Success Stories

Health Savings Accounts dominated the news this week. Several reports:

  1. Two witnesses stood out during a Senate Finance Committee hearing on Tuesday by telling their own HSA success stories:
    • Utah businessman Joseph Knight said his small manufacturing company was facing a 49% premium increase for its health plan in 2005. Dropping insurance wasn’t an option because one employee had a wife with cancer and another had a child with a serious illness.

      To keep the insurance and afford the premiums, his company switched to high deductible insurance ($3,500 single and $7,000 family) and contributed $600/$1,200 to employees’ HSA accounts.

      Knight and other top executives worked hard to educate their 60 employees about the new plan, meeting with them in the evenings over pizza to answer questions. “Education is crucial,” he told the Senate. The result: Employees are “very satisfied” with the new plan, and many already have significant HSA savings.

      Senator Rockefeller asked if “lower-income workers would still be happy if they have a catastrophic illness.” Knight said that he has a $7 per hour employee with high medical costs, and because all out-of-pocket costs count toward the deductible with HSAs, “even those with the lowest incomes come out ahead” over the previous plan (which also had a higher-than-traditional deductible).

    • Financial Services Consultant Eric Beittel said he and his wife were expecting their second child and, “Though Jen had a job she loved as a public high school teacher, she wanted to stay home with our children,” he said.

      The problem: job lock. She was afraid to lose the family’s health insurance. When Eric started pricing conventional policies, he found premiums to be $800 to $1,000 a month, prohibitively expensive on only one income.

      HSA-qualifying insurance offered an alternative: A $3,600 deductible policy for about $200 a month.

      With three children now, he says the premium savings more than make up for the higher deductible, and his wife has become a much more savvy consumer of health care services. “It gave us an extraordinary opportunity?an opportunity for my wife to be home with our children. Priceless.”

    • Another bright spot: Sen. Rockefeller, no fan of HSAs, said he was intrigued by research that shows that use of preventive services increases for those with HSA insurance. “This is enormous in my mind?We’ll look into this and, if you are right, that’s significant and we’ll take this into account.”
  2. But you would never know there was a single success story about HSAs from reading a one-sided article on the front page of The Wall Street Journal on Monday, (which had my blood boiling during a trip to Miami and back that day to speak on consumerism in health care at the Coral Gables Biltmore).

    The Journal story was about a small employer’s struggle to provide his 34 employees at Russ Moore Transmission in Fort Wayne, Ind., with the information they needed to manage their new high-deductible insurance.

    Manager Nick Bond said the previous health plan encouraged employees to overuse medical care “because they didn’t have to pay for much of it themselves.” The switch from the low-deductible plan was not easy, as both employer and employees struggled to find the information they needed to be better health care consumers.

    Bond clearly didn’t have good agent support, and he and his office manager “had to hole themselves up in their offices for about two weeks developing a spreadsheet with price information on 32 drugs.”

    So yes, HSAs aren’t for everyone and not every switch is a success. But the Journal story was very unbalanced in not giving the other perspective of companies that get it right.

  3. The House Ways and Means Committee voted 24-14 to send a bill to the floor to make HSAs more attractive. The legislation, sponsored by Rep. Eric Cantor (R-Va.), would:
    • Allow employees to make a one-time tax-free transfer of funds from their Flexible Spending Account and Health Reimbursement Account into an HSA.

    • Allow a one-time transfer of funds from individual retirement accounts to an HSA so funds could be available right away to meet family health expenses.

    • Allow employers to make higher contributions for non-highly compensated employees.

    • Simplify the HSA rules so people could contribute up to the maximum (now $2,700 for individuals and $5,450 for families) to their HSA instead of limiting the contribution to the amount of the deductible on their health insurance policy.

    There are other provisions which you can read here, but these all seem very positive to us. The measure must now pass the House (expected) and the Senate (much more difficult), but outgoing chairman Bill Thomas said he is optimistic the measure can be enacted when Congress returns in November for a short lame-duck session.

    But not if Rep. Pete Stark (D-Calif.) has anything to do with it. He said the bill “sums up the entire Republican health care agenda: You’d better hope you don’t get sick because you won’t be able to afford medical care.” Stark added, “Why are we dedicating the few remaining hours of this Congress to a bill that does little more than provide a new billion-dollar tax shelter for the wealthy?”

Finally, the Citizens’ Health Care Working Group issued its report this week, with congressional hearings to follow next year. Here was our take on this missed opportunity to actually inform the policy debate and advance a substantive conversation over health reform. And here is an AP article that ran in major papers around the country quoting us about the report.

