Earlier today, an Assembly committee held a hearing on Assembly Bill 47 – a tax credit for Health Savings Accounts (HSAs).
In case you don’t already know, HSAs are high-deductible health insurance plans – commonly known as “catastrophic” plans. They’re called that because the policy holder – you or me – has to pay the first couple thousand dollars (or so) of our own medical costs each year. After that, the insurance kicks in, and we’re covered.
They’re supposed to protect you from the catastrophes - long illnesses, bad accidents, appendectomies, etc. – while also providing incentives to not spend money if we don’t have to.
The incentive works like this: instead of a regular deductible, HSAs have accounts. Your annual deductible – real money – goes into your account. If you spend that down to zero, then the insurance takes over.
If you don’t spend it down to zero, if you don't use the whole deductible in a given year, you keep it. You keep the money. It stays in your account, earning interest, compounding, until you need it for health costs later in life.
It's like a second retirement fund.
Here’s another best part: in many cases, the employer can pay the entire deductible, because the premiums are so low they still save money. That’s what happened in Manitowoc County: the county pays the deductible - $1,500 per single person, $3,000 per family - and they’re still paying less than they were for traditional, comprehensive insurance.
Plus, the employees no longer pay any deductible, no longer pay co-payments. Everybody is winning with HSAs up there.
Even if that weren’t true, even if HSAs cost the same as a traditional plan, they’d still be a good deal for employees because of the investment aspect. I’ve said it before, I’ll say it again: HSAs are a good idea.
That is, they’re a good idea unless control is your agenda. If individual choice, individual empowerment, and the Laws of Supply and Demand aren’t your cup of tea, then HSAs are, likewise, not your cup of tea.
For example, a snippet of testimony on today’s bill from the lefty group Citizen Action of Wisconsin:
...we believe it is unconscionable to offer up false solutions to the health care crisis at a time when millions of Wisconsinites feel that their access to health care is at risk.And from the AFL-CIO:
It is fair to ask whether this expensive initiative offered to address the health care crisis provides the path to affordable, quality, comprehensive health coverage for all residents of our state.I could go through their testimony point by point, explaining why they’re wrong along the way, but…how very tedious. Allow me to translate, instead: HSAs don’t do everything for everyone. They aren’t the perfect solution. They aren’t a solution at all.
… Assembly Bill 47 is the wrong path to health care reform and will actually undermine the goal of health coverage that meets the actual health care needs of the population.
Thus, we shouldn’t support them. They shouldn’t be allowed.
One. Two. Three. Sigh.
Of course HSAs aren’t “the solution.” For the record, I doubt there is “a solution” to our health care “crisis.” Health care costs money. Somebody has to pay it. CAW and the AFL-CIO will, it seems, be unsatisfied unless every citizen has the best and most comprehensive plan available at the lowest possible price…to them, the consumers.
But unless and until somebody discovers the Magic Bean, their wishes are going to remain just that: wishes. What they want doesn't work.
For a lot of people, HSAs are an improvement. They're certainly better than nothing, which is what a lot of employees face if rapidly rising costs might force their employers to drop insurance altogether. That is, as I understand it, part of the "crisis" we face.
But, no. Not good enough.
Luckily, their intransigence is hardly fatal for HSAs. They’re not even a factor in the bill’s fate, really. Not when its eventual success or failure rests with the Democrat-controlled Senate, where doctrine clearly states: “if the government is paying for it, it must be free.” This bill provides incentives for individual choice, responsibility, and independence from somebody else’s authority. The Senate will never go along with it.
And anyway, even without the Senate, CAW, and the AFL-CIO, and even without any Wisconsin state tax breaks, enrollment in HSAs is growing fast. Over 40% growth in 2006 alone.
It’s hard to keep a good idea down.
13 Comments:
Lance, there is so much wrong with HSAs it’s hard to know where to start.
First, they are being pushed by an insurance industry trying to stay in the healthcare profit loop, and they are willing to share those profits with the politicians that make it all happen. (Can anybody say Leah Vukmir?)
