The Expert

HSA's Promote Health Care Consumerism

Health Savings Accounts (HSA) are increasing in popularity and are changing the way we look at our health care decisions–in a good way.  A little background on HSAs:  HSAs are special savings accounts that allow individuals to pay for their health care expenses with tax-free money from the first dollar they spend on health care.  Contributions to HSAs are tax deductible and the interest earned on the account is tax free when funds are used for eligible medical expenses.  An individual can contribute up to $3,050 in 2010 and a family (2+ people) can contribute up to $6,150.  The individual/family owns the HSA so the money rolls over year to year and can grow exponentially! 

In order to contribute to an HSA you must have a special health insurance policy called a Qualified High Deductible Health Plan (HDHP).   HDHPs must have a minimum deductible for singles of $1,200 and for families $2,400.  HDHPs cannot have deductibles higher than $5,950 for singles and $11,900 for families.  Plan out of pocket maximums cannot exceed the maximum single/family deductibles.  HDHPs generally require that a plan member meet the deductible first for all services (ER, office visits, hospitalization, Rx, etc…) but insurance companies can include preventative coverage (physical exams, well child check ups) for just a copay (example, $25) without meeting the deductible. 

I personally have a HDHP for my family and I think it is great!  My premiums for a family of 5 are under $300/month, my family deductible is $5000 and my out of pocket maximum is $7,000.  We only pay $15 copays for preventative care–and with 3 kids under 5 years old–that is great.  I believe the main purpose of health insurance is to insure against catastrophic health care expenses that would financially destroy my family.  On my plan, I know that I will never pay more than $7,000 in any worst case scenario in one calendar year.  This is something I can plan for and $7k would not bankrupt me. 

Having a “high” dedcutible changes how we have purchased health care.  We used to have a rich copay plan where we only paid $15 for any type of doctor’s office visit and small copays for Rx.  We had no incentive to be good health care consumers because we only paid the small copay and never thought twice about taking ourselves or our kids in to the doctor.  Now that we have to pay the first $5k/year of all our health care expenses we only take our kids in when necessary and we shop around for the best care at the best price. 

For example, my son had a ear infection a few weeks ago–it was bad enough that he needed antibiotics.  To just walk through the door of our pediatrician it would have cost us about $100.  The IHC InstaCare would have been about the same.  So we searched around and found an IHC ExpressCare in Draper.  It is located in Smith’s Food.  It has one exam room and a Physician Assistant.  They will see anyone over 2 years old and they just do basic routine care like ear infections and the cost: $49.  We walked right in (no appointment-no waiting) my son was examined, the PA prescribe the medication and we were done!  If I had had a plan where I just paid a copay I would have never considered shopping around.  The same kind of thing happened when my wife had a baby last year.  Our insurance did not cover maternity so we shopped for the hospital, doctor, and anesthesiologist who would give us the best price.  Everything turned out great and we saved a ton of money.  To top it all off, we have paid for all our health care over the last 2 years with our HSA money and I have saved over $3000 in taxes because of the HSA during that time!!!

Could you imagine if everyone had a HDHP and an HSA? We would actually force doctors and hospitals to better compete for our “business”.  We would collectively put downward pressure on prices, promote better quality, and these changes may possibly curb or stop the upward trend to health care inflation that plagues our insurance premiums.  I don’t believe HSAs are the silver bullet that will save our health care system, but I do believe they are a piece to the puzzle.

Washington DC is an incredible city!  There is so much history and so much to do that it was a little overwhelming.  Between all the meetings I was able to see many of the sights–however I plan to go back and spend another week or two.  The main purpose of my visit to Washington DC was to visit the our Utah Federal legislators–and that I did.

I was able to visit with Senator Hatch, Senator Bennett, and Representative Chafetz (I live in his district).  The good news is that they are all on the same page regarding the current health care/insurance reform legislation–they oppose it.  They all seem to understand that health care reform should focus on reducing costs (which is the underlying problem) rather than focusing on access to health care through health insurance. 

Visit with Senator Hatch

The democrats believe that if everyone where to be insured then they would have access to health care.  On the surface this sounds correct, but when you look at the cost of insurance and the ongoing rise in health insurance inflation you will realize that getting people insured will not reduce costs.  Actually it will increase costs because it will most likely increase demand faster than we can increase the supply of doctors and hospitals.  When costs increase people stop buying insurance because it becomes unaffordable.  When costs are too high many people will choose to go on welfare health insurance like Medicaid, PCN, CHIP, etc….  Who pays for all this?  You and I pay for it through higher taxes (not to mention our future posterity).  Getting everyone insurance might make us feel better but it does not solve the problem: cost.

