This post was written by Niko Karvounis & Maggie Mahar
Consider this headline: “Health insurers reinvent themselves as money managers.”
The short version of the story, which appeared in the Los Angeles Times yesterday, is this: “insurers are moving away from their traditional role of pooling health risks [and paying for health benefits]” and, instead, are beginning to move into money management as they offer to help consumers save for and pay for their own healthcare. If this strikes you as troubling—if, in other words, you think that health insurance should be about health care and not banking—then a closer look at Michael Hiltzik’s well-researched piece will make your stomach churn. (Thanks to a Health Beat reader for calling our attention to what he called a “chilling” story.)
Health Beat has written about the health savings accounts (HSAs) that encourage consumers to sock away money away to pay for their own medical expenses in the past. To re-cap briefly: An HSA is like a 401k—you do not pay taxes on the dollars you put into the plan. There’s just one requirement: you can open a HSA only if you also buy a high-deductible insurance plan that typically offers minimal coverage, and a deductible of, say, $5,000.
Because the premiums of high-deductible plans are so much lower than other health insurance products, they can be attractive to many low-income Americans—even if they do not have the extra cash to put away in an HSA (Remember: if you want an HSA, you must buy a high-deductible plan; but if you buy a high-deductible plan, you are not required to open a HSA.).
High-deductible plans are gaining traction in our health care system: America’s Health Insurance Plans report that, at the start of this year, 6.1 million Americans were covered by high-deductible plans—up from 3.2 million in 2006.
Why such fast growth? One big reason is that powerful health care stakeholders—namely, employers and health insurance companies—see the plans as a way to cut costs by shifting costs to the consumer. As the Times points out, high-deductible plans offer “fewer overall benefits than traditional plans. They are designed to cover chiefly catastrophic medical expenses. Routine medical care becomes the responsibility of the consumer. Some of the plans exclude maternity benefits, preventive care and mental health services.”
In other words, enrollees pay lower premiums for less coverage, and
then have to pay more out-of-pocket when they actually use care. The
flip-side of this is that administrators of the plans (employer and
insurers) don’t have to pay as much in benefits, because so much care
will be funded by the patients themselves.
Banks also are pushing the high-deductible/HSA idea. If you want a
health savings account, you will probably go to a bank to pen the
account—and banks want that business. "Every bank wants to increase
its share of HSAs," John Casillas, director of the Medical Banking
Project, a health care financial services organization, told the
Times. "There’s fees for managing the account, transaction fees, fees
for investing the funds. You’re going to see many billions of dollars
moving from premium payments to professionally managed investment funds
under HSA rules.”
The billions of dollars flowing into the HSAs cost the banks nothing;
this is money that otherwise would have gone into the pockets of health
insurers in the form of premiums. It’s pure growth—and insurance
companies know it.
That’s why insurers are starting their own banks—so that they can reap the fees that come with managing HSAs. The Times
notes that UnitedHealth’s OptumHealthBank, the first such ‘insurer
bank,’ “has attracted $600 million in health savings account deposits
from nearly 400,000 customers. The bank collected more than $34 million
in service charges on those deposits in the year that ended June 30,
according to its reports to federal banking regulators. Over the same
period, it earned $46 million in interest and produced a profit of
nearly $33 million for its parent company.”
Insurer banks have become downright common-place: “Blue Healthcare
Bank, funded by 33 of the 39 member plans of the Chicago-based Blue
Cross and Blue Shield Assn., was chartered as a Utah-based thrift last
year.” Meanwhile, WellPoint Inc., the nation’s largest insurer, managed
to open its own bank, Arcus, only after promising the government that
it would limit its mail-order pharmacy and program for managing chronic
disease to “less than five percent of total revenue.”
In other words, insurance companies are consciously trying to move out
of the business of health care in order to collect “fees for
maintaining the accounts, handling some disbursements and investing the
balances—and for overdrafts, electronic transfers, even printed checks
and monthly statements.” You can see why they’re so eager to do so: the
more high-deductible plans there are, the fewer benefits that insurance
companies have to pay out; and the more HSAs there are, the more
management and administrative fees insurers can collect. By creating
their own banks, insurance companies can retain some of the revenue
that traditional banks are trying to siphon off though their own HSA
programs.
This is understandable. Insurance companies are pretty desperate
to find new sources of revenue, because these days, it’s becoming
harder and harder for a health insurer to turn a handsome profit. In
recent years the amount that insurers pay out in benefits has been
spiraling. A 2006 analysis by Price Waterhouse Coopers found that
between 1993 and 2003, reimbursements for medical expenses grew at an
annual rate of 7.2 percent. Premiums grew at essentially the same exact
rate, 7.3 percent, meaning that insurers are barely able to keep up
with the rising cost of providing health care. As a result, Wall Street
no longer favors their shares. Even before the current stock market
downturn, health insurance companies were having a tough time:
WellPoint saw its stock drop from $82 a share in 2007 to $49 a share in
June; UnitedHealthCare stock plummeted from $53 to $22 a share this
summer.
