decisions that best meet their needs.
"They encourage employees to become consumers of health care and provide them with the tools necessary to understand how to work with their physicians to get the right care, in the right setting, at the right time," said Barbara Gniewek, principal and health care industry leader of Deloitte's Human Capital practice.
The survey, held in conjunction with Deloitte Consulting LLP's Human Capital practice and co-sponsored by The ERISA Industry Committee, was conducted over four weeks in December and early January. Results were presented by Secretary Thompson at the 2006 Health & Human Capital Management Congress on Tuesday (1/24).
"In addition to cost savings, consumer-directed health plans can offer employees an additional tool to save money tax free for retiree health," said Edwina Rogers, Vice President Health Policy for The ERISA Industry Committee. "Further, many of our members are aggressively working to supply their employees with quality and efficiency information on health care providers."
A Deloitte study released in November found that 43 percent of U.S. companies either have a consumer-driven health plan in place (22 percent) or will be offering one in the next two years (21 percent). Another 51 percent said they are reviewing consumer-driven options and may offer one in the near future if they can be proven to be attractive to employees while saving money.
Posted by Wiley Long at 09:34 AM | Comments (0)
January 25, 2006
You'll get better health care when you foot your own bill
Health insurance was invented as a health benefit that employers could offer employees as an incentive to hire on. The theory was that healthy employees would be consistent employees, and the health of their families would be ensured.
Today, we see health insurance as a burden, not only to employers but to employees, families, doctors and society.
The rise in health insurance premiums has far outpaced inflation, and yet the health care delivered is no more comprehensive, and likely less so, than even just a few years back.
General Motors used health insurance as a major bargaining chip with the United Auto Workers group recently in its contract negotiations. The union relented and allowed the sweeping changes. However, GM still will pink-slip 30,000 employees.
From a doctor's point of view, we could see it coming. The drive toward technological health care delivery and increased active longevity comes at a high price: research dollars for new scanners, new medications, new chemotherapy agents, and availability of highly subspecialized physicians.
And yet the obesity rate continues to rise and, subsequently, the rate of diabetes, hypertension and heart disease. Cigarette smoking is still at a 20 percent rate in the United States. As we move to being less of a manufacturing society and more of an information-based technological society, our sedentary lifestyles are becoming a huge burden on the system.
Insurance is the great equalizer for patients. For one co-payment, you can see a physician straight out of medical school or a university professor in practice 25 years with a stellar bedside manner. A physician who has been sued 20 times (though less likely to be credentialed with an insurer) with an awful bedside manner will make the same amount of money as a respected pediatric neurosurgeon for an evaluation and management visit. The insurance companies pay them both the same. A standard visit with those doctors will pay about $50 on average. How fair is that?
Patients will continue to see benefits decline for the benefit of insurance company shareholders. They profit at your loss. In my opinion, shareholder-owned for-profit health insurance runs counter to any notion that health care is a public good.
There's only one solution for the system, and that is coming slowly but surely. You will begin to spend your own money for health care.
Health Savings Accounts allow patients to store money, much like an IRA, for use in health care. To make this system work well, though, doctors and patients need to learn what health care really costs. And that's what makes this system much more viable in the long term.
I think the key to this change, though, will be balance billing, which will allow physicians and hospitals to bill above contract rates. This will allow the better and more patient-friendly doctors to bill what they're actually worth. Providers will compete for your business, both from a price and quality-of-care delivery standpoint.
Why is this better? For one, it will help reduce your or your company's premium. It will reduce intervention from the insurance company, like prior authorizations, because it's your money.
It will force doctors to become much more cognizant of the costs of health care because they will no longer be spending big corporation money in your workup, they will be spending yours.
And finally, you, the patient, will become much more involved in your health care because it's coming out of your pocket. Because it's your money, doctors will be much less likely to practice "defensive medicine" and more likely to discuss at length the merits of their workup plan and options.
You will become intimately involved in the decision-making about whether to have a CAT scan done, or an MRI, or a colonoscopy, or picking a brand name vs. a generic medication.
And when you become involved, you're more likely to demand better pricing, better evidence and better behavior from the people that deliver health care to you.
Including the doctors.
Posted by Wiley Long at 11:16 AM | Comments (0)
January 24, 2006
Have You Opened Your Health Savings Account for 2005 Yet?
There are thousands of people who have purchased a High Deductible Health Insurance Plan (HDHP) in 2005 and, for one reason or another, have yet to open a Health Savings Account (HSA) for tax year 2005.
HSA for America wants to remind you that April 15, 2006, which falls on a Saturday this year, is the last day that you can open and contribute to an HSA for the tax year 2005.
You must have had a qualified high deductible health insurance plan for at least one full month in 2005 to open an HSA and claim an HSA deduction for 2005. You must pro-rate your contributions by the number of full months you had the Health Savings Plan.
• You are not allowed to reimburse yourself for qualified health care expenses until you open a Health Savings Account, so whether you purchased your HDHP last year or it took effect 01/01/06 the most important thing to do next is to establish an HSA somewhere, so you can reimburse yourself going forward.
• Shop for the HSA that fits you. Make sure you compare the different HSA administrator fees. Some providers charge monthly or annual fees. Some even charge to use the debit card. These costs can add up.
• Always keep your receipts for your HSA qualified health care expenses.
• You can use your HSA a forced savings account, and continue to pay your health care costs out of pocket. There is no time limit for when you can reimburse yourself for your health care expenses; you just need to keep legible receipts and records in case you do reimburse yourself at a later date, or in case you are audited.
