Health Savings Accounts and Health Reform

A recent study by OptumHealth concludes that 78% of HSA accountholders believe that HSA’s should be a part of any health care reform that may take place. The study states that 30% would have no health insurance if it were not for their health savings account.

This study may take some of the political sting out of the debate about HSA’s. Democrats contend that HSA’s are just a way for the rich to store and keep more of their money from Washington. The study shows that 70% of the respondents earn less than $75,000 per year.

America’s Health Insurance Plan recently reported that 8 million Americans are now insured through a health savings account. This figure is up from 6.1 million in 2008. The AHIP study reports that almost half of the accountholders have a median income of $50,000 per year.

A typical American household of four enrolled in a ppo plan spends $2,820 per year in out of pocket medical expenses according to the Milliman Medical Index. Many studies show the premiums for a high deductible health plan which must accompany a health savings account have much lower premium costs than ppo plans. With a HSA you can choose the deductible you want, or the premium you can afford.

Many are  concerned that with a high deductible plan you will pay more in out of pocket expenses. That’s where professional medical bill negotiators like INSNET help individuals. They provide risk free medical bill review and negotiation. They charge a percentage of the amount saved on your medical bill, with no fee if there is no savings.

There are certainly many facets involved in healthcare reform, but empowering individuals to attempt to control their own costs certainly makes sense to me.

The Uninsured and Health Savings Accounts

The Congressional Budget Office recently announced that there are currently 45 million Americans without health insurance. They state that without changes to federal policy that the number will be 54 million by 2019. The actual number is up for debate, I know a number of people who elect not to pay the premiums for health insurance, and spend that money elsewhere, even though they have the means to pay.  Whatever the number is, there are a significant amount of people who cannot afford premiums for health insurance.

Many employers now offer high deductible health plans. These plans are unlike many HMO plans where a patient pays small co-pay amounts for doctor visits, hospitalizations and prescription drugs. With high deductible health plans, the patient is responsible for paying medical expenses from dollar 1. The cost savings for the employer and employee for this type of coverage is significant, and could save as much as 30%. If the employer has set up a Health Savings Account they can fund the savings realized from the lower premiums into the accounts for their employees to use.

Here’s an example: A small business with 50 full time employees offers an HMO health plan. The annual premium cost is $325,000, of which the employer pays 75% or $243,750, the employee pays the balance, which is taken out through payroll deductions. Under the HMO plan the patients pay:

$15 doctor office visit co-pay

$250 out patient hospital co-pay

$500 in patient hospital co-pay

$15/$25 prescription drug co-pay

To attempt to lower costs, the employer changes to a high deductible health plan and HSA for its employees. With the patient responsibility starting a dollar 1, the premiums are less expensive. The same 50 full time employees can be insured with a high deductible health plan for $235,000. This savings is in excess of 25%. The employer can use the premium savings and fund $1,500 into each employee’s HSA. Health insurance will pay for any expenses once the deductible has been met. Now that employees are paying for healthcare from funds in their own account, they are more likely to shop for a better price, making them better healthcare consumers.

Smart employers will supply their employees with tools to ensure they make smart decisions for themselves. Access to wellness programs, prescription drug discount programs, discount lab and screening centers and medical  bill negotiators all help patients reduce what they pay on their medical bills.

Finding health insurance for those who really are in need is a challenge. For those who simple choose to put their money elsewhere, high deductible health plans provide an opportunity for those to have some peace of mind that catastrophic medical bills will be paid for.

Health Insurance Deductible of $1,000 was the norm for 2008

It is not just those with Consumer Driven Health Plans (CDHP’s) or Health Savings Accounts (HSA’s) who are adjusting to increased deductibles.  In a Mercer study, National Survey of Employer-Sponsored Health Plans, it is reported that the median deductible for PPO health plans in 2008 was $1,000.  69% of all employees covered by employer sponsored health plans are enrolled in a PPO plan.

Just eight years ago only half of the PPO plans even required a deductible, and then it was just $250.  Currently 79% of plans require a deductible be met before insurance pays.  Mercer contends that the startling revelation of this study is this increase refers to traditional PPO plans, not CDHP’s which require a deductible of at least $1,100 for individuals.

In these tough economic times, employers are looking to reduce costs.  Premium costs go down the more the deductible goes up.  In order to reduce costs, employers can raise deductibles.  According to Blaine Bos, a worldwide partner at Mercer “Raising the deductible has become a fallback for employers faced with cost increases they can’t handle.  It’s the easiest way to reduce cost without taking more out of every employee’s paycheck.”

Another way to reduce costs is to change the type of health plan offered.  The cost per employee in a PPO plan for 2008 was $7,815 compared to $6,207 for employees enrolled in CDHP’s.  “The introduction of the HSA may have changed employer’s thinking on just how high a deductible can go without causing employees to revolt” said Bos.

Whether it’s an increase in PPO deductible or change to CDHP’s, employees will not see any change to their checkbook until the time comes to pay their doctor bill and suddenly they realize they are paying more before their insurance pays due to higher deductibles.

Lowering healthcare costs by offering Consumer Driven Health Plans

A recent Wellpoint report shows that both employers and consumers are saving money with Consumer Driven Health Plans (CDHPs).  The report details almost 8,000 employer groups who moved from non CDHP’s in 2006 to CDHP’s in 2007.  The initial cost trend for groups who elected CDHP’s was slightly negative compared to the 7-10% increase in costs for non CDHP’s.

What was also encouraging in the report was that consumers enrolled in CDHP’s had a higher utilization of preventative care than consumers in non CDHP’s. Males were more likely to utilize preventative care with a CDHP than females.  This is encouraging because health experts have observed males go to the doctor less frequently than females.

The choice of a health insurance plan is a personal decision based on your individual health and financial situation.  Some consumers find the savings in monthly premium with a CDHP will offset the costs involved with a higher deductible.

“Open Enrollment” and HSA’s

A recent New York Times story illustrates that it is “open enrollment” season in businesses nationwide as employees choose their health benefits for the coming year. The story details how some large corporations are switching from offering traditional insurance with small deductibles or co-pays to high deductible health plans which accompany Health Savings Accounts.

The offering of HSA’s by employers should not be viewed negatively as this article suggests. HSA’s empower employees and consumers by offering the freedom to choose when and where they receive their healthcare. HSA’s are growing in popularity at a rate of 20-30% a year. Currently 12 million American lives are insured with HSA’s. HSA’s provide a way for both the employer and employee to save money.

Premiums for high deductible health plans which must accompany a HSA are less expensive than traditional insurance. Employers (who pay the bulk of the premium cost for employees) choose this option to save money, and in the case of self-funded companies, to fix costs. Many employers fund their employees HSA accounts the difference in the amount saved in premium cost from changing to a high deductible health plan. Employees can also contribute pre-tax money into their HSA account, which are not taxed. When an employee or member of their family incurs a qualified medical expense, they pay for the treatment out of their HSA. When the employee pays for the medical treatment the withdrawal is not taxed as long as it pays for a qualified medical expense. The amount of money an employee has in their HSA rolls over year to year and can be invested in a variety of ways.

As the NY Times article details, HSA’s are not ideal for everyone, but what health plan is? Does it make sense for a young healthy family to pay over $1,000 a month in health insurance premiums just so they can pay a $20 co-pay when they go see their doctor? With a HSA, the monthly premium amounts drops tremendously and you pay $125.00 for the yearly visit out of your HSA.

If your employer allows you the choice between traditional insurance and HSA’s I recommend looking at the details of each plan. Patient advocates such as INSNET are always available no matter what type of health plan you elect.