But as insurance companies scramble to save their bottom line, patients
are the ones who suffer. As a matter of health care policy, health
savings accounts are a bad idea because they cater to those people who
least need tax-payer assistance to pay for their health care. And note
that HSA savers never pay taxes on the dollars they put into
the account—even when they take dollars out to pay for healthcare—which
means that other taxpayers are, indeed, funding this very generous tax
shelter. (By contrast, when a retiree takes money out of a 401-k, he or
she does pay taxes on every dollar. The HSA is unique in sheltering the
money forever.)
On average, HSA accountholders earn two-and-a-half times as much money
as everyone else, reporting an adjusted gross income of $139,000,
versus $57,000 for other filers. As time goes on, HSA accountholders
have become increasingly well-to-do: a 2007 survey by
the Employee Benefits Research Institute (EBRI) and the Commonwealth
Fund found that 31 percent of the households in the U.S. with an HSA
have incomes of $100,000 or more, up from 22 percent in 2005.
Meanwhile, the proportion of households making under $50,000 a year
with health care savings accounts dropped from 33 percent in 2005 to 19
percent in ’07.
It should be pretty obvious why the rich like HSAs and poorer Americans
are dropping from the rolls: whether you want to save the money in a
money-market account or invest it in the stock market (most HSA
programs give you the option to do either) you need to have the extra
money on-hand to do so. Keep in mind: half of all Americans live in
households earning well under $60,000—and that’s joint income, before
taxes. By the time they pay for housing, utilities, food, gas to get to
work, clothing, car repair—and maybe try to put a little away for
retirement or a child’s college education—most have nothing left to
squirrel away in an HSA.
But the difference between HSA savers and other Americans isn’t just a
matter of income. People with HSAs are also more likely to be single,
white college graduates who are in good health; they are less likely to
suffer from chronic conditions. Again, these are the people who have
fewer health care needs than the rest of the population: they don’t
have kids to care for; they’re well educated (education is the most
powerful predictor of life expectancy); and they’re healthy.
When you pull these people out of the shared risk pool of traditional
insurance, it makes it that much harder to insure the people who are
left—the middle-class, the working-poor. under-educated minorities, the
disabled, and so on. Without healthy patients to cross-subsidize
high-risk patients, premiums for everyone else go up. "This is a
turning point," notes UC Berkeley’s Jacob Hacker to the Times.
"It’s a fundamental shift away from the idea of broadly shared risk.
It’s going to lead to a complete transformation of the health insurer…”
It could also lead to an exodus from traditional insurance, even by the
sick and needy folks who need it most. When healthy people leave the
system to start their own little nest-egg, premiums rise. And a s
premiums climb more people are likely to shift to high-deductible plans
that cost, say, $200 a month, because that’s all they can afford. But
then you are left with a situation where the poor and the sick are
stuck with plans that force them to spend more out-of-pocket for their
health care—usually without the cushion of HSA assets.
Remember, having a high-deductible plan doesn’t automatically provide
you with an HSA; it just makes you eligible to open one (if you have
the extra cash). In fact, a sizeable proportion of people with
HSA-eligible high-deductible plans don’t have the accounts—42 percent,
according to the 2007 EBRI/Commonwealth study. The poorest chunk of
this group—people making under $50,000 a year—are the folks who have no
savings account and no comprehensive coverage. They have to pay a
monthly premium—which will still increase over time—and pay down a high-deductible, all without a health care nest-egg.
Little wonder then, that this group is the most likely to delay or skip
prescriptions and health care needs because of cost concerns. According
to the EBRI/Commonwealth survey: 53 percent of respondents with incomes
under $50,000 who have high-deductible plans without HSAs said they’d
deferred need care over the past year, versus just 36 percent of
people who made more than $50k and had health accounts.
The buzzwords in consumer-driven medicine are “choice” and
“empowerment”—as though foregoing necessary medical care because you
can’t afford it is a form of self-actualization. Sure, insurance banks
are offering choices—but they’re the kind of choices that are meant to
split the HSA market even further so that the companies can cater to
the richest of the rich.
Insurer banks are now encouraging accountholders to invest
their HSA savings in mutual funds, because more complex, higher-reward
investments present more opportunities for administrative and
management fees and a longer-term money managing relationship. Of
course, mutual funds are risky investments (they’re not insured by the
federal government), which means that the only people willing to sink
their health care savings into the stock market are those who can risk
losing it (i.e. the wealthy). Furthermore, if you want to actually use
your invested HSA funds to pay for health care expenses, you need to
sell your shares and transfer the money into an HSA deposit account (a
conventional savings account) and then withdraw the funds from there.