• You decide whether to spend from the account for your health care expenses and how much to spend, or whether to spend out-of-pocket and to save the HSA money for the future.
Visit HSA for America to find out all you need to know about Health Savings Accounts.
Posted by Wiley Long at 09:24 AM | Comments (0)
January 23, 2006
Bush Speech to Focus on Health Savings Plans
If it's your money, you spend it more wisely. That is the idea behind the health care system that President Bush wants to create with a series of initiatives in his State of the Union address. Health Savings Accounts will be at the center of those initiatives.
The American people are very, very frustrated with the health care system, for good reason," Al Hubbard, the chairman of Bush's National Economic Council, said Wednesday in an interview.
Health insurance premiums are rising faster than inflation. The number of employers offering health coverage is dropping. The ranks of the uninsured are growing. These developments explain why health care is near the top of many Americans' list of worries.
Taming health care costs and energy prices will be priorities for Bush this year, Hubbard said.
With most of Congress up for re-election in November voting that could end Republican control on Capitol Hill, Bush hopes to shift from the polarizing war in Iraq and divisive domestic issues and help his party at the ballot box.
Democrats say the president is undertaking a campaign to transfer much of the cost of health care to the consumer, which discourages people — particularly the poor — from seeking care they need.
Hubbard and other administration officials, echoing hints Bush has provided in recent speeches, sketched the outlines of the president's health care agenda to be presented in the Jan. 31 address. Most is a repeat of previous proposals that stalled in Congress or expansions of earlier measures that passed:
- Raising the dollar amount allowed to accumulate in existing health savings accounts. In these accounts, people shoulder more of the responsibility for the costs of care. They deposit money tax-free into a dedicated account while purchasing a high-deductible health savings plan to cover catastrophic expenses.
- Additional tax breaks to help people who do not have employer-provided insurance coverage buy their own.
- More portability for health insurance when people switch jobs.
- A way for people to get more information about the price of the care they get and the performance of the doctors they see.
- A switch from paper medical records to more cost-effective, error-reducing electronic records.
- The ability for small businesses to pool the purchasing of health insurance coverage across state lines.
- A cap on malpractice verdicts other than actual economic damages, something Bush has been able to get through the House three years in a row, but not the Senate.
Democrats are challenging Bush's intentions and point to the billions of dollars in proposed cuts to Medicaid, the government health program for the poor and disabled, that would allow states to increase fees on beneficiaries.
Democrats also say that focusing on providing tax advantages to individuals for a health savings account draws the healthiest and wealthiest out of traditional employer-based insurance. Left behind, they say, are the sick and the less well-off in a system that is increasingly expensive and thus eventually less available.
Hubbard said Bush's proposals arise from a belief that controlling health care costs requires choices to be driven more directly by a price-conscious, informed patient-shopper than by employers, insurers and others. The hope is that consumer demands will then drive the market into providing better and cheaper services.
"All we're doing is trying to give consumers the opportunity to be engaged in the process with a HSA plan," he said.
"It's unfair to treat people who don't have employer-provided insurance differently (in the tax code) from those who do have employer-provided insurance," Hubbard said.
"It's not fair for people who feel like they can't leave their job or they'd lose their insurance. And it's not fair not to know what the quality of the providers are and what kind of pricing they're being charged for services," Hubbard said.
Bush has run into big problems with his domestic priorities:
- His proposal to add private accounts in a major remake of Social Security, intended to be his focus in 2005, was shelved after an aggressive sales campaign yielded little support, even among Republicans.
- An effort to simplify tax laws, already pushed into 2006 by the Social Security drive, has been postponed again until 2007 to avoid a potentially explosive debate in an election year.
- Bush's desire to see a foreign guest worker program and other immigration changes is mired by divisions within his party.
Let's hope President Bush's initiatives for health savings accounts and consumer-directed health care fare better than his social security and tax break initiatives. American's deserve better than the current healthcare system.
Find more HSA Information at HSA for America.
Posted by Wiley Long at 10:02 AM | Comments (5)
January 21, 2006
California needs Health Savings Accounts not socialized medicine
Greg Aghazarian is the lead Republican on the Assembly Health Committee in California and a proponent of Health Savings Accounts. Here's what he had to say in an article published Jan 19th, 2006:
As the lead Republican on the Assembly Health Committee, I have had the opportunity to work closely with my colleagues on many proposals to improve California's health care system.
I follow a simple principle: California has the best doctors and scientists in the world, and there's no reason we shouldn't have the best medical care. We must focus on keeping up with the changing times in California while ensuring quality health services are delivered to hard-working families.
One proposal that would do this is Assembly Bill 661, by Republican Assemblyman George Plescia, of La Jolla. This common-sense bill (and its counterpart, Senate Bill 173 by Republican Senator Abel Maldonado, of San Luis Obispo) would make health care more affordable to workers by creating Health Savings Accounts. Such plans would encourage California's workers to save money for medical expenses on a tax-free basis. This bill would conform to existing Federal Health Savings Account laws and would make it easier for people to prepare their income taxes.
Not only would workers have the option to save for health care expenses, but employers would have the ability to contribute to Health Savings Accounts on behalf of their employees - a low-cost benefit that many employers would embrace. It's a win-win situation for all Californians.
The way I see it, any vehicle that encourages savings for health care is a step in the right direction, and a reminder that each of us is responsible for our basic needs and those of our family.
