Friday, February 18, 2011
We switched from what I''ll call "traditional" insurance product - a United Healthcare sponsored PPO with a reasonably low deductible, high (and rapidly growing) premium and 80/20 in-network coverage, to an HSA. For the uninitiated, here's what an HSA is - it stands for Health Savings Account.
Rather than our business funding rapidly increasing insurance premiums against the low deductible, 80/20 plan in which people had a very limited incentive to manage their costs, we decided to give people the money we were paying to United to fund their HSA. The HSA then attaches to a low premium, high deductible, 70/30 plan. I call this true insurance, because we are essentially paying people a pile of additional cash ($4000 + premiums for a family plan) and they manage that against their deductible.
Employees actually wanted it. And as an employer, we converted a defined benefit into a defined contribution (sound familiar?). Employees like the idea of getting the money, managing their costs and then actually rolling the money that they save, building an account. And the employee still has considerable catastrophic coverage in-network and a cap in the event of a significant event. True insurance. The problem with our existing healthcare system is overutilization, because providers and patients had no reason think through the economics of buying healthcare. With this product, you do - whether it's using generic drugs, preventive care or saying no to the unnecessary MRI, I get to to make my choice.
Now, how about if we did that for people with Medicare and Medicaid? I bet the rate of increase in medical costs would miraculously slow. What the government pays Medicare and Medicaid providers varies considerably by region, but assume it pays $800 per month per person for Medicare and $150 per month per person for Medicaid. Do you think maybe if they funded that into an HSA for every Medicare and Medicaid recipient, they might do a better job holding costs down and making individual decisions that work for them better than the government can or would?
Our government has to convert its benefit programs into defined contribution plans from defined benefit plans before it too goes broke. Just like the steel, airline and auto industries before it, the union drive for defined benefit pensions and benefits is bankrupting our government. If we don't convert Medicare, Medicaid and Social Security into defined contribution plans soon, the dollar and treasury market will suffer inordinately, the US dollar will lose its global reserve currency status and we will suffer powerful social instability.
The solution is actually remarkably simple and direct and has been adopted for pensions by most of the private sector (401-ks) and is in process for healthcare (HSAs are growing rapidly). The government must do this to arrest the growth of the budget.
There is no serious alternative.
Why don't people just say it?
My understanding is that HSAs are doomed under Obamacare. Self employed here with a $10,000 deductible that pays 100% after the deductible. Huge premium difference. To me much better than a $500 deductible with 80/20. I don't have an MRI for a sore toe or knee.
We also did this, in 2010, and it has been wildly popular with our 45 employees. The only complaint we've heard has been with Mellon Bank as account administrator, but that is relatively minor. Hopefully, ObamaCare will go by the wayside and we can keep this plan.
Even though I use all of my HSA money every year (kids with braces and one with allergy shots) I love the control that it gives me over choosing my health care. The thought of having it taken away pisses me off.
My spouse's company does something similar. They switched to HSA high deductible plan. What they found was that they could let people pay their own charges, then reimburse them up to the limit of their deductible. The net effect was that everyone had their expenses covered as before, but the overall cost of the program was greatly reduced. I hear the provider would not greet this warmly, but they are getting the deal they expected and the employee/owners are getting the care they bargained for at far less cost.
I think HSA for medicare would be a great way to go. In addition we should do away with the current estate tax and replace it with an end of life health care bill. So that the heirs receive a bill for a % of the medical cost for the last three years of life up to a % of the estate. Combining these two would go a long way to reduce health care costs as families ration their own care. Dr visits & MRI's with HSA's and massive end of life care with the estate bill.
Eliminating tax-free payment for OTC drugs didn't do HSAs any favors.
I don't think an Obamacare conforming plan qualifies as an HSA plan. However, Obamacare didn't make non-OC plans, like HSA-eligible ones, illegal. You can still have a non-OC plan, but you (a) aren't eligible for subsidies, and (b) in some cases you or your employer will be required to pay a penalty for not buying health insurance (since non-OC plans aren't "health insurance" for OC purposes).
The problem with HSA plans is that it negates the following Democrat dictums:
1. Healthcare is a right.
2. First dollar coverage, therefore, is mandatory.
3. Only the government can deal with this complexity.
In reality, healthcare is like anything else. It's something you need, hopefully occasionally. Like a nice dinner out or a home renovation, people will always find a way to use their own dollars much more wisely than if they were spending other people's money.
As when George Bush tried to "privatize" Social Security...and thus guaranteeing the average person 2/3 of a million bucks in their pocket at retirement instead of a government IOU, we will see massive resistance to anything that "disempowers" those who currently run our lives and pocketbooks.
Just look at Wisconsin.
I got an HSA the year they came out. I estimate that in 7 years I have saved approx. $20,000.
I knew that Obama was not serious about reform when he did not mention the HSA. An HSA would solve most of our problems.
It can easily be disconnected from employment. You can change jobs and still keep the same health insurance.
It makes people "think" about health care. It makes people talk about price with their doctor.
However, there is a hill to overcome with an HSA. It does require that one save money to make an HSA work.
If I could wave a magic wand 70% of Americans would have an HSA overnight and then we would have medicaid for poor and let the rich do what they want.