This process not only takes a few days, but also requires a relatively
high degree of financial literacy—which favor generally healthy,
wealthy and well-educated.
As insurance companies work to eke out as much profit as possible from
the very top of the income ladder, everyone else is likely to see their
benefits shrivel as they shoulder more of their health care costs. If
this sounds bad to you, you’re not alone. Polls reveal that
high-deductible plans are actually very unpopular with most Americans.
In 2004, a Kaiser Family Foundation survey found
that 56 percent of Americans saw these plans as “very unfavorable,” and
79 percent said that such plans made them feel “vulnerable.” In the
same survey, 71 percent of respondents said that the most important
reason to have health insurance is to protect against high medical
bills—something which high-deductible plans are consciously not built
to. Indeed, their operating logic is that patients should be exposed to their medical costs in order to become more cost-conscious.
High-deductible/HSA plans aren’t even popular with people who have them. A 2007 survey
from Towers Perrin, a global professional services firm, found that
people with HSA-based health care plans “are less comfortable with the
level of financial risk their plan exposes them to, less likely to
understand how the plan works, less favorable about how easy it is to
use the plan, less favorable about the clarity of communication around
benefit change and less satisfied with the basic elements of their
plans—including access to affordable, quality health care.” The ’07
EBRI/Commonwealth survey reports that “64 percent of individuals with
comprehensive health insurance were extremely or very satisfied with
their health plan, compared with 35 percent among [high deductible
health plan] enrollees and 47 percent among [HSA plan] enrollees.”
Americans see insurance as a system that insulates them from risks and unpredictable dangers. We don’t want
high-deductible health care plans. But insurance companies, unable to
get their act together to effectively manage health care, are trying to
get out of the business of insurance and into the business of banking.
While some affluent customers might welcome the customized service of a
health care money manager, people like Alex Kipper are getting the
short end of the stick.
Kipper is a Californian engineer who, according to the Times,
“lost his employer-provided health insurance during the dot-com bust
when he was laid off by a Silicon Valley company.” Since losing his
job, Kipper has “eked out a living translating Russian medical and
technical papers on a freelance basis, earning roughly $30,000 a year.”
As you can imagine, this is not the kind of money that lets you start a
health savings account—but it is the sort of not-so-high income that
makes a cheaper, high-deductible health care plan attractive, at least
in the short-term.
Indeed, Kipper was “virtually uninsurable” under traditional insurance
because he has high blood pressure, so “he signed up for a bare-bones
policy that provides no coverage until his medical expenses exceed
$8,000 in a year.” His monthly premium is just $200—low by health
insurance standards—but Kipper says that "nothing is covered,
absolutely nothing.” And his deductible is so high that he hasn’t gone
“to a doctor’s office in three years.” Kipper is less than pleased.
“This plan would be fine if it was really cheap, like $25 a month,” he
told the Times. “But not $200.”
Kipper’s story—that of a lower-income person with a chronic condition,
forced to pick a cheaper plan that gives him little to no value—will
become more common as health insurers recast themselves as money
managers. The insurance companies will increasingly wash their hands of
benefits for people like Alex and turn their attention to moving money
around for the people who have it. And all the while, they’ll tell
us—as consumer-driven advocates always do—that we should be thanking
them for it.
"We want the customer to be empowered," said James Rowan, CEO of Arcus, WellPoint’s HSA bank, to the Times.
This is downright insulting: insurance companies are moving toward a
business model that Americans don’t want, don’t need, and can’t afford.
This shift isn’t about empowerment—it’s the end of health insurance as
we know it—and the beginning of more dangerous, under-regulated financial
management.
It might be a trigger for demo projects in which groups of self employed and small business employers pool and group contract directly with nurses and physicians to provide employees AND THEIR DEPENDENTS primary health and preventive health services on site.
I mused about doing that (link at my name).
Three key predicted advantages and desired outcomes:
Reduced lost time for school and work since services provided on site and during scheduled off hour times as well as during work/school times.
Family approach to prevention, health and wellness screening, education and coaching.
Higher productivity resulting from controlled blood pressure, effective smoking cessation, effective nutrition counseling and weight/fitness management.
Integration with local public health programs to increase disease surveillance, prevention and containment efficacy, while reducing redundance of services and minimizing extraneous costs.
Elimination of insurance and TPA adminsitrative fees.
Customization of provider services based on patient and employer needs.
Higher provider and patient satisfaction due to availability of long term therapeutic relationship with primary care provider.
Maximization of use of professional nurses(BSN+ educated nurses with community health preparation) to provide primary health care and case management in ambulatory care setting.
This model would also go a long way in providing care to children who often do not have insurance even when one or both parents is insured. it would stretch school health nursing coverage, which is being reduced or eliminated as budgets are cut.
