IN THIS ISSUE:
? “HSAs Will be Widespread” – Kiplinger’s
? “The Most Formidable Reform Movement in Health Care”
? Ownership Society in NY Times
? Ownership Society in Business Week
? Ownership Society in Cleveland Plain Dealer
? “Momentum Rolling Toward Consumer Driven Health Accounts”
“HSAs Will be Widespread” – Kiplinger’s
I don’t know if it is the upcoming elections, the open enrollment seasons, or the year-end push for HSA enrollment, but there have recently been a lot of big, thoughtful articles about consumer driven health care in the media.
One of the best was by Mary Beth Franklin and Kimberly Lankford in “Kiplinger’s Personal Finance.” The article cites several examples of people who are saving money by using HSAs and says, “If your employer doesn’t offer the [HSA] option during this year’s open season, you might want to start agitating to have it added ASAP.” They add that, “Employers are just beginning to build them into benefit plans. By this time next year ? HSAs will be widespread.” The families cited as examples of satisfied users include Bill Lomel who owns a roofing company in Atlanta and “was struggling to pay $750 a month for insurance for himself and his three children.” He switched to a $5,000 deductible with Golden Rule and is saving $6,000 a year in premiums. Now he’s planning on extending the same program to his 25 employees.
The article also cites the First National Bank of Orwell, Vermont that has purchased $4,500 deductible policies for its employees and contributes $3,250 to their HSAs. That leaves a $1,250 gap before the insurance kicks in. “That may sound like a lot,” says the article, “but it’s really not when compared with a traditional health-insurance plan that has a $500 deductible and a 20% co-pay.” An employee in such a plan would incur $1,300 in out-of-pocket costs when using $4,500 worth of services. Bank president Mark Young says, “What I like about HSAs is that they force consumers to be invested in their health care.”
Another example is Carl Blachowicz who runs a one-person auto repair shop in Orlando, FL. His wife Debbie worked at AT&T and the family contributed only $80/month to cover themselves and two children. After she retired they could have continued that coverage for $1,200/month, but decided to keep Debbie on the AT&T policy for $440/month and put Carl and the kids on a $5,000 deductible policy from Assurant for $230/month. Carl says, “It’s one of the better things I’ve done since I’ve been in business.”
“The Most Formidable Reform Movement in Health Care”
November’s “Money Magazine” also has a big article, “Are You Ready to Own Your Health Care?” Written by Amy Feldman and Peter Carbonara, the story says it would be a mistake to take lightly President Bush’s promise that “more people will own their own health plans.” They say, “Behind the slogan lies the most formidable reform movement in American health care.” They say consumer driven health care “is much bigger than either [political] party,” and is “rapidly taking on an air of inevitability.” It cites employers such as Sara Lee and insurers like Aetna as examples of how serious the movement has become. The article quotes former CEO of Physicians Health Services Bob Natt as saying, “Over the next 5 to 7 years the traditional plan for most employers will be gone.” The article goes on to quote widely from Regina Herzlinger of the Harvard Business School who is “the unofficial godmother of consumer-driven health care.” Much of the article is devoted to Dr. Hezlinger’s critique of the current system which is “shielded from the discipline of the market.”
The article also cites doubts about the approach, especially the concern that it is just an excuse for shifting costs to employees (apparently some people still don’t realize that there is no cost shifting – every penny employers spend on benefits is money not available for wages). The article also says that “there’s the question of whether it’s wise to trust ordinary Americans to make their own health-care decisions.” The article says Dr. Herzlinger cites “marketing studies that suggest that an innovation goes mass market when 16% of the target users adopt it.” She asks, “Are one in six people sufficiently interested in health care to change it?? I think we’re at that tipping point.”
Ownership Society in NY Times
President Bush’s idea of an “Ownership Society” has sparked a great deal of interest. Writing in “The New York Times,” Daniel Gross asks, “Are Americans, the world’s champion consumers, ready to turn thrifty?” He says the general idea is that “The more money Americans set aside to finance their retirement, their health care, and so on, the smaller the burden will be on employers and the government to pay for these things.” He doubts it will work since most Americans don’t maximize the savings opportunities currently available. But he misses the point that “ownership” involves a lot more than just saving for the future. It also involves putting the individual consumer in charge of deciding how and when those savings will be spent. That is what will force change in crusty old non-competitive industries like health care.
SOURCE: This article appeared in the October 17, 2004 issue. The article is available for purchase at query.nytimes.com/.
Ownership Society in Business Week
The Ownership Society has Robert Kuttner worried, too. Writing in “Business Week,” he argues that owning one’s own house is different than owning one’s own health plan. He says, “Ever since the New Deal, public policy in America has protected ordinary people against unforeseen risks.” He especially doesn’t like HSAs, for four reasons – 1. “The approach fragments the risk pool [by attracting] younger and healthier people.” 2. “Individual policies are far more expensive than group policies to underwrite and administer.” 3. “These high deductible policies don’t cover preventive care.” 4. “Low income people lack the means to use a Health Savings Account.” He doesn’t care much for people owning their own retirement plans, either, and argues that public safety nets make risk-taking possible.
SOURCE: The article ran in the October 17 edition of “Business Week,” but you must be a subscriber to access it on-line.
Ownership Society in Cleveland Plain Dealer
But Christopher Montgomery argues in the Cleveland “Plain Dealer” that the Ownership Society “might already be on the rise.” Younger people especially don’t trust or rely on the public safety nets that have Mr. Kuttner so enamored. They represent “an entire generation of workers that has had the notion of fiscal self-reliance drilled into it.” He says, “For many echo boomers, as the children of baby boomers are known, gaining some control over federal insurance programs such as Social Security seems like a natural progression.” He quotes EBRI’s Dallas Salisbury as saying young people have been told “from day one not to assume that someone else is going to give you retirement income and health benefits.” A number of younger people are quoted, including 24-year-old PR associate Laura Domokos who doesn’t believe Social Security will be around when she is ready to retire. “I prefer to have control of my finances, to see a tangible item and know that down the line I’m going to get my payoff,” she says. The concept has its critics, of course, including Joseph White, chairman of the political science department at Case Western Reserve University. Mr. White argues that “Social Security could be fixed by addressing the massive federal deficit.” (Isn’t that a little like saying Social Security could be fixed by fixing Social Security?) The article goes on – “White is even less sanguine when it comes to health savings accounts… ‘What does health care mean in the ownership society? You own your own disease?'” (Actually, yes, that is precisely what it means. You own your own disease and no one will care more about it than you yourself will).
“Momentum Rolling Toward Consumer Driven Health Accounts”
Finally, M. William Salganik has a big article about HSAs in the “Baltimore Sun.” He says, “Whatever the result of next month’s election, momentum is rolling toward consumer-directed health accounts.” He adds, “The new option presents the greatest change in health insurance in more than a decade.” He cites the Moline family of Bowie, Maryland, who were paying $800/month for health insurance when husband Chris was starting a new floor-covering business. They cut their monthly premium to $400 by switching to a high deductible health plan and are putting $200 of their savings into an HSA. Wife Sharon says, “We calculated the worst-case scenario, a catastrophic year, and we would still come out paying less out-of-pocket with this plan.” The article also cites a New Jersey hospital that “projects 18% savings for each worker who switches,” and “Rolls Royce North America [that] projects savings of $200,000 for next year, after making HSA contributions” based on enrolling only 800 or fewer employees of a total workforce of 6,500. The article goes on to cite critics who worry about adverse selection and risk segmentation, but are rebutted by Aetna President Ron Williams who says, “Our conclusion is that there’s no adverse selection worry we’ve seen manifested in the data so far.”
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