Nation's Capitol

The republican’s proposal is directed more towards reducing costs first.  They believe that if you reduce the costs in the health care system then health insurance inflation will stabilize or decrease and more people will be able to purchase health insurance.  Fortunatley they seem to understand the root problem.  Unfortunately I personally believe their proposal is too weak and does nothing more than half-heartedly promote more consumerism in the market to put downward pressure on costs.  It’s a step in the right direction but not a silver bullet. 

I have many ideas that I believe would truly reform our health care for the better by reducing costs, improving quality, and improving access.  I plan on posting another article on that topic in the future.  For starters the federal government could change the way Medicare, Medicaid, SCHIP, Veterans, Tri-Care, etc…pays for health care since the feds currently pay for about half of all health care.  Those on the government rolls should have more skin in the game (personal responsibility), they should incentivize beneficiaries of these programs to find the best doc and the best price.  They should not pay doctors on a fee-for-service reimbursement but rather require that docs have their prices transparent to the patient and allow the patient to negotiate price.  If Medicare and other federal programs do not allow free-market principles to govern, then I do not see any hope in curbing health care inflation. 

Supreme Court Building

As I met with these legislators, I tried to drive home the point that our current health care system is not a free market and until it functions like a free market costs will continue to go up.  I let them know that many of my clients are having a hard time paying for health insurance and many have already dropped coverage because of cost.  I asked them to do all they can to free our health care system so that costs go down, quality increases, and more people can afford insurance.

Obama supports reconciliation

Yesterday, President Obama gave his blessing to congress to go ahead with a very controversial strategy called reconciliation to pass the unpopular health care reform bills.  Reconciliation is a tactic that only requires a simple majority of 51 votes to pass legislation.  Currently, the House has passed a version of the health care bill and the Senate has passed another version of the health care bill.  The bill was stalled in its tracks once Scott Brown, Republican of Massachusetts, won Ted Kennedy’s (Democrat) senate seat.  Democrats lost their super-majority and now republicans can filibuster the passage of the bill and democrats now do not have the 60 votes to override a filibuster.   In order to avoid the filibuster the democrats are now planning to resort to reconciliation pass the bill with a simple majority (51 votes). 

The reconciliation strategy is a bad idea for everyone–including the democrats.  Reconciliation is typically used only for budget, spending, and debt-limit bills and was designed so that budgets would be easier to pass in order to keep the government rolling.  Reconciliation has been used in the past to pass contentious bills.  The difference today with this health care bill is that it will fundamentally change 17% of our economy and affect every American’s health care.  For a change of this magnitude reconciliation is a way to thwart the will of the people.  Since November of 2009 every major poll of Americans show that the majority do not support the current health care legislation by a margin of 10+ points.  Another point of concern is that the republicans have been shut out of the process.  Those republicans represent millions of Americans–so in essence those American’s views on health care have not been given their due representation. 

President Obama and the democrats seem willing to face an enormous political backlash by resorting to reconciliation–many will fall on the sword so to speak to do this.  Why?  Why would they do this?  My only explanation is that if they can get this passed–even though they will lose politically–they beleive it will fundamentally change America and will never be repealed (even if they lose control of congress). 

From what I know of the current House and Senate bills–they are not designed to reduce costs.  In fact Utahan’s will see anywhere from a 30% to 50% increase of the bat from this legislation.  Those increases will come from mandating that everyone buy health insurance, guaranteeing coverage without pre-existing conditions, and community rating (premiums of younger go up and subsidize premiums of the older); costs which I am opposed to because they are not good for my clients (this topic will be another blog post).  That increase in health insurance premiums does not include the already burdensome 10% to 15% renewal increases every year due to health care inflation and utilization.   No matter what the politicians say, this bill will not reduce health care or health insurance inflation; but rather, it will increase Federal Government control of your health care and health insurance, increase your taxes as you subsidize other’s costs (even more than you already do), and leave you with less choice as private insurance is regulated out of business. 

I agree that health care reform legislation should start over and focus on reducing the costs of health care, incentivize consumerism, and incentivize better quality rather than federal control of  health care. http://www.youtube.com/watch?v=LnpWEqhyaEM