Preventive care could be carved out of insurance policy coverage, and the efficacy of management could be used to reduce risk and premiums.
If services are contracted directly, CMS participatory regulations might not have to come into play since the population would for the most part not be Medicare eligible. (Musing here – if all employees’ dependents were included in the covered services, this would also include elders and disabled family members, so never mind on that score).
Anyway, it’s a model that works well inthe community, provides satisfiers to providers and to patients/families, keeps workers/students productive and reduces absenteeism, and eliminates a lot of administrative fees for claims.
What am I missing?
Where are the pitfalls?
Without mentioning any names, I wonder if this story helps explain the real reason why so many HSA advocates are so vocal for the concept. Are they personally making big bucks on the concept behind the rhetoric??
HSA were originally billed as a way to encourage people to take a more active role in how their healthcare is paid for. As intended, it was sold as a way to pay less for insurance, but then to manage your own costs below that high deductible. This was sold as an option to having the patient completely insulated from the actual cost of healthcare by the buffer of a relatively small copay. (the theory being that if it always costs you a small copay then you are more likely to consume more healthcare services, versus making a cost-benefit analysis to determine if the actual cost (that you have to pay) is worth the value of the service).
Generally speaking, I think that the goal of increasing the patient’s active participation in the selection and payment of getting healthcare is a good thing. Is there any disagreement out there on this point?
Now, it seems that the HSA/high-deductible plans have been perverted, to put it mildly, assuming that the above post with respect to the LAT aritcle is true (and I have no reason to doubt its veracity).
What, then, would the authors of this blog suggest to increase patient participation (as in, payment and selection of healthcare) as an alternative to HSAs as implemented?
Matt asks:
“Generally speaking, I think that the goal of increasing the patient’s active participation in the selection and payment of getting healthcare is a good thing. Is there any disagreement out there on this point?”
—————
I have my reservations about this. Sure patients usually can choose their provder and whether to get any healthcare process done (of course not mandatory smallpox vaccinations in the past and maybe other public health measures), and can choose from a list of acceptable treatment alternatives, but I do not see the point of the patient creating the listing of Dx or Tx options. I also have a problem with cost dictating what treatment is able to be chosen for some but not others in an exact similar demographic and diagnostic situation.
Let me ask Matt a similar question. What objective healthcare improvement mission is satisfied by “increasing the patient’s active participation in the selection and payment of getting healthcare”? I again ask this from the point of view of what is offered to the patient to be done and whether the patient can make real comparisons of cost-related quality by shopping around?
When you speak of insurance policies that do not cover maternity benefits, I suspect you are referring to Wellpoint’s insurance plan it calls Tonik. This is a low cost plan aimed at young, healthy MALES. Maternity benefits would approximately double the cost. Young (presumably single) males don’t need maternity benefits and don’t want to pay for them.
Your contention that removing young, healthy people from the comprehensive insurance pool makes that insurance more expensive for everyone else is not necessarily true. Much depends on how the high deductible plans are priced relative to the more comprehensive plans. To take a simple example, suppose a health insurer sells a group of high deductible plans for an aggregate premium that is $10 million less per year than a comparable number of comprehensive policies would cost. At the same time, because of the high deductible, the insurer pays out $10 million less in medical claims than it would have under the comprehensive policies. Under this scenario, consumers who bought these plans, in effect, underwrote the risk associated with the high deductible at a medical cost ratio of 100%. Since the medical cost ratio for most insurers’ commercial blocks in the group market is 80% or a bit higher, consumers seeking comprehensive coverage could actually wind up net better off because of the availability of high deductible plans. It would be interesting to see a study of how this plays out in one of the five states with community or modified community rating. We should also remember that the alternative for many purchasers of high deductible plans is not comprehensive health insurance but no insurance at all.
I’ve said numerous times before that if it were up to me, I would eliminate the tax preference for employer provided health insurance altogether and reduce the lower income tax brackets and/or raise the standard deduction so the Treasury does not raise any more net revenue than under the current system. If that were done, there wouldn’t be any reason to offer HSA’s either. I think the end result would be that everyone would become much more sensitive to the cost of both health insurance and health care and would become much more astute purchasers and consumers of both.
Matt, Annie, NG–
Thanks for your comments.
Matt–
We have quite a bit of reserach showing that if patients have higher co-pays they are just as likely to skip needed care as unneeded care. For example, middle-aged women don’t go for mammograms if there is a co-pay; vets don’t sign up for a smoking cessation clinic.
Take away the co-pay and they do.
This is not rational, but as many social scientists have demonstrated people often do not act in their own self-interest.