John C. Goodman, president of the National Center for Policy Analysis, wrote in his "Health Savings Accounts Will Revolutionize American Health Care," that the concept of HSAs "is not conservative or liberal. It's an empowerment idea." Goodman also said that Health Savings Accounts should "appeal to everyone who suspects that impersonal bureaucracies care less about us than we care about ourselves."
An impersonal bureaucracy is exactly what we would have to deal with if socialized medicine were to become the law of the land in California, as one lawmaker has proposed.
Senate Bill 840, by Sen. Sheila Kuehl, D-Santa Monica, would create a single-payer health care plan, in other words government-run health care coverage for everybody. The money to run such a plan would come from the already-drained pockets of taxpayers.
Proponents say this plan is necessary to correct California's fragmented health care system and deliver health care to all citizens.
I agree our system is not the well-oiled machine we want it to be, nor is it in the state of ruin depicted by Kuehl and her allies. Changes are necessary to keep up with the state's ever-changing population, but a single-payer health care plan would not serve as a magic cure-all for our health care problems.
In fact, such a drastic transformation of one of California's biggest economic forces would actually create a health care disaster.
First, socialized medicine would do nothing more than create a monopoly by the government. Without the incentives created by competition, a single-payer system would likely give us a system with all the innovation, compassion and efficiency of the Department of Motor Vehicles.
Look at the state of health care in Canada, England, New Zealand and much of Europe - all countries that offer single-payer health care - where waiting for months on end is part of the "health care for all" deal.
In fact, 25 percent of patients undergoing elective surgery in those countries are forced to wait more than four months before they see the lights of the operating room according to the Fraser Institute, a Vancouver think tank. The average Canadian patient waits more than eight weeks to see a specialist and another nine weeks before getting treated.
In Quebec, the waiting game is so excessive that 10,000 breast cancer patients sued 12 hospitals for causing them to wait eight weeks for radiation therapy.
You would think after being put on hold for weeks and months on end, the patients in these countries would at least receive top-notch care. Think again. The average U.S. doctor sees about 2,000 patients a year, while the average Canadian doctor squeezes in close to 3,100 patients. Quality care is not what overworked, exhausted doctors deliver to ailing patients.
I am confident my colleagues will see SB 840 as an unwarranted measure that would have ruinous effects on the state's health care system. I am hopeful they will vote in favor of responsible legislation such as AB 661 that will arm California families with tools like health savings accounts to make medical plans more attainable and affordable.
We couldn't agree more with Assemblyman Aghazarian. Let's hope the rest of his colleagues are smart enough to see the dangerous effects of Socialized Medicine and in turn support the use of Health Savings Accounts to help the California healthcare system. You can find detailed HSA information at HSA for America
Posted by Wiley Long at 11:12 AM | Comments (0)
January 19, 2006
Momentum Builds for Consumer-Driven Healthcare Campaign
Another advocate for transparency within the healthcare system, industry veteran Barry Stokes launched a new web site to promote Consumer-Driven Healthcare and Health Savings Accounts.
Fueled by a fleet of consumer-oriented education and awareness tools, Stokes -- a.k.a. the Consumer Driven Guy -- seeks to provide Americans with a greater understanding of the future of healthcare savings accounts and options for cost-effective decisions about their care.
"Consumerdrivenguy.com will help Americans become better informed to make smarter choices about their healthcare plans and costs," said Stokes. "As a consumer myself, I found there was really no one place consumers could go to get objective, third party information on healthcare options. I created consumerdrivenguy.com to help fill that void."
Gaining momentum daily, consumer-driven healthcare is a revolutionary development that puts patients first, not providers. With Health Savings Accounts, it transforms the "one-size-fits-all" healthcare plan into a healthcare savings account and investment strategy that allows the consumer to control their own money and care.
Consumers and policy makers, alike, can now rely on the Consumer Driven Guy to provide information about existing healthcare issues and realistic suggestions that are both practical and efficient via:
- An interactive consumer education website
- An interactive weekly issues blog http://www.consumerdrivenguy.com;
- Regular consumer-oriented columns for syndicated reprint
- National seminars and regional speaking engagements
"Most people get several price quotes when they shop for a new car," Stokes said. "But when we get knee replacements, for example, we just go to the doctor who says 'this is what you need' and that's that. People have no idea how much it's going to cost, and we should."
Spiraling healthcare costs are creating unbearable economic pressures on the corporations that offer most private healthcare coverage. In 2004, employer health insurance premiums increased by 11.2 percent -- nearly four times the rate of inflation, according to the National Coalition on Health Care.
Companies are almost universally re-evaluating healthcare coverage as a way to improve their bottom line; many are turning to consumer-driven HSA plans and options.
"Consumerdrivenguy.com is designed to provide the resources to help consumers better understand the trends in healthcare, how to decipher the industry's jargon and get sound advice on how to address their specific healthcare plan," Stokes explains. "My goal for the site is to educate consumers on the right questions to ask and how to understand their choices."
At HSA for America, we applaud Mr. Stokes for his efforts to educate people on Consumer-Driven Healthcare. We are also doing our best to help people understand this new and exciting trend in the healthcare industry. For more on Health Savings Accounts and how they work, please visit our HSA Information page.
Posted by Wiley Long at 08:20 AM | Comments (0)
January 17, 2006
Saying 'no' to traditional health insurance
A successful entrepreneur who has co-founded four high-technology start-ups since 1989, Mark Galvin has seen the cost of providing employee health insurance with traditional third-party payers more than double over the last five years.
