Stuck in HSA Denial (Dems won't concede what statistics can't hide/HSAs work, even for the poor)

The American Prowler ^ | 2/24/2006 | David Hogberg

[nickcarraway]

Consumer-driven health care is beginning to show real signs of progress. A recent survey by America's Health Insurance Plans found that the number of people with a health savings account (HSA) tripled, from 1 million to 3 million, in barely a year's time. Companies are finding that high-deductible plans coupled with an HSA cost less. In his recent visit to Milwaukee, President Bush pointed to the hamburger giant Wendy's, which saw an increase of only 1 percent in its premiums after switching to an HSA plan.

Although I haven't had much to cheer about regarding the White House as of late, health care is an exception. President Bush has released a relatively bold agenda that would add steam to consumer-driven health care. The proposals include allowing all taxes, including payroll taxes, to be deducted from HSA contributions; putting individually-purchased health insurance on a more equal footing with employer-purchased insurance by permitting those who buy an individual HSA policy to deduct the cost of the premium from their income taxes; and also putting individual-purchased insurance on an equal footing with that of large employers by allowing individuals to purchase their insurance out of state.

Despite the progress, the political left refuses to acknowledge consumer-driven health care's promise and persists in promoting misconceptions about it. Jason Furman, of the liberal Center for Budget and Policy Priorities, in a missive against HSAs, complained that:

Our nation is suffering from two chronic health challenges: spiraling insurance premiums and 46 million Americans with no coverage at all. Just since 2000, premiums have skyrocketed by 73% and 6 million more people have become uninsured. The President's Health Savings Account "solution" would likely make these problems even worse.

Actually, consumer-driven health insurance provides relief from higher premiums. The Deloitte Center for Health Solutions released a survey showing that while premiums for more traditional plans rose between 6.6 and 7.5 percent last year, premiums for consumer driven plans rose only 2.8 percent. That's lower than the 2005 inflation rate of 3.4 percent.

Furman also overlooks improvement in the insured/uninsured numbers since HSAs came on line in 2004. While Census Bureau statistics show the number of uninsured has increased by 6 million since 2000, in 2004 the growth in the uninsured slowed. In the previous three years, the growth in the uninsured had ranged from about 3.2 percent to 5.7 percent; in 2004, it was under 2 percent. Another promising development in 2004 was that the total number of privately insured and those with employer-based insurance increased for the first time in five years. The arrival of a lower cost insurance product in the form of HSAs is likely one factor leading to these positive developments.

In reaction to Bush's agenda, many liberals like Ted Kennedy trotted out the increasingly tired "only for the healthy and the wealthy" charge against HSAs. While it is tempting to go through all the evidence showing it isn't true, it may be more instructive to consider the example of Wendy's touted by Bush. The average worker at Wendy's is likely part of the "working poor." And since the health of the poor tends to be worse than that of general population, chances are that Wendy's employees are a bit sicker on average. In other words, Wendy's is an excellent example of consumer-driven plans not being primarily for the healthy and the wealthy.

Furthermore, other parts of Bush's health care agenda make HSAs more accessible for the poor and sick. Bush's agenda permits a low-income family to take a refundable tax credit to purchase an HSA. It also allows small businesses and civic and religious groups to form associations that enable them to pool their resources to purchase insurance for their members. Finally, Bush enables employers to put additional contributions in the HSA of an employee with a chronic health condition.

Despite all the promising news, the path toward a more consumer-oriented health care system will not be without some serious obstacles. Many people are still stuck in an "entitlement" mentality regarding health care, for years accustomed to employers and insurance companies picking up the tab. A recent article in the Chicago Tribune examined the experience of Lutheran Social Services, which switched to an HSA plan last July. On balance, it has not been positive:

Larry Lutey, the agency's vice president of human resources, said many employees "don't like the HSA, to be quite frank," because it's a new way of thinking about buying medical services, and workers think it costs them more. "If my position had been an elective one," he added, "I would have been voted out of office this year."

Lutey said employees are unhappy with HSAs because "it feels like they're paying more upfront. The perception is, this is a very expensive type of plan. Even though there is money in [employee] accounts to cover these expenses, people end up feeling they're paying more out of pocket."

As the example of Whole Foods shows, companies can minimize such problems if they make a serious effort to educate employees about the switch to a consumer-driven plan. Nevertheless, there will be both some resistance and resentment as people change from health-care dependents to health-care consumers.

Despite some problems, consumer-driven health care can be expected to grow as it lowers costs and gives people more control over their health care choices. Congress can move the process along even more if it acts on Bush's health care agenda.

David Hogberg is a senior research analyst at the Capital Research Center. He also hosts his own website, Hog Haven.

[goldstategop]

The idea is if people pay directly for their health care, they're likely to get better service and lower costs for health care plans won't be in the business of pleasing a third party but pleasing the direct end consumer of their health services.

(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")

[TheCPA]

I have an HSA and they are great. The money that goes into the account is deductible in calculating adjusted gross income. If a taxpayer does not put in the maximum amount allowed during the year, the taxpayer has until April 15 (or April 17 in 2006) to contribute additional amounts up to the maximum. In this way, an HSA is similar to an IRA. Distributions from HSAs used to pay medical expenses are not taxable. HSAs do not have a "use it or lose it" requirement as do Section 125 plans.

