IN THIS ISSUE:
? On the Road Again
? ?Americans are Gobbling Up HSAs?
? HSAs Next Big Opportunity for Banks
? What to Look for in HSA Administration
? HSAs May Solve Clarke County?s Health Care Problems
? Through a Glass Darkly
? Interstate Insurance Sales
On the Road Again
After being able to spend most of the Holidays and through the Inaugural sleeping in my own bed, I’m back on the road. I’m writing this from Kansas where I’ll be meeting with two legislative committees in Topeka and then speaking at a dinner of the medical societies of Johnson and Wyandotte Counties in Overland Park. The Flint Hills Center is cosponsoring this trip. Just like everywhere else, Kansas is concerned about health care costs and access, but the discussions here are marked by a level of civility that is unknown in Washington. Governor Kathleen Sebelius (D) has proposed raising $50 million, mostly through cigarette taxes, to expand Medicaid. She also wants to import drugs from Canada. Senate Republicans have responded with a plan to increase funding for community health centers and encourage participation in a discount drug plan set up by the drug manufacturers. They also want to promote the use of HSAs. Republicans responded to the governor’s plan by saying, “We really can’t afford to do that. We have a lot of other demands out there, including school finance.” Press reports said that Governor Sebelius “welcomed the Senate initiative, but added, ‘This plan does not address the essential issue of coverage for more Kansans.'” No name calling, no hysteria, no scare tactics, just an honest disagreement about priorities and resources.
SOURCE: The governor’s plan is at http://www.ksgovernor.org/docs/HealthyKSOutlineFinal.pdf
An article on the Senate Republican plan is at http://www.kansas.com/mld/kansas/10678232.html
“Americans are Gobbling Up HSAs”
The meetings in Kansas were marked by an enormous enthusiasm for HSAs and other forms of consumer driven health. Everyone is interested in applying them not only in the private sector but for the state employee and the Medicaid and SCHIP programs as well. William Short of UMB Bank reported that getting involved in consumer driven health is the bank’s number one priority today. I have never seen anything like it. These programs are being absorbed by the market far faster than other benefits innovations such as HMOs, FSAs, or 401-Ks. An article by Joel Finkelstein in “AMNews” reports, “Americans are gobbling up health savings accounts, according to a preliminary industry survey, which suggests that the products could quickly have a significant impact on the health care market.” The article cites the recent AHIP survey which pegged HSA enrollment at 440,000 as of September, 2004, and quotes AHIP president Karen Ignani as saying, “This is an emerging market, and it is off to a fast start.” The article says the survey counted only 13,000 accounts at large companies, which were slow to implement the plans because “few large firms had open enrollment periods between the time HSA products became available and the time the survey was conducted.”
HSAs Next Big Opportunity for Banks
The “Business Journal of Minneapolis” reports, “Health savings accounts could be the next big business opportunity for banks in 2005.” The article says, “Banks have been slower [than insurers] to offer the products, but are quickly catching on to their potential.” It goes on to cite US Bank, Wells Fargo, and Associated Bank, whose senior vice president Mickey Webb says, “We are enormously happy with how [HSAs] have been selling. We’ve opened thousands of accounts since July 1? We didn’t anticipate such a strong start.” The article goes on to discuss different marketing strategies of the various banks and concludes the HSA business could rival that of IRAs.
What to Look for in HSA Administration
Gerry Hatler, the CEO of EvergreenBank in the Seattle area, has a column in the “Business Journal of Puget Sound” in which he advises readers what to look for in HSA administration. He includes: Easy access to the money in the account through the use of debit cards or paper checks; Low minimum payment limits, so you can withdraw as little as $10 if you need to; Low administrative fees that can be paid either from the HSA itself or outside of the account; Adequate investment options including safe and liquid short term accounts combined with more aggressive options and balances that build up over time; and Good customer service representatives who can answer your questions. He concludes that “it’s easy to see the potential for financial growth and continued tax benefits for anyone utilizing this new and exciting product.”
HSAs May Solve Clarke County’s Health Care Problems
“The Winchester (Virginia) Star” discusses the impact of rising health care costs on county government in an article by Jessica Sabbath. She notes that county premiums have been increasing at 14.2% per year since 2000 while inflation has been only 2.4%. Rusty Dodd, a consultant hired by the county to help rein in costs says, “At some point, the employers are going to give up.” The article adds, “In Clarke County, where premiums for government employees have more than doubled in the last four years, HSAs are seen as a possible solution.” Mr. Dodd says that HSAs encourage people to think, “Do I need to go to the doctor today or can I just go to a pharmacist?” William Houck is the chairman of the Clarke County school board and a practicing oncologist who says that “many of his patients with low-deductible insurance policies request unnecessary test or studies.” Mr. Dodd has sent out RFPs to Anthem, Community Health, Lumenos, UniCare and Southern Health Services for the county to decide whether to adopt HSAs for its employees.
Through a Glass Darkly
While almost everyone looking at the experience to date with HSAs is impressed, even amazed, at the rapid adoption, Karen Davis, president of The Commonwealth Fund looks at the same phenomenon and concludes in a new presentation that “Current enrollment in HDHP/HSAs [is] low.” She also concludes that “early evidence” indicates “relatively low take-up rates” and that they are “attractive primarily to higher income employees and those with lower health expenses.” What she bases these conclusions on is a mystery since that is not in fact what the early experience with HSAs shows. Ms. Davis also presents data based on a survey done in 2003 that purports to show that people with high deductibles have more trouble with medical costs than those with low deductibles. Of course, as the survey was done in 2003, the people did not have access to an HSA, and she does not examine whether people with low deductibles also had trouble paying their premiums. Even more curiously, the study itself is not available on the group’s web site, only some PPT slides and a press release so it is impossible to verify her conclusions.
Interstate Insurance Sales
Finally, Dr. David Gratzer of the Manhattan Institute had a commentary in “The Wall Street Journal” on the interstate sale of insurance, as proposed last year by Congressman Shadegg (R-AZ). He points out that premiums vary dramatically between states, comparing Kansas City where a certain benefit program costs $170/month for a family of four, to Boston where a similar policy costs $750/month. He adds that employer-sponsored HMO coverage is a third more expensive in New Jersey than in California. He argues that much of the difference is due to state regulations including mandated benefits and rules like community rating and guaranteed issue in the individual market. The consequences include higher premiums, more uninsured, and reduced labor mobility. He says allowing interstate sales of insurance would restore the Interstate Commerce Clause of the Constitution and increase competition, and concludes, “Allowing a competitive market for health insurance won’t be a major budgetary expense – but it may prove priceless to the cause of advancing market reforms to better American health care.”
SOURCE (requires subscription): http://online.wsj.com/article/0,,SB110661643244934843,00.html
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