And, he says he’s fed up with traditional insurers, their manipulations, offerings and costs.
“Something is wrong. There is nothing to explain it,” Galvin said during a recent interview at the offices of Whaleback Systems, a Pease-based company and his fourth high-technology initiative.
“The cost of homeowners or automobile insurance hasn’t doubled in that time period. As a business owner, it’s a pet peeve.”
Another Galvin annoyance is the propensity of traditional insurance companies to promise one thing, while delivering much less.
Coverage disconnect
”They say they will cover you, but they seem to argue every charge. At the end of the day, unless you wanted to do full time battle with them, you weren’t going to get (fully) reimbursed.”
Finally, Galvin is also annoyed by the need to obtain pre-authorization from the insurer, before a procedure can be done.
“It suggests that rather than following the advice of your family doctor, who is often a trusted advisor, the insurance company wants to have control.”
With the advent of Whaleback, Galvin knew the time had come for something new, different and financially less onerous to his bottom line, while still protecting employees.
He opted for Health Savings Accounts. Here’s how they work.
Under guidelines established by the Internal Revenue Service, Galvin is able to establish a tax-free employee owned account for each of his 20 staffers, in their names.
In 2005, Uncle Sam allowed each single employee $2,650, while the family limit was $5,250. In 2006, the individual limit is $2,700, while a family tops out at $5,450.
Unspent dollars left from last year roll over tax free into this year’s account, while Galvin contributes another $2,700 for an individual or $5,450 for a family.
Should an employee opt to leave the company, the worker keeps the unspent dollars and, at age 65, is able to convert the account into a personal 401-k retirement plan. Like any other 401-k, it remains tax-free until retirement, when it can be drawn upon and taxed.
Young workers benefit
Younger workers and those who stay healthy “are actually ahead of the game,” said deputy commissioner Alexander Feldvebel, of the New Hampshire Insurance Department.
Should a Whaleback employee need to see a doctor, payment is made using a Visa debit card, drawn on Wells Fargo Bank. There is no additional paper work, resulting in savings to the physician and, unlike more traditional insurance plans, there is no co-pay.
Drug related charges can also be covered, without a co-pay, by presenting the card.
Employee accountability
Galvin contends the HSA Plans forces an employee to be more aware of medical costs. Under traditional plans, a worker seldom knows or asks about the costs associated with a procedure.
The HSA also makes it more likely an employee will shop around for the best price, since the worker owns the account and gets to keep what isn’t spent.
In short, an HSA makes health care costs “more of an issue and brings it to the forefront of an employee’s mind,” according to Leslie Ludtke, health policy analyst, with the New Hampshire Insurance Department.
Feldvebel said the accounts are increasingly seen as shifting the market to more consumer driven health care. “If you’re responsible for the initial tier that you pay for, you’ll be a more interested buyer and more likely to use health care in a more cost effective manner. . .it introduces incentives for consumers to be cost conscious.”
“It’s a theory that’s out there,” he added. “Because it’s consumer driven, employees will have an interest in how much things cost.”
Other services
Depending on the policy and what is negotiated with the underwriter, a variety of preventative services and laboratory fees are also fully covered, even if the employee has not met the deductible, which can be $1,000 or more and which the employee must pay. In many plans, the deductible can come directly from the HSA.
Services include routine physical exams and well-child visits with a primary care physician, an annual gynecological exam, routine pre-natal services, mammograms, pap smears, lead screenings, PSA screenings for prostrate cancer, immunizations and one colonoscopy screening every 10-years, for those over 50. A complete list can be found on our HSA Qualifed Expenses page.
Under Whaleback’s plan, the costs are not deducted from a worker’s HSA account, but come directly from a policy with Patriot Healthcare, Galvin’s underwriter. This may not be true for other underwriters.
“They recognize that (paying for) preventative care saves a lot of money on the other end,” Galvin said.
Zero balances
Should there be a zero balance in a worker’s account, Galvin has a backup plan in the form of a high-deductible policy, whose premiums the company pays. This policy means each employee and family is indemnified against a catastrophic illness.
According to Galvin, at the end of 2005, his “typical” employee had 75 percent of the Whaleback’s original deposit left in their accounts.
Savings
Under his previous insurance company, to cover employees in 2005, Galvin would have paid out $231,888 in premiums.
In its first year, coverage using health savings accounts — including the fee for the high deductible plan — cost Galvin $164,267, a savings of $68,000.
“Who loses in this equation,” he asked. “Only the traditional insurance companies” and their policies, which he no longer uses.
Posted by Wiley Long at 06:27 PM | Comments (0)
January 15, 2006
Health Savings Account Legislation Pending on Capitol Hill
A Health Savings Account can be a good way to improve a family’s healthcare without busting the budget. Some in Congress want to encourage greater use of this financial tool and there is a proposal on the table to create new ways for families to use Health Savings Accounts. House Speaker Dennis Hastert says Health Savings Accounts allow people to offset their health insurance deductibles by putting pre-tax money into interest bearing or investment accounts, save money and improve healthcare.
“I felt that people had to have ownership of their insurance policies. So they could have real portability, so they could have something they could make decisions on where to go to get health care and something that they had in their own pockets, that somebody else, a third party, wasn’t making those decisions all the time.”
And that’s why Virginia Congressman Eric Cantor is trying to expand the use of Health Savings Accounts through new legislation.
“The idea behind what we are trying to do is to allow the employees the same level of benefit that they get under their current healthcare insurance structure. The difference will come in the fact that they will own this account. It will be their money; the incentive will be for long-term savings in healthcare, not short-term spending.”