High deductibles are worse. Many people with high deductibles simply cannot afford to use their insurance. Consumer Reports wrote about a women a with $4,000 deductible who had a miscarriage. She couldn’t afford to seek medical help so she just “stayed in bed for 3 days and tried not to move around much.”
You write: “I think that the goal of increasing the patient’s active participation in the selection and payment of getting healthcare is a good thing. Is there any disagreement out there on this point?”
Yes there is a great deal of disagreement on this point. The Bush administration, the insurance industry and others who would like to shift costs away from the insurer and toward the sick person have pushed the theory that if patients had “more skin in the game” they would be more prudent in their use of healthcare. See NG’s comment.
NG is right– patients are not in a position to determine the value of various medical treatments.
For one, there is so much hype out there about treatments– in the form of advertising, misleading information from drug-makers and device-makers, even hospitals advertising that they do certain treatments for Alzheimers when there is no medical evidnece those treatments work.
Medical jourals have been accused of publishing reserach done by people who have a financial interest in the outcome–and not disclosing their bias when publishing the article.
This is why we need a Comparative Effectiveness Institute made up of physicians and medical reserahers who have no financial interest in the treatments reviewing reserarach done, not by manufactureres, but by reserachers with no financial interest, and then distributing information on which treatments are best for patients who meet a certain profile.
This info would be very helpful to doctors. But it would be over the head of the vast majority of consumers–particularly as you get down to which treatment work for a particular cohort of patients and why–there the profile could get pretty technical.
People should not try to become their own doctors. They should work with their doctors. What the patient brings to the table is his knowledge of himself–his fears, concerns and hopes–for instance what he is willing to do and what he
is not willing to go through to live an extra 9 months. What the doctor brings to the table is what he learned in medical school and what he has learned since, treating many patients suffering from a similar condition. Much of that is inarticulate intuitive knowledge. . . . It’s not something a patient will find online.
Annie– What you suggest has worked for some companies. I haven’t done any in-depth research on it, but it seems to me a logical way to eliminate the middle-man (the insurer) and the expense of the middle-man as long as whoever is organizing workplace care has the expertise and ability to bring together a good group of nurses and physicians.
Ideally, that person would be a nurse or physician (or a nurse and physician working together) who have been practicing medicine in that community for a number of years, so that they know the players and can reach out to particularly competent people for recommendations.
Barry–
Wellpoint’s is not the only plan that doesn’t offer maternity benefits.
Many such plans are sold to women who don’t plan to get pregnant . . .
To say that young males don’t want to share in paying for maternity benefits is to say that they are perfectly happy to have their sisters, girlfriends and mothers pay more for insurance (which is what happens when you take young healthy males out of the pool and sell them cheaper insurance that includes no benefits.)
I suppose those young healthy males have all taken a vow of celibacy too?
If not, since it takes two people to make a baby, I would suggest that said young healthy males should participate in paying for the insurance that covers the pre-natal care that both the baby and the mother need.
As for studies showing how high-deductible plans affect the cost of insurance for others . . .
Barry, the studies have already been done.
When you divide the pool of people who need insurance, those who are older, poorer and sicker wind up in a pool where insurance is either a) far more expensive and/or b) inadequate–Swiss cheese policies filled with hole..
And to pretend that if people had “more skin in the game” they would become most “astute” purchasers is to ignore the ambiguities of medicine and the fact that the vast majority of Americans are not in a position to analyze the pros and cons of various treatments.
You are simply repeating the language of “choice” and “personal responsibility” that the Bush administration has been using for the last eight years.
This language also says that rather than having a pension that he can count on when he retires, every employee should become his own money manager and manage his own 401-k as he chooses.
The result: today the “empowered” employee who faithfully put money into his 401-k has lost an average of 40 percent of his savings–through no fault of his own.
The conservatives and libertarians who preached the language of choice and personal responsibility thought it would be a good idea to leave the financial markets unregulated so that those who understand how the game is played could rob those who didn’t.
And believe that lost money is not coming back. This is not a market that is going to “bounce back.”
Take a look at today’s papers. We are look at financial panic that has spread around the globe. . .
So when conservatives talk as if the consumer should become his own doctor by making “astute” medical decisions about what treatments he does or doesn’t need they are simply leaving him to the mercy of “direct-to-consumer adds on TV.” OF course it is the conservatives in this administration that approved keeping those ads on TV. We are the only country in the world–except New Zealand– where these ads are legal.
This article is rife with errors and inaccuracies which are common to those who want the government to pay for everything and think this is possible without a 60% effective tax rate. Pipe dream.
“The billions of dollars that go to the banks cost nothing” Total crap. Celent issued a study that shows that only the top 5 banks handling HSAs in terms of volume are profitable at all. In fact, the study goes on to say that the average annual revenue for the top 25 HSA administrators is negative 8 dollars per account. That’s right, they lose 8 dollars per account per year. Why do most do it then? Customer loyalty, loss leader product for cross sell opportunities etc. Or they are looking longer term.