In the process they seek to siphon off the young and invincible and dangle the so-called "savings" to suck them in. Unfortunately some will buy the argument without looking at the risks.
1) “After that, the insurance kicks in, and we’re covered.”
Don’t count on it. You assume that it is catastrophic coverage and the company is not going to bail out (read that; cancel your contract) when you get really sick and you need it. They are already doing that today (ask Blue Cross for details). They all have a legal "out," and when they need it they look at pre-existing diseases not disclosed (did you think they forgot that?). You assume that when you exceed the personal deductible that they are not going to have gatekeepers and deny care and interfere with the doctor’s decisions like they do today. Don’t count on it. When your money runs out and *they* have to start paying, you are in trouble.
2) Their job is to siphon off the well and leave the sick to fend for themselves. Not only will this drive up the costs of all other insurance policies, it removes the “well patient” from any pool that will make health care affordable for all.
3) Yes, those in the HSA will now start looking at costs and avoid doctors whenever possible. They’ll avoid both wasteful AND needed care, the latter of which will delay care until it is more costly to treat or becomes untreatable. That may help us, incidentally, because those who die prematurely no longer expend costs.
4) Delaying care will be costly, both to you and your employer. Indeed they will end up with a sicker workforce, that’s the only direction it can go. And the current benefits to employers will depart as they start losing workers to better benefits down the street.
HSAs are a good idea? One way to test this is to mandate them for the state legislature. See if they’ll pass that! Another is to eliminate the cash that flows between the insurance industry and the politicians and see if it still passes. Not just delay the money, as Vukmir is doing, eliminate it also in years to come.
The answer is, without both of those plumbs, they will continue to push the industry’s agenda. And those who don’t understand the issue will continue to believe the industry’s hogwash.
"America will always do the right thing, but only after everything else fails." Winston Churchill
Jack Lohman
http://MoneyedPoliticians.net
John,
Once again you prove that when it comes to HSA, no matter how long your posts, you have no idea what the hell you are talking about.
Lance is right.
Sigh.
Well, Brian, which HSA do you sell?
Health Savings Accounts and High-Deductible Health Plans: “HSAs coupled with high-deductible health plans increase cost-consciousness among enrollees, but have little effect on overall health care costs.” The Bell Policy Center http://www.thebell.org/PUBS/IssBrf/2007/08-HSAs.php
Jack,
Bell Policy Center? Are you serious? Why not just quote MoveOn.org?
Jack, as Lance said, HSA's are not for everyone.
However...
"HSAs are a smart option for the self-employed, owners of small businesses, and employees and people whose companies are dropping health benefits.
Initially a boutique health-coverage product, HSAs are now being offered by virtually all of the top insurance companies, such as Aetna Inc., Cigna Corp., and Blue Cross and Blue Shield. The company that pioneered the HSA concept, UnitedHealth Group Inc.'s Golden Rule Insurance Co., reports that more than 40 percent of its customer base is now covered by HSAs.
Both consumers and employers are driving this trend in the market. The share of all companies - not just those with fewer than 200 workers - now offering HSA plans is up to 40 percent. The 75,000 people who work for Eastman Kodak Co. will be offered three health plans this open enrollment season, including a plan in which they would not have to pay any premiums but have a higher deductible – and that plan will include a Health Savings Account.
Small and self-employed businesses - where the overwhelming majority of American jobs are being created - continue to turn to HSAs as a cost-effective way to cover workers. Tom Terrill, a suburban Chicago insurance broker, recently told the Chicago Tribune that small businesses are turning to HSAs in greater numbers in the Chicago area because "data is mounting to demonstrate their merits."
Government is part of the trend as well. In their new contract with Orange County, Calif., the county's 1,600 sheriff's deputies have a provision that phases in HSAs as a substitute for what the county traditionally grants to retirees.
Even some labor unions are proposing HSAs be put in their next contract. In Tiverton, R.I., the teachers union proposed moving from traditional health insurance to a high-deductible plan that would include a Health Savings Account. The city and the union eventually agreed on a contract without HSAs, but the union's proposal is noteworthy. Past congressional debates over HSAs once featured organized labor's opposition; the Tiverton teachers union is an affiliate of the National Education Association, proof that minds and hearts change over time.