Dr. Dave Stevens of the Christian Medical Association calls Health Savings Accounts an excellent resource for families.
“It decreases bureaucracy, decreases filing, lets you make decisions on what you want to spend your money on, what’s reasonable and what’s not. And by doing that, people keep their health care costs down.”
The legislation will add more types of health care savings accounts. With members of congress supporting HSA Plans, Health Savings Accounts will continue to grow.
Posted by Wiley Long at 09:49 AM | Comments (0)
January 13, 2006
Early Retirees benefit with a Health Savings Account
For early retirees who are healthy, a health savings account can be a smart option to help lower your health insurance costs while you wait for your Medicare coverage.
Here's what you should know:
The biggest reason more people don't retire before age 65 is lack of health insurance.
Unless your former employer provides you retiree health insurance or you take a part-time job that provides some coverage, you're pretty much on your own.
If you're thinking about buying health insurance on your own, you can lower your premiums significantly by raising your deductible, which is where a Health Savings Account can come in handy.
Created by the 2003 Medicare Act, an HSA is tax-free savings account that's tied to a high-deductible health plan.
How it works is you first purchase a high deductible health insurance HSA plan with a deductible of at least $1,000 for an individual or $2,000 for a family. Then, you open a HSA, which is a tax-sheltered savings account (similar to an IRA) you can withdraw from, anytime, tax-free to pay for medical expenses that aren't covered by your high deductible health insurance plan.
And, whatever money you don't use rolls over from year-to-year, providing you with a stash of cash for your later retirement years.
Each year you can fund your HSA with tax-deductible contributions, which in 2006 can be up to the amount of the deductible, but not more than $2,700 for individuals or $5,450 for families, and if you're 55 and older, you can make an additional contribution of $700.
What's covered?
HSAs can be used to pay your health plan deductible, co-payments and a broad range of qualifying medical expenses, visit our qualified expenses page for a complete list.
Things to know
To open and contribute to a Health Savings Account, you cannot be enrolled in Medicare and must be covered by a qualified high deductible health plan (without other medical coverage).
If you withdraw money from your HSA before age 65 for nonmedical expenses, you will pay income taxes plus a 10 percent penalty. After 65, such withdrawals are treated as retirement income and are subject to normal income tax, but no penalty.
If you die, your spouse can inherit your HSA free of taxes. However, if the money goes to other heirs, it would be subject to income tax.
To find a HSA plan, visit HSA for America who provides a comprehensive list of insurers in each state.
When choosing a HSA, pay attention to fees and the investment choices offered. Some providers offer HSAs free, while others charge more than $100 in the first year.
Savvy tip: HSAs are best suited for healthier people who typically don't spend a lot on medical care.
To help determine what's best for you, add up one year of out-of-pocket costs under your current health plan (including premiums, deductibles, co-pays and uncovered medical expenses) and compare it to what you would have paid with a high deductible health plan and an HSA.
Posted by Wiley Long at 11:28 AM | Comments (0)
January 11, 2006
Banks to pursue Health Savings Account business
Banks increasingly are viewing health savings accounts as a lucrative source of potential income and are promoting themselves as naturals for managing them, according to industry insiders.
Last month, The Health Savings Account Council, a Washington-based trade organization, was launched to promote the use of Health Savings Accounts and the interests of banks that administer the accounts.
The council, with 12 initial member companies - nine of which are banks - is an offshoot of the American Bankers Association, also based in Washington.
Banks will provide to non-bank financial advisers a reliable local source for administering HSAs, said Kevin McKechnie, staff director at The HSA Council. "And clients have the option of directing the bank to allow their adviser to choose the investments for the accounts."
In addition to establishing a new trade group, banks recently have taken several other initiatives to drum up more Health Savings Account business.
Wells Fargo & Co. in San Francisco began administering HSAs for select Blue Cross Blue Shield plans.
U.S. Bancorp in Minneapolis started offering HSAs to individuals and small businesses through its branches, website and call center.
And JPMorgan Chase & Co. in New York partnered with Louisville, Ky.-based health insurer Humana Inc. so that clients can sign up for services from both companies at the same time. "For bank advisers, this will be one more product to sell - and a very big one," Mr. McKechnie said.
Too small for brokers
"Brokers will start sniffing around HSAs when they smell higher-balance accounts with a minimum of $50,000," said Alenka Grealish, manager of the banking group for Celent Communications LLC, a Boston-based consulting firm for financial institutions. Banks, on the other hand, have the ability to efficiently manage accounts as small as $500, added Ms. Grealish, who works in Celent's Portland, Ore., office.
"When an account grows to over $5,000, the banks with broker-dealer subsidiaries can transfer the amount in excess of $5,000 to their broker-dealer," Mr. McKechnie said.
"The banks with broker-dealers are building integrated platforms so they won't lose these accounts in the same way they lost much of their individual retirement account business to outside broker-dealers and mutual funds," Ms. Grealish said.
"Banks have been paying a lot more attention to HSAs but have been slow to understand what the opportunities are," said Eric Remjeske, partner at Devenir LLC, a Minneapolis firm that developed an investment platform for HSAs. "Many banks are in the early adapter phase, using their proprietary, in-house money market and mutual funds to invest HSA assets," he said.
Banks will have to offer a greater variety of investments, such as brokerage accounts, if they want to attract HSA customers, Ms. Grealish added.
"They can't treat HSAs like savings accounts," she said.