Many high deductible health plans (HDHPs) do include no deductible preventive care coverage and do not exlude pregnancy etc.
People with high deductible health plans who have preventive care coverage are actually more compliant with annual checkups because they don’t want to be hit with high expenses of a serious illness – precisely the kind of consumer behavior that HDHPs/HSA were intended to encourage.
HDHPS are allowing many small businesses to offer insurance for the first time, taking folks off the government rolls, and many to continue to offering health coverage in an environment of double digit premium increases.
The average high deductible for an individual HSA plan is in the 2000-3000 range, after which, in many policies, the patient’s out-of-pocket responsibility ends. Compare that to a regular 20% co-pay. In the HSA plan the out of pocket for a 40000 hospitalization is 3000. For the 20% copay plan it is $8000. These plans do mean a higher upfront responsibility for routine medical care, but people will not go bankrupt under HSA plans. And they get to keep the money if they don’t use it rather than giving it to the insurance company as premium they get to keep if it is not used.
That you have issues with giving consumers more money and more choice as opposed to your big brother solutions is frankly anti-American. It’s why we hate HMOs.
And poor Mr Kipper. Instead of paying $600-800 a month for health insurance or going uninsured he puts 400 to 600 a month more in his pocket, and if he monitors his high blood pressure and controls it with medication – the same as he would do if he had a health plan with all the bells and whistles – he is no less healthy. If he chooses not to pay for a doctor visit once or twice a year with the 400-600 a month he is not paying the insurance company and he should be, then shame on him. I wonder if he has problems with a $300 monthly car payment and a $100 monthly insurance payment for the privilege of driving.
You cannot complain that people like him do not have access to affordable health care or affordable coverage because he chooses an HSA plan. The fact that you try to use this one example to make your case rather than looking at the millions of people who have realized the financial and health advantages of being engaged in their healthcare decisionmaking is pretty disingenuous.
Adding consumers to the payment chain is putting a much needed control into the spiraling spending machine of providers who don’t discourage overutilization by patients who overutilize health care because they don’t care what it costs, and insurers who are more than willing to pay for it and charge it back to employers, which is breaking the back our our economy.
Additionally, MSAs, the precursors of HSAs were initially a concept that was put forth to Congress by the Democrats (I can send you a copy of the letter). But since the Bush administration promoted it, the Democrats have chosen to disown it and use Bush’s other failures to paint it as another Republican evil idea, letting partisanship become more of an issue than giving people the option to try to participate in the healthcare chain. Shameful.
HSAs are the wave of the future — and always will be. This is a product that is reaching 2% of Americans and there’s no reason– but for the hype from proponents and opponents — to believe this number will ever break into double digits.
they don’t make sense to anyone who’s not being promised a tax cut by Obama. For the rich, they’re a useful tax dodge. Young healthy folks buy high deductible plans because they’re cheap without regard to the tax advantages.
high deductible plans raise valid concerns about adverse selection. but HSAs are an irrelevant sideshow that’s not having a demonstrable impact on our health system.
Hi Paul
You state:
“People with high deductible health plans who have preventive care coverage are actually more compliant with annual checkups because they don’t want to be hit with high expenses of a serious illness – precisely the kind of consumer behavior that HDHPs/HSA were intended to encourage.”
There may in fact be a study that illustrates that point. But there are others that contradict it as well. The holy grail answer on HSA’s and first dollar coverage, what is the sweet spot for payer/payor responsibility, etc., is still unclear–and most policy folks who follow this would agree.
I think it is a bit premature to close the book and say individuals who use these products will do the right thing on the net net. The big experiment still remains to be done (RAND HIE aside). THe best insurance option for the right person and price, to give the optimal outcome, is still a black box.
Brad
Jim, & Paul–
Jim– I agree that when it comes to healthcare “HSAs are an irrelevant sideshow.”
Though as a matter of tax policy, they are costing tax-payeres a bundle. And insofar as those who establish HSAs leave them, untouched, in their estate to their heirs, who then set up their own HSAs, HSAs became another way that the wealthiest families in the U.S. consolidate great wealth. And this is a very dangerous trend.
Paul I’m afraid your comments are driven by ideology rather than knowledge of the research.
We now have more than two decades of reserach showing that the high cost of healh care is driven by supply, and physician’s preferences–not by consumers overutilizing care (see http://www.dartmouthatlas.org)
When banks take in HSA money, the cost is “nothing” in this sense: they are not cannbilizing their own business. These are dollars that,otherwise, woudl have gone to insurers in the form of higher premiums.
Consumer surveys showing how insecure people feel who have HDHPs suggest that many have holes, and a deudctible so high that the patient doesn’t dare use the plan, even when sick.
