While Washington debates whether to bankrupt the U.S. health care system with a single-payer solution that destroys the private market, or a public-private partnership that subsidizes it, real reform continues to spread via Health Savings Accounts — a system that puts cost control in the hands of consumers. There are more people in the country with HSAs than there are in the Federal Employees Health Benefits Plan (the one all federal employees, including congressmen and senators have).
HSAs are based on a very simple concept: Cut your insurance premiums by 25% and put the money you save into a tax-free account that you use to meet your insurance deductible.
According to the Kaiser Family Foundation, a liberal think tank, families save an average of $3,836 by switching to an HSA-qualified health plan. This annual premium savings of $3,836 is roughly equivalent to the deductible of the HSA policy. But the savings are there year after year, while the deductible is spent only in years when you need that much health care.
More money in your pocket, tax free, and less in the insurance companies’ coffers.
Furthermore, the HSA insurance premiums’ annual rate of increase is 3% to 5% a year, versus 8% to 10% increases for traditional health insurance.
House Bill Kills HSAs
If you want choice in your health care, if you want you and your doctor to make your own treatment decisions, an HSA is the plan for you.
Under the House of Representative’s current health reform bill, HSAs will cease to exist in the individual insurance market, the government-run Health Information Exchange and are not included in the government-run health care option. The Democrats’ plan in the House will mandate HSAs to death, driving up the cost of the health insurance, and destroy the savings that fund the HSA.
Before the House Energy and Commerce Committee ceased its work, one of the Blue Dog Democrats was planning to offer an amendment to correct this problem, by exempting HSAs from these HSA-killer mandates. Alas, we will have to wait and see what transpires, but as of now, HSAs are dead in the House of Representatives bill.
Politicians talk a great deal about the uninsured. But people have a rational interest in maintaining their own health. The primary factor increasing the number of the uninsured is the runaway health-care inflation that forces businesses and individuals to opt out of traditional third-party payment plans.
As a result of the cost-cutting incentives of HSA plans, nearly 2.5 million persons obtained health coverage as of January 2008 who previously had none. Of those purchasing HSA plans through an employer, 27% were previously uninsured. Among those purchasing such plans privately, 40% were previously uninsured.
HSAs also increase the use of preventive care, not by nagging you to death, but by creating personal financial incentives for you to take care of yourself. With the chronically ill, their financial incentive to stay on their treatment regime is simple: If I do not take my medications and I get sick, I pay out of my pocket when I have to go to the doctor or hospital. This is why the chronically ill who have insurance via an HSA have fewer doctor and hospital visits than those chronically ill with traditional-old-school health insurance.
If our national goal is to minimize those lacking an insurance safety net without imposing mandates or inflating costs, Health Savings Accounts are a major part of the answer.
Unions See Advantages
Even unions are beginning to understand the rationality of the high-deductible, low-cost, private-choice-driven plans. At the troubled Boston Globe newspaper, the Mail Handlers and Carriers Union faced a single-year premium hike of 13% on its employee health care plan in 2007. The union converted to an HSA plan with a $1,500 deductible for individuals and a $3,000 deductible for employees. The new plan, unlike the old, included increased coverage for dental and vision care. Even with the expanded coverage, the averaged employee saved $1,170. And the union saved money on total premium costs as well.
A system based on consumer-driven shopping forces providers to compete in creating better products and superior services at lower cost. If Washington is serious about reforming health care without bankrupting the nation, it will look toward the tried-and-true market incentives of Health Savings Accounts.
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