Insurers start banks
Some health insurance companies have been forming banks to handle the financial aspects of HSAs, which are written in conjunction with high deductible health insurance plans, Mr. McKechnie noted. "That's competition for our banks, and there might be some conflicts in that model," he added.
"Federal law says that the HSA is the property of the individual who can choose the institution that will manage the account," Mr. McKechnie said. He pointed out that many people do business with the same bank for decades but change health insurers every few years.
America's Health Insurance Plans, based in Washington, is the major trade association representing insurers that provide the high-deductible health plans written in conjunction with HSAs.
Nevertheless, health insurers will be welcomed into the HSA Council, according to Mr. McKechnie, and one of the initial members is Assurant Health in Milwaukee.
"You can't have an HSA without an insurer," Ms. Grealish said.
Diversity needed
"In time, it would be good to broaden the organization's membership to include other participants in the HSA market. It's important to unify the independent efforts of these participants," Mr. Remjeske said.
"The council appears to be heavily bank dominated," Ms. Grealish said.
"Insurers may be worried that money will flow out and go on the banks' books instead of theirs," she said. "This is the banks' way of pushing back to secure their position."
But the organization is needed and is an important step in ensuring the integrity of the product and consistent policies, Ms. Grealish added.
One of the vexing problems that banks will have to confront is the proper use of the debit cards that clients use to pay health-related expenses, as people could conceivably use the cards to buy anything.
"The card can't distinguish between asthma medication and a case of beer," Mr. McKechnie said. He noted that it is the client's responsibility to obey the tax laws controlling the use of HSA funds and that the banks try to help by providing educational materials on appropriate card usage.
Please visit our HSA Administrators page for a complete listing of banks offering Health Savings Accounts.
Posted by Wiley Long at 09:46 AM | Comments (0)
January 09, 2006
Health Savings Accounts Help Cut Costs
As more employers jettison health insurance coverage due to rising costs, people are increasingly turning to Health Savings Accounts.
Several surveys indicate the market is going the Health Savings Account route -- a trend signaled by recent ventures into the Health Savings Account market by insurance giants such as Aetna, Cigna and Blue Cross Blue Shield.
One company, United Healthcare underwritten by Golden Rule, says 42 percent of its entire customer base now is covered by an HSA policy. Incredibly, these HSA customers already have accumulated an astounding $141 million in their savings accounts.
This is proof that HSAs are working the way Congress intended when it passed a bipartisan bill making HSAs available to all Americans in 2003. That $141 million is controlled by consumers who can use it to meet health care or retirement savings needs.
This is money that, in the usual third-party payment setup, would go to insurance firms or get lost in the maze of the health care system.
The average premium for an HSA-qualified individual high deductible health insurance policy went down by 19 percent in the first half of 2005. The monthly premium dropped from $137.94 to $111.57, saving consumers more than $300 a year.
Given the bad news about rising health insurance costs, which leave 45 million Americans without coverage, this data helps explain why the market is increasingly taking this route. According to the Kaiser Family Foundation, people insured by employer-provided HMO, PPO and POS policies are paying an average of $308 in monthly premiums -- almost $200 more than those insured by HSAs.
The impact on consumers, especially low-income consumers who were previously uninsured, has been substantial. Just under half of the Health Savings Account customers who bought their policies here at HSA for America had incomes of less than $15,000 had been previously uninsured for at least six months. Of those with incomes between $15,001 and $35,000, 43.4 percent were previously uninsured for at least half a year before obtaining an HSA policy.
With an HSA in conjunction with a high deductible health insurance HSA Plan, money is placed into a health account tax free, grows tax free, and can be withdrawn tax free as long as it is used for medical purposes. Any money left in the account at the end of the year can be rolled over to the next year.
The Health Savings Account grows, building resources a patient can use for medical care. And since the money belongs to the individual, Health Savings Account users pick their doctors and hospitals -- no referrals needed. When individuals have more control over health care spending, they become better consumers and health care costs are driven downward. This is Consumer Driven Health Care at work.
As more Americans discover the advantages of HSAs, and as more companies offer them, consumers will be able to affordably insure themselves. Because HSAs are portable, individuals won't necessarily have to worry about losing coverage if they change jobs, lose a job or want to start a business.
Lower costs, more choice and an opportunity to build savings? Perhaps our current health care crisis is on the mend because of Health Savings Accounts.
Posted by Wiley Long at 09:46 AM | Comments (0)
January 07, 2006
Government proposal for Health Savings Accounts will reduce Uninsured
The Bush administration is considering a proposal to that would boost Health Savings Accounts. It would give a refundable tax credit to those under age 65 to purchase high deductible health insurance HSA plan with a Health Savings Account. According to the University of Minnesota, the plan would reduce the number of uninsured in America.
Author Roger Feldman and his colleagues examined the effect of three simulations: a refundable tax credit of up to 90 percent of insurance premiums, a 75 percent HSA subsidy for low-income individuals, and a full subsidy for those unemployed, regardless of income. The results:
- Bush's tax credit proposal would reduce the number of uninsured by 10.7 percent at a cost of about $8.1 billion; it would also increase the number of people who turn down employer-sponsored insurance, but would only affect 1 percent of the employer-offered market.
- The buy-in subsidy would reduce the number of uninsured by 16.5 percent, at a cost of about $10.8 billion for those who are uninsured, and $1.4 billion for those who turn down employer-sponsored health insurance.