Grace-Marie Turner


  • 2006 Employer health benefits survey
  • Small group health insurance in 2006
  • Medical mindset
  • Medicare debacle
  • Opportunities for state Medicaid reform
  • High-priced pain: What to expect from a single-payer health care system

Source: The Kaiser Family Foundation and the Health Research and Educational Trust, 09/26/06

Average premiums for employer-sponsored health insurance rose to $4,242 a year for single coverage and $11,480 for family coverage in 2006, according to an annual survey released this week by the Kaiser Family Foundation. But the 7.7% average premium increase was the slowest rate of growth since 2000. The survey includes a wide range of information on trends in employer-based health coverage, including data on high-deductible health plans, health savings accounts, employee cost sharing, and disease management and wellness programs.
Full text:

The authors of this study also published the results as a Health Affairs Web Exclusive.
Full text:

Source: America’s Health Insurance Plans, 09/06

The news was better for small group health insurance coverage. A survey by America’s Health Insurance Plans found that premiums for small group coverage averaged $3,730 a year for single coverage and $9,770 annually for families in 2006. The survey included data from more than 650,000 small groups, with 80% having 10 or fewer employees. AHIP found that “Small group premiums in 2006 were slightly lower than those reported in the 2005 Kaiser Family Foundation survey of (mostly) larger employers, despite an additional year’s increase in health costs.” The survey also provides data on employee cost-sharing, premiums by state, premiums by size of group, and choice of benefit plans.
Full text:

Author: Sally Pipes
Source: National Review Online, 09/21/06

The “biggest obstacle” to controlling health care spending is consumer insulation from cost, according to Sally Pipes of the Pacific Research Institute. Pipes maintains that the solution to rising health care spending is not more socialism and risk pooling, as argued in recent articles by UAW president Ron Gettelfinger and New Yorker writer Malcolm Gladwell. “For Americans to truly manage health-care expenditures, we must see it as akin to other life necessities, food, housing, clothing, and transportation,” she writes. “The truly needy are provided for collectively, through government programs. The rest of us must budget for routine expenses and insure against catastrophe.”
Full text:

Author: Lawrence A. Hunter, Ph.D.
Source: The Hill, 09/26/06

Congress continues to impose price controls on doctors’ fees as a means of controlling spiraling Medicare costs, but Dr. Lawrence Hunter of the Institute for Policy Innovation warns controls fail and distort markets in the process. When “controls are imposed to keep prices [down], demand for the good or service in question rises, supply begins to dry up, and quality?declines.” Hunter calls Medicare a “gigantic welfare program,” and argues that when Medicare beneficiaries have “no skin in the game, consumers have no effective brake on their demand, and health-care providers under Medicare have every incentive to provide more services.” (Accelerating demand is a major force driving up Medicare expenditures and beneficiary premiums.)
Full text:

Authors: John C. Goodman, Michael Bond, Devon M. Herrick, and Pamela Villarreal
Source: National Center for Policy Analysis, 09/28/06

The National Center for Policy Analysis encourages “common-sense” reform to Medicaid like substituting less-expensive for more-expensive providers and therapies, selective contracting with health care facilities and hospitals, and expanding efforts to combat fraud and abuse. The NCPA study describes Florida’s program to use consumer-selected health plans to inject competition, choice, and control into Medicaid. “The ultimate goal of Medicaid reform should be to move patients to the same type of private health plans most Americans have,” concludes the study. “In order to move in that direction, states should encourage private insurance, remove barriers to competition and allow Medicaid recipients to participate in private plans.”
Full text:

Author: Kevin C. Fleming, M.D.
Source: The Heritage Foundation, 09/22/06

A single-payer health care system “has detrimental secondary effects far in excess of the primary beneficial effects alleged by its proponents,” writes Dr. Kevin C. Fleming of The Heritage Foundation. “Policymakers should?focus closely on the performance of existing models: the British, Canadian, and other state-run systems,” writes Fleming. “The empirical evidence generally shows that such a system would result in government rationing and waiting lines for care, reductions in the quality of care, chronic funding crises, slower adoption of and reduced access to advanced medical technology, labor strikes and personnel shortages, creation of new sources of inequality in access to care, expanded bureaucratic power, politicization of personal health care decisions, and a loss of personal freedom,” he writes.
Full text:


Solutions for Patient Centered Healthcare
Santa Clara County Medical Association Debate
Saturday, September 30, 2006, 10:00 a.m. – Noon
Stanford, CA

For additional details and registration information, go to:

Transparency in Health Care: What Consumers Need To Know
Heritage Foundation Briefing
Tuesday, October 3, 2006, 11:00 a.m. – 12:30 p.m.
Washington, DC

For additional details and registration information, go to:

Grace-Marie Turner speaking on the Mark Wayne Show
WICH 1310 AM Radio Broadcast
Thursday, October 5, 2006, 8:40 a.m.
Norwich, CT

For additional details, go to:

Health Care Emerging Issues Forum
Heartland Institute Event
Thursday, October 5, 2006, 9:00 a.m. – 10:30 a.m.
Chicago, IL

For additional details and registration information, go to:

State Health Care Policy Reform Summit
State Policy Network Annual Meeting
Saturday, October 7, 2006, 8:00 a.m. – 3:00 p.m.
Milwaukee, WI

Grace-Marie Turner will serve as moderator during SPN’s Health Care Policy Reform Summit. For additional details and registration information, go to:

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.