[nickcarraway]

Who is your HSA through?

[angelanddevil2]

So how does that work?. You select HSA as your health insurance, right?. Actually you don't pay an insurance company but you put your money in your healthcare account and you can't spend it unless it's for healthcare, right?.
So you say that the "use it or lose it" rule does not apply, but works more like an IRA, it accumulates . Questions: 1.- if you are sick, do you have to pay all the medical bills?. I mean, with a healthcare insurance, part is paid by the insurance company. 2.- If the answer is yes, then let's say that you started your HSA account last month and are sick this month. For sure in one month you didn't have the time to save enough. What's the point then?.

[Gondring]

My employer has every incentive to "educate" the employees on the HSA plans...for every sucker they get to take the HSA plan, the company has to spend $800 less in premium contributions as compared to an HMO or PPO option.

The point that the HSA is a great way to go if you're healthy or wealthy really is true. For either of those groups, it's the sensible way to go, since you can save money while protecting yourself against catastrophic problems, but I wouldn't recommend it for others.

[Carry_Okie]

The proposals include allowing all taxes, including payroll taxes, to be deducted from HSA contributions; putting individually-purchased health insurance on a more equal footing with employer-purchased insurance by permitting those who buy an individual HSA policy to deduct the cost of the premium from their income taxes; and also putting individual-purchased insurance on an equal footing with that of large employers by allowing individuals to purchase their insurance out of state.

This is a great idea. Now if we could just get third party quality and customer satisfaction verification going in a big way, we could dump the bureaucrats to boot.

[FarmerW]

I am no expert in HSA, but let me give it a shot.

You still pay an insurance premium to the insurance company of your choice. The only difference is the deductible on that policy. To qualify for an HSA you must select a high deductible policy. In the case of a family it is around 5k and for an individual it is about 2k. The change every year slightly I am not sure what it is for 2006.

So you or your employer can put the HSA approved amount in your HSA fund, most likely at your bank. You get a check book for that account or a debit card.

When you see your dr, it is exactly like before, with your insurance card. The dr bills your insurance, the insurer approves/declines the charges just like before and applies the discount they have with that physician...then they apply the amount owed to your deductible. This is the same as the majority of people have now with their small annual deductibles. When the bill arrives to you, you pay it from that HSA check book.

If you never reach your deductible, then the money left in your HSA account at the end of the year remains in your account and is yours forever, but can only be spent on certain things without tax implications. (insurance if you ever become uninsured, cobra, longterm nursing home care, secondary policy when in medicare might be some examples)

If you reach your deductible in a year, the policy kicks in just like it would with a $200 deductible policy would.

To the poster that said it didn't make sense to do it with their employer for a $80 a month savings, that might be true in their particular case. Obviously, they need to look at the package their employer is offering. The savings in premium for me is about $5500 / year. About the same as what gets put into the HSA account. So worst case, if I spend it all in a single year I am even, less the tax advantage. But, I am self employed. An employee needs to add in if the employer is funding the HSA account or not. So $80 / month less PLUS the money in the HSA might be a great deal, just $80 a month might not.

[TheCPA]

I have mine with Golden Rule. They are a leader in HSAs, but there are other good companies that have them also. The funds are held by the Northern Trust Company. I have a checkbook that I use to pay medical expenses.

[TheCPA]

To have an HSA, you must have a high-deductible health insurance policy. You pay the health insurance premium and your contribution to the HSA. You may use the money in the HSA to pay medical expenses (including dental and optical) that will not be reimbursed by insurance. You may also pay the medical expenses out of your regular funds and let the money in the HSA grow. In my plan with Golden Rule, the minimum HSA contribution is $25 per month and the maximum is the annual deductible divided by 12. In my case, I have a $2,700 deductible, so my maximum monthly HSA contribution is $225.

[jrp]

My employer offers an HSA-like option in addition to several HMO & PPO type plans. The company contributes $1000 to my HSA account each year. Unused money rolls over from year to year. If I use up the HSA money, I pay the next $800 out of pocket. After that, a traditional 90/10 policy kicks in. I pay about $36/month for this plan. If I leave the company, I do not get to keep any money leftover in the account - it reverts back to my employer. This plan is administered by Lumenos.

[nickcarraway]

Is an HSA the same as a Medical Savings Account? We should have a thread on the subject, because more people should use it. I've been meaning to open one up.

[q_an_a]

Buried deep in this sotry is this fact...which will cause more people to get insurance.

Furthermore, other parts of Bush's health care agenda make HSAs more accessible for the poor and sick. Bush's agenda permits a low-income family to take a refundable tax credit to purchase an HSA. It also allows small businesses and civic and religious groups to form associations that enable them to pool their resources to purchase insurance for their members. Finally, Bush enables employers to put additional contributions in the HSA of an employee with a chronic health condition.

Now if they can figure out how to make the insurance portable, Republcians will have made a geat contribution to our national well being.

[nickcarraway]

It shouldn't be too hard. IRA's etc. are portable.

[djreece]

. . . people change from health-care dependents to health-care consumers.

HSA BTTT!

[TBP]

BTTT.