- A full subsidy would reduce number of uninsured by 47 percent, however, it would cost an estimated $52.3 billion for those previously uninsured, and $16.9 billion for those who turn down employer-sponsored health insurance.
- A full subsidy for the unemployed would prevent the erosion of the employer-sponsored health insurance market and would reduce the number of uninsured even more than the Bush administration's proposal, but it would cost more -- about $11.2 billion.
In conclusion, the Bush administration's tax credit proposal would double individual Health Savings Account take-up and reduce the number of uninsured by about 2.9 million people, at a cost of about $8.1 billion annually.
Posted by Wiley Long at 10:39 AM | Comments (0)
January 05, 2006
Congress to look at ways to make Health Savings Accounts more attractive
Congress next year will consider ways to make health savings accounts more attractive.
A Health Savings Account is a tax-free account that individuals can use to pay medical costs. It must be combined with a high deductible health insurance plan.
More than 1 million people now are covered by HSA-eligible health insurance plans, many of them offered through employers. That number will "skyrocket in 2006," says Scott Serota, president and CEO of the Blue Cross and Blue Shield Association.
The Blues plan to open a bank to serve customers with HSAs and other consumer-directed health plans. This bank will "make managing health care easier than managing checking accounts," Serota says.
The American Bankers Association and the American Bankers Insurance Association just launched the HSA Council, which will address technological and regulatory issues facing banks in the Health Savings Account market.
Business groups plan to lobby Congress for additional tax breaks for HSAs, including giving small businesses a tax credit for the first $500 employer contribution to a family policy and the first $200 contribution to an individual policy.
Refundable tax credits for the uninsured and a tax deduction for high-deductible health insurance premiums also would make HSAs more affordable, according to the U.S. Chamber of Commerce.
Another bill aims to make HSAs more attractive to employees at larger businesses, which are accustomed to richer benefits than employees of small businesses.
The legislation, introduced by Rep. Eric Cantor, R-Va., would allow employers to coordinate HSAs with flexible spending accounts and health reimbursement arrangements. It also would increase contribution limits to HSAs.
Cantor says HSAs "are the cornerstone of health care reform" because they "put consumers in the driver's seat."
Current HSA enrollees are more cost-conscious, but they also are more likely to avoid or delay needed care, according to a recent survey conducted by the Employee Benefit Research Institute and the Commonwealth Fund. HSA enrollees also are less satisfied with their health plan than people with traditional insurance, the survey found.
Posted by Wiley Long at 10:34 AM | Comments (0)
January 03, 2006
Study shows Health Savings Accounts can help the Uninsured
The first academic research on Health Savings Accounts has just been published in the November/December issue of Health Affairs, a publication respected by many within the health policy establishment who often have been naysayers regarding the potential of consumer-directed health care and Health Savings Accounts. Here's what they found...
Until recently, much of the data available on HSAs have come from individual carriers, conservative think tanks, and trade associations. HSA skeptics have doubted their figures - that between 33 percent and 40 percent of those purchasing HSAs were previously uninsured.
Widespread Acceptance
The Health Affairs report, "Health Savings Accounts: Early Estimates of National Take-Up," by Roger Feldman, Stephen T. Parente, Jean Abraham, Jon B. Christianson, and Ruth Taylor, reviews the relative merits and potential of various proposals to expand HSA affordability for the uninsured. Even the most basic statements made by these University of Minnesota researchers are likely to make waves in certain circles.
For example, the authors find "widespread national adoption of individual Health Savings Account plans is possible" and "early indications are that they are a viable alternative to existing plans like traditional PPO and other lower deductible plans."
The Minnesota team performed sophisticated forecasting simulations of the extent to which several different policy proposals - including President George W. Bush's health care tax credit for HSAs - would:
- reduce the number of uninsured;
- reach the low-income uninsured; and
- cause people receiving employer-subsidized group coverage to drop it and move to the individual market (presumably for a better deal).
'Doughnut Hole' Looms
The study found a health care tax credit would lower the number of uninsured by 10 percent. Coauthor Feldman's baseline for the number of uninsured excluded those who had access to some form of coverage, including full-time college students, people enrolled in public health programs, and those who had the option to be covered though a spouse's policy. That brought the baseline number of uninsured to 27 million people. Under the president's health care tax credit, Feldman says in the report, 2.9 million people would gain coverage.
According to the study, even more people would be likely to obtain HSA coverage with a health care tax credit if the authors had assumed lower deductibles. For their simulations, they assumed a plan requiring a $3,500 deductible for a single person and a $7,000 deductible for a family. Those deductible amounts are far higher than what is required by current HSA law, which is $1,000 for a single and $2,500 for a family.
The president's health care tax credit does help people meet their deductible by making a contribution to their HSA account (as well as helping with their monthly premium costs). But that assistance is nowhere near enough to cover these assumed deductibles. That means there is a "doughnut hole" - a gap in coverage that must be met by the individual or family.
Under Feldman's assumptions, a single person would have $1,000 in his or her HSA account. But with a $3,500 deductible, he or she ends up with a $2,500 "doughnut hole." For families, the exposure is even greater, with $2,000 in an HSA account but a $7,000 deductible, producing a $5,000 hole to be filled with family resources.
Cost-Effectiveness of Tax Credit
Clearly, those numbers would give pause to many people, particularly when Americans are so used to modest deductibles and first-dollar coverage. For uninsured folks who have modest resources, those numbers are downright scary.
For an HSA health care tax credit to make a greater dent in the uninsured population, less out-of-pocket exposure would be needed. The authors affirm that in their article, even while noting the cost to taxpayers then increases as well.