The growing popularity is rooted in the product's middle name: savings. A consumer will typically save up to 50 percent on an HSA plan premium over traditional health plans.
Further, an HSA policyholder has more control over his or her health-care budget; you make the decision when to spend and when to save. And the money you don't spend accumulates year after year earning interest - reserves that can help meet the increased health costs of later life and retirement.
Some of the working population is lucky enough to have a traditional health-insurance plan that works for them, but for the rapidly growing number of people who are swiftly losing their benefits, HSAs are not only a cost-effective alternative, but one that allows them a lot of freedom."
http://www.philly.com/inquirer/opinion/20071225_Health_savings_accounts_are__happily__highly_infectious.html
Obviously, Brian, your ommission of which HSA you represent makes clear your personal stake in this, but so be it.
Are HSAs good for anybody? Perhaps the young and indistructable and those who don't get sick. Certainly not those who are middle or lower income, or those who may get sick. But if the employer pressures them to accept them when they can't afford it, well, that's too bad. Whatever successes you might be able to point to will be short lived.
And frankly, if the politicians pushing them made them mandatory for state legislators, perhaps even I could be swayed. But they won't. They know better.
(HSAs) are being pushed by an insurance industry trying to stay in the healthcare profit loop, and they are willing to share those profits with the politicians that make it all happen. (Can anybody say Leah Vukmir?)
Jack, can you argue this without slinging mud? Have you so little confidence in your philosophy and arguments? First Rep. Vukmir, then Brian. Typical.
How come I haven’t gotten a check from the insurance industry yet? Lost in the mail?
Anyway:
1) “After that, the insurance kicks in, and we’re covered.”
Don’t count on it. You assume that it is catastrophic coverage and the company is not going to bail out (read that; cancel your contract) when you get really sick and you need it…
Insurance of any kind – not just health insurance, and certainly not just HSAs – is a pay-first, receive-later business. The possibility exists that a business might take your money now and not pony up their end when you need it. Just ask seniors and near-seniors who are concerned about losing future Social Security and Medicare benefits.
That’s why we have things like DATCP and the Office of the Commissioner of Insurance, to give people some protection. One of the legitimate government functions, in my mind.
2) Their job is to siphon off the well and leave the sick to fend for themselves. Not only will this drive up the costs of all other insurance policies, it removes the “well patient” from any pool that will make health care affordable for all.
It does not do that when an employer offers HSAs to all their employees. It may, in the case of individuals buying their own insurance. Your position, then, is to deny individuals that choice?
3) Yes, those in the HSA will now start looking at costs and avoid doctors whenever possible. They’ll avoid both wasteful AND needed care…
Most HSAs offer first-dollar coverage for preventative care – that is, preventative services do NOT come out of the deductible. They’re covered.
4) Delaying care will be costly, both to you and your employer. Indeed they will end up with a sicker workforce, that’s the only direction it can go. And the current benefits to employers will depart as they start losing workers to better benefits down the street.
See my answer to #3. And employers can already lose workers to a better compensation package down the street.
HSAs are a good idea? One way to test this is to mandate them for the state legislature.
I wholeheartedly agree, and will be first in line to sign up.
Your argument seems to be that people either should not be allowed to or are not capable of making health care decisions on their own. While I disagree with you, I also encourage you to continue making that argument.
Lance, I don’t think asking Brian which HSAs he sells is slinging mud, unless you feel HSAs indeed fit into the category. He has chosen not to answer so readers can draw their own conclusions. And referencing an article by a small business association filled with insurance industry members does tend to say a lot about his biases.
But you’ll have to excuse by cynicism, I deal constantly with industry shills who hide behind the anonymity of the internet to push their product. I prefer being honest about who I represent.
And Vukmir? Do you really want to get into her campaign contributions from the insurance industry and her votes on spending money to satisfy contributors? Sorry, the public has a right to know about politicians that are causing their taxes to be spent inappropriately. And surely the right-wingers can defend them, though I thought they too were concerned about inappropriate taxation.