You assert that people with HDHPs are more compliant with annual check-ups. Evidence?
Also, you might be intersted in knowing that there is quite a body of reserach showing that for patients with no symptoms annual check-ups do no good in terms of preventing diseases. (Seeing your doctor once a year to talk about things might be very useful; but instead annual check-ups feature a an array of expensive tests that do little good unless a doctor has a diagnosis (based on symptoms) and knows what he’s looking for.
But, obviously, you don’t read medical journals–just political rants.
For what it’s worth, my employer first offered the HDHP/HSA option this year (in open enrollment a year ago).
The way ours is structured, it’s hard not to come out ahead with the HSA when you factor in the difference in premiums together with the employer contribution into the HSA. The family deductible is $1700 higher than with the PPO plan, but the premiums are $1100 a year less out of pocket and the employer is matching $500 a year or more into the HSA.
And in the open enrollment kit for this year, our HDHP/HSA option will cost 5% *less* in 2009 than it did in 2008 while the PPO option (with the same insurer) is rising 11%. And to top it off, my employer is doubling its HSA match from last year, going to as much as $1000 or more per year.
In my particular situation it works well. Having said that, though, the shift from traditional indemnity plan to HDHP/HSA shares some similarities to the shift from defined benefit pension plans to 401K plans, and we know all too well how people with 401Ks and no pension are feeling about their chances for retirement right about now.
“The way ours is structured, it’s hard not to come out ahead with the HSA when you factor in the difference in premiums together with the employer contribution into the HSA. The family deductible is $1700 higher than with the PPO plan, but the premiums are $1100 a year less out of pocket and the employer is matching $500 a year or more into the HSA.”
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Please explain this more clearly. Is the employer paying the premiums or is the employee? Are you saying that under the old PPO plan the employee paid $1100 more in premiums or just the employer. What is/was the employers payment to the plans under both the old and the new high ded plan?
NG: I mean the employee’s contribution. The HDHP/HSA option is about $1100 per year out of our paycheck and the PPO option is twice that. So between the $1100 saved on the payroll deduction and the $500 we receive this year as an employer HSA contribution, we’re $1600 ahead of the PPO which almost completely absorbs the higher deductible in a worst-case situation. And since we’ll get $500 more next year, it’s virtually impossible to construct a scenario where electing the PPO is better than electing the HDHP/HSA.
I’ve seen other people offered these HDHP/HSA options but the math strongly discouraged it. In our employer plan the math almost always works out to favor the HSA option.
Tim,
Is your employer paying anything toward employee healthcare in either of the older PPO option plan or the High Ded option plan other than the HSA contributions in the high ded plan??
Tim,
Is your employer’s health insurance plan self-funded and is your workforce younger and healthier than average? If the answer to both questions is yes, the employer is virtually certain to save money based on expected lower utilization of healthcare services. Insurers could never offer a HDHP plan with such compelling economics for the member and expect to come out ahead.
I happen to love HSAs and would recommend any of my clients that are not provided with a quality group health insurance plan to invest in an HSA. I think it is a great way for those with lower income to provide their family with a quality health insurance plan. I just think there are so many benefits, and one of them being the tax break. I have had an HSA for the past five years and have been extremely happy with the results.
Based on NG’s and Maggie’s comments, I have to admit I’m not a fan of the “us and them” scenarios laid out, with respect to the perception that 1) patients are “not in a position to determine the value” of healthcare options, and 2) that comparative research results are “over the head of the vast majority of consumers”. I can’t say for certain that those points are not true on average for a person who attempts to digest the information on their own, but I can certainly say that if that information and those decisions are either not available to the patient or are taken away from the patient, those points will certainly become true to a much larger extent. Regardless, part of being a physician is to explain the options and risks so that the patient understands as well as they are capable. The first step to that is to not insult their intelligence just because the physician is unskilled at explaining complex topics.
Generally speaking, a Comparative Effectiveness Institute would be good, certainly, but finding disinterested parties is, practically speaking, only theoretically possible. As soon as you ask “who’s paying for this”, objectivity and dis-interest disappear. Its a great idea that really does need implementing, but expectations for its charter, execution, and output need to be realistic.
As for having cost enter into the selection of treatment, why shouldn’t cost be part of what dictates treatment? Its analogous to to the tradeoff between choosing a less-expensive car that has fewer safety features versus an expensive one with cutting edge safety features and stability control. Its analogous to buying a $50 chair for work (for the types that sit all day) versus a $400 ergonomic Herman Miller. What about choosing more expensive health food over the less expensive fast food? Daily, we all use cost to make decisions that can and do ultimately affect our health and safety. Why shouldn’t the relationship between a patient and a doctor really be any different? Just because you say so? (Please understand that I’m not advocating a complete free market healtcare system where insurance does not exist and the patient pays everything directly – I just think that its a good idea that the patient share in some proportional cost of the healthcare services that they consume.)
