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.

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

That’s right, I will be going to Washington DC during the second week in March (about two weeks from writing this) to participate in the “Capitol Conference” for the National Association of Health Underwriters (that sounds boring doesn’t it?). First off, I’ve never been to DC–so I am excited to experience it. Second, I will have the opportunity to personally meet with our Federal legislators including Sentor Hatch, Bennett and Representative Chaffetz. Others in our group will meet with Representative Matheson and Bishop. The purpose of the visit is to inform and educate our legislators on health care and health insurance reform issues. In a nut shell we advocate more choice in the marketplace, reforms that will actually lower costs (which will lower rates!), and all good ideas that will benefit our clients!

Over the next few months I am going to be posting regularly about ideas I think are “good” for the health care and health insurance industry and above all good for all Americans. Let it be clear that I do not believe more State or Federal Government control of our health care/insurance is better. You may have a different opinion and that is fine with me.

This DC trip gives me an opportunity to be an ambassador of ideas. I invite all Utahns (that want to) to write me about their ideas for health care/insurance reform. Email them to me at expert@uthealthplans.com or comment on this blog. I promise that I will personally print the ideas and hand them to your Federal legislators in DC. I would really like to inundate them with ideas. All ideas are welcome (even ones I do not agree with). After all, these guys in DC represent everyone–not just me. When I get back, I also promise to report back to you all on this blog.

This is a question I get all the time and for good reason.  Over the last 8 years that I have been in health insurance sales I have had to present rate increases to my clients every year, ouch!  This is not fun and I will be the first to tell you I dislike rate increases as much as anyone–after all I buy a personal health insurance policy for my family and get the same increases.  So why do rates go up?

There are hundreds of reasons health insurance premiums increase year after year, so to simplify it I have narrowed them down to three: rise in the cost of health care delivery, high utilization, and artifically low Medicare reimbursements. 

First is is important to understand that health insurance premiums are a shadow of the costs associated with health care since health insurance is a payer of health care.  So when health care costs go up and people using the health insurance to pay for health care rises, so does your health insurance premiums.  It costs a lot to deliver health care and the cost keeps rising but only about 3 to 4% a year (much less than the 11% average health insurance premium increase).  These costs include a doctor’s overhead, malpractice insurance, investments in technology, and pro bono care.  Health care technology is getting better every day but with those advancements comes higher costs and those costs are passed on to me and you usually through health insurance premium increases. 

Utilization is a fancy word for using your health insurance.  It’s fine to use your health insurance–that’s what it is there for–however, many people do not use it wisely.  For example “over-utilization” is where consumers go to the doctor for every little cough or sniffle, choose not to get second opinions when recommended for a procedure, and other countless bad health care consumer situations.  Another problem is that doctors tend to practice defensive medicine–meaning the perform numerous unnecessary tests and procedures in order to cover their behinds in case of a lawsuit.  I have seen some studies that estimate that up to 50% of all tests and procedures are unnecessary.  This is a huge burden on the consumer and those paying health insurance premiums. 

Last but not least, artificially low Medicare reimbursements are a big problem.  The Federal Government (Medicare) sets the price that doctors get paid from Medicare insurance (insurance for the elderly and chronically disable).  Medicare has not increased what it pays to doctors to keep pace with doctor’s costs of doing business.  Many doctors have retired early because they can not stay in businesses with the Medicare reimbursements so low.  Other doctors will subsidize their loses from treating Medicare patients by negotiating higher reimbursements from privates insurance companies.  Sometimes these reimbursements are 25% or more than Medicare reimbursements.  So what does that mean to you?  Since you most likely pay health insurance premiums to a private insurance company your rate reflects a high premium due to the  cost shift from Medicare.  Simply, you are paying at least 25% more than you should be paying.  To fix this Medicare needs to increase their reimbursement to the docs that accept Medicare to the same levels private insurance pays.  This will better equalize the premiums and you will not be carrying more than your fair share. 

So how do we fix it so our premiums stop increasing?  I will give you my opinion to the question in another post.  Until then, do your best to be a good health care consumer and pray our system changes for the best.