That said, people are indeed concerned about how our Social Security money is being spent, but the majority do not want the system turned over to private industry. We want the money better invested and to not become a slush fund, and giving it to bankers is not our first choice. And turning Medicare over to private industry -- which currently has some Medicare contracts that cost taxpayers 20% more than traditional Medicare -- should alert you to the pitfalls of for-profit medicine. And conservatives want more of the same?
At least Medicare doesn’t need the added bureaucracy of the DATCP and the Office of the Commissioner of Insurance to protect its beneficiaries. I get sick, I get care, and the caregiver gets paid.
>>> “It does not do that when an employer offers HSAs to all their employees.”
Or pressures employees with incentives to make the change so the employer can save some money and transfer risk to the employee.
>>> “Most HSAs offer first-dollar coverage for preventative care – that is, preventative services do NOT come out of the deductible. They’re covered.”
And so patients get their preventive care and find out they have a problem they can’t afford to treat? What next?
>>> “I wholeheartedly agree, and will be first in line to sign up.”
That’s nice, but I’m suggesting they mandate that all *legislators* sign up for the HSA. If it’s good enough for the taxpayers it’s good enough for lawmakers. And I don’t know your business, Lance, but why don’t you negotiate out of your current coverage and sign up for a private HSA?
And you may be a very smart fellow, but 80% of the public cannot effectively make these choices and 100% of them cannot predict whether they are going to need health care in the future. Yes, some will keep their HSAs until they start needing care, and then switch into the standard system, only then to be faced with the pre-existing diseases that caused them to switch in the first place, and won't be covered with the new policy. I think HSA users are painting themselves into a corner.
And here's where our tax dollars are going:
"New York Attorney General Andrew Cuomo will sue UnitedHealth Group and subpoena 16 other insurers to investigate reimbursement practices that allegedly cheated customers out of hundreds of millions of dollars."
HSAs are just an extension of standard insurance plans. No thank you.
Jack, that story (here's the link) doesn't mention HSAs. In fact, the examples they use sound more like comprehensive-type plans.
Point being: if a company is going to be dishonest, they'll be dishonest. HSAs are no more likely to be targets of that dishonesty than any other type of plan. You're better off making that argument about insurance in general than about one specific type.
By the way: I assume you opposed the original Healthy Wisconsin Plan? It utilized HSAs.
But they never seem to mention Medicare as cheating their patients, do they?
Medicare is not perfect, and I've written much about that. See http://tinyurl.com/2hzj65
But we certainly don't need another bureaucracy to protect the public. And HSAs are just an extension of current insurance plans.
I did not support the original Riemer plan but did support the Miller plan. If the original plan came back to the floor I'd have to look at it again. Generally I'm against "fair weather" insurees that won't support the big pool until they are in trouble, and then want to jump in.
Jack,
I would have responded sooner, but I have a family, a job and a life and can't keep up with what every uninformed blog poster has to say about me.
To reiterate that you are completely full of crap, let me be perfectly clear.
I do not sell HSAs. I do not represent HSAs. Although I was at one time an advocate for the health insurance industry, I have not worked for an HSA-related interest in more than 3 years. But my experience has taught me about the policy enabling legislation, the product and the industry as a whole. Rather than simply spout off some left-wing anti-everything rhetoric, I support HSAs as a component of the health care market place because, and I will type this very slow so that you can keep up. They work.
Evidence-based health care policy, if you will.
Ok, Jack, you can now continue to sling your angry invective and baseless personal accusations across the Internet.
Whatever floats your boat.
Evidence-based health care policy? Where do you get that? HSAs promote dollars-based medicine!
Yes, we need evidence-based health care, but we won't get there until we have a solid, national database where 100% of our population's diseases and treatments and results (sans patient ID) are stored and compared and then given to the physician before he treats the patient. We need ONE national database, not the hundreds that are in production. But that means "government control" which flies in the face of the right-wing philosophy of "everybody for themselves."
Thanks for your Bio, at least I know where your views have been molded. Mine is at http://moneyedpoliticians.wordpress.com/about/ (I'm sure you're very interested.)
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