As to Maggie’s first comments in reply: yes, its frustrating to see people make bad decisions, especially such as not getting treatments when getting certain healthcare services (such as a mammogram) are affordable. Anecdotes abound on all sides of the argument. Anecdotes should not change policy. Changing coverage (reducing copays, making it free, whatever) isn’t going to change the fact that bad decisions will be made on both sides. I think the unintended consequences of free health care (Massachusetts and Hawaii have become good case studies) will be worse in the long run than one in which each person has a direct financial hand in the their treatment.
Finally, I grew up with the the language of “choice” and “personal responsibility” when I was a kid, which was a long time before the Bush administration (I’m not telling you how long). If “choice” and “personal responsibility” are no longer any good, then I think we’re all in a lot more trouble that I thought. Blaming the current financial weakness on conservatives and libertarians is a non sequitur, and surprising for your financial journalism background, Maggie. This mess was a long time in the making, crossed multiple administrations, and has more to do with failed regulation than lack of regulation.
Matt said:
“As for having cost enter into the selection of treatment, why shouldn’t cost be part of what dictates treatment? Its analogous to to the tradeoff between choosing a less-expensive car that has fewer safety features versus an expensive one with cutting edge safety features and stability control.”
Why not go one step further and condone outright substandard treatments, maybe complete neglect, and maybe even incompetence as a choice for the poorer folks because they can’t afford good care, which can be defined if we had the will. You know, there is a reason why car salemen and refrigerator salemen are not in professions and not licensed by the state. A smart guy like Matt could probably answer why if he really had to!
Tim, Matt, NG, Tim (second comment) and Barry —
Thanks for your comments
Tim– The analogy between
HDP?HSAs and 401ks is a very good one. In both cases, we are shifting responsibilty to the individual consumer to make the right decisions . ..
In many areas of life, that’s fine.
But when it comes to your health and managing money that you cannot afford to lose, it can be very dangerous.
Matt–
First, purchasing a chair and purchasing healthcare really cannot be compared.
If I cannot afford a really nice chair, that is not the end of the world.
If I have a high-dedutible plan, don’t have the cash to pay down the deductible, and so cannot afford needed healthcare, that is a serious problem.
I think of the Consumer Reports video showing a low-income woman in the Midwest who had a high-deductible plan (all she and her retail employer could afford). She had a mis-carriage but couldn’t afford to pay the deductible so just “stayed in bed for three days, and tried not to move around too much.”) That shouldn’t happen in a country as wealthy as the U.S.
What I say about people making bad decisions is not “anecdotal”
It is based on medical research published in medical journals. For instance, when the VA dropped its $10 (or $15) co-pay for its smoking cessation clinic, many more vets used it. And it has been very successful in helping them stop smoking.
There are countless examples.
Finally, you write: “but finding disinterested parties is, practically speaking, only theoretically possible. As soon as you ask “who’s paying for this”, objectivity and dis-interest disappear.”
This simply is not true– as NICE’s experience shows. (Search “NICE” on this site and you’ll find my posts.)
Finally, if you read serious financial publications you will find that deregulation–starting in the 1980s–is widely blamed for the meltdown.
As for doctors explaining things to patients– reserach shows that “informed consent” is very, very sketchy. Most patients don’t know the basic facts about the risks and benefits of surgeries and treatments that they have agreed to.
What we need is “shared-decision-making.” But that takes more than 20 minutes. It requires about 5 hours of the patient viewing videos more than once, reading a pamphlet, talking to his doctor, coming back again . . .
(Again google shared-decision-making on this site.)
Finally, when conservatives talk about “choice” they are usually telling people that they are “free to choose what they can afford.” (or forced to choose what they can afford.)
In our society, “choice” is a joke for the 60% (or more) of Americans who can not afford the necessities of life: safe shelter, nutritious food, high quality health care, a good education . . .
They have no “choice” except to go without.
NG–I agree with your reply to Matt.
Tim– It sounds as if you have a very generous plan.
I’m afraid it’s the exception, not the rule.
see Barry’s comment. He may well be right that your
company has a younger and healthier workforce and so is able to cut a much better deal.
Barry–see my response to Tim– very likely you are right. Of course when a younger, healthier company gets a better deal, insurance becomes that much less affordable for companies that have older employees and a few very sick ones (especially smaller companies.)
Health insurance is nothing but a parasite in health care, taking money from people and not actually doing anything of any value. It should be abolished completely. The entire industry must be banned.
We need universal health care now and NO health insurance blood suckers.
Anyway, it’s a model that works well inthe community, provides satisfiers to providers and to patients/families, keeps workers/students productive and reduces absenteeism, and eliminates a lot of administrative fees for claims.