At a cost to the government of $2,761 per year per person covered, the health care tax credit is one of the more cost-effective proposals Feldman and his coauthors studied. The study also found the health care tax credit proposal is the least disruptive to the group market, keeping Uncle Sam from subsidizing people who already have private coverage.
A health care tax credit would gain its take-up from those who most need it, the study found, with at least 40 percent of the newly covered coming from the bottom 25 percent of income brackets and a full 75 percent from the bottom half.
Government Role Increasing
Currently, Congress finds itself in tight budget constraints, but doing nothing won't save federal dollars, because taxpayers will end up footing the bill for the uninsured through federal programs that pay for uncompensated care at hospitals, as well as through higher Medicaid and SCHIP costs.
In just one year, from 2004 to 2005, the percentage of people covered by government health insurance programs rose from 26.6 percent to 27.2 percent. According to a November study by The Heritage Foundation, over the next five years the cost of Medicaid is projected to increase by 41 percent.
Hence it would be wise to divert some of that enormous build-up toward plans with greater effectiveness and lower cost, such as health care tax credits. According to Feldman's study, Congress could create a viable five-year health care tax credit demonstration program helping three million people per year that would cost $8 million a year, or $40 million for the five-year program.
"The academic community finally is coming around to see that HSAs, in conjunction with refundable tax credits, could dramatically reduce the number of uninsured," said Grace-Marie Turner, president of the Galen Institute. "It will be very hard for opponents of HSAs to ignore this study in the top health policy journal. This is an important breakthrough."
Learn more about HSA Government information and find out what Health Savings Accounts can do for you.
Posted by Wiley Long at 11:47 AM | Comments (0)
January 02, 2006
Health Savings Accounts Milestone
It's not just Father Time who turned a year older yesterday. The New Year marks the second birthday of Health Savings Accounts, the largest innovation in health care policy since Congress created Medicare in 1965.
Though little noticed outside the world of health policy analysts, creation of Health Savings Accounts was a profound shift. It heralded a move towards Consumer Driven Health Care, a broad and inevitable movement to transfer control of health care decisions and dollars from large bureaucracies, public and private, to individuals and families.
A Health Saving Account combines a high deductible health insurance with a side fund offering tax-deductible contributions, tax-deferred investment growth and tax-free distributions provided funds are spent on qualified medical expenses. This year, an individual is responsible for the first $1,050 to $2,700 of expenditures ($2,100 to $5,450 for families). Routine care is paid out-of-pocket, albeit with tax advantages. Just as car and homeowners insurance do not pay for maintenance and minor repairs, health insurance kicks in only in the event of a true catastrophe. Once a deductible is met, a generous insurance package, often 100 percent of covered expenses, takes over the burden. Money unspent in one year rolls over into the next, earning compound interest.
In short, Health Savings Accounts put the insurance back into health insurance, provide Americans with a triple tax free means to save for future expenses, and deliver a strong incentive to economize on use of health care.
Like any change, HSAs have powerful and vocal enemies. "You're giving them peanuts," gripes Columbia University Professor Sherry Glied, author of an anti-HSA study for the Commonwealth Fund. "Very few people will gain insurance coverage because of tax preferences for health savings accounts."
The evidence so far contradicts the critics. Health Savings Accounts have proven popular with both individuals and employers. Although a significant change from traditional medical insurance, more than 1 million HSAs were established by spring 2005. Roughly half of them were bought in the nongroup market.
HSAs are expanding health insurance. A study by America's Health Insurance Plans, an industry organization for health insurers, found 27 percent of small business companies that bought policies previously offered no health insurance. The same study found 37 percent of individual Health Savings Account purchasers were previously uninsured.
By allowing people to retain and roll over money not spent on health care, HSAs transform health coverage from a use-it-or-lose-it insurance option into a wealth-accumulation vehicle, similar to 401(k) retirement plans.
A wide range of Americans find HSAs attractive. Far from being only for the wealthy, 1 in 2 new nongroup purchasers earn less than $50,000 each year, says a study by eHealthInsurance, an online brokerage serving the individual market.
And it isn't only the young. It seems old dogs can learn new tricks. The eHealthInsurance study found 45 percent of purchasers were over 40, with 19 percent 50 or older. A study by Assurant Health, serving small businesses, individuals and families, found 73 percent of its HSA customers were families with children and 57 percent included persons over age 40.
HSAs show economic incentives matter. The consulting firm McKinsey surveyed employees who had HSA-style accounts for an entire year. The good news: Employees were more attentive to their health, being 30 percent likelier to get an annual physical and 25 percent likelier to engage in healthy behaviors, and 20 percent likelier to comply with doctors' recommended treatments than their colleagues in traditional health plans.
The bad news: Only 44 percent of study respondents were more satisfied with their new plans than their former plans. A major dissatisfaction is lack of information on price and quality differences among providers. Eight in 10 respondents reported they had inadequate information on doctors' fees.
These numbers are hardly surprising, given that most of the U.S. health care infrastructure is designed to shield patients from ever knowing the true costs of care. As thousands more elect HSAs, health-care providers will surely produce consumer-oriented information. Aetna, for example, recently made available on its Web site the prices its members will pay specific doctors for their 25 most commonly performed procedures.
HSAs aren't a silver-bullet solution to all U.S. health-care problems. And they certainly aren't for everyone. Still, HSAs have accomplished much in two short years. They have a promising future.
Posted by Wiley Long at 10:43 AM | Comments (0)