Sunday, January 29, 2006

 

The HSA scam

We have some experience with the whole Healthcare Savings Account/Medical Savings Account deal because some of the convervative caucus in the Statehouse in 1997 tried - and thankfully failed - to foist this upon state employees as an "alternative" to their traditional health care insurance plan.

Now, hopefully, most progressives grasp that this HSA stuff is a horrible idea for the consumer. Making health insurance an individual's problem - even the savviest individuals - has many consequences, all of which are bad in the long run because triggers a phenomenon called "adverse selection," provides dubious savings to employers, robs consumers of the ability to share (pool) risk and eliminates their capacity to utilize the bargaining power of group purchasing.

Take this case in point that we found in our files (no link available) regarding an HSA/MSA experiment in Ada County, Idaho, as reporterd by the Labor Research Associates's Economic Notes:
The experience of one county employee, Terry Johnson, the county's personnel chief, is instructive. According to Employee Relations Weekly, the county contributed $1,100 to Johnson's account and offered an indemnity health insurance plan that covered 100% of his health care costs - after a $2,000 deductible. Early in the year, Johnson broke his ankle and had to pay $900 out of his own pocket before he could touch the $1,100. And, since the injury happened before the county's monthly payments had built up in his accounty, Johnson had to front even more than $900 in medical bills and wait for reimbursement.

Meanwhile, the exodus of Johnson and other health workers out of the county's traditional health insurance plan prompted the insurance company to threated to raise premiums by 15% if the county kept the medical savings account. That would have meant an additional $328,000 in premiums, according to Johnson, while the county saved only $39,000 in premiums on the 150 workers who chose the option of high-deductible insurance with [a] medical savings account.

This is a case study in the economic of saolidarity. Pooling risk and purchasing powere lowers costs and can maximize the health care bang for the buck. Offering health people the supposed opportunity to save money and control their medical destiny will continue to tap into the deep springs of American individualism. But in this case, both the individual and the group got burned.
This, in fact, would have been the case had the State of Ohio been forced to offer HSAs/MSAs to its employees. Discussions and economic modeling showed that what was experienced in Ada County, Idaho would have been duplicated in Ohio on a much grander - and more disasterous - scale.

Nevertheless, despite the potential for elusive savings, there is a strong pitch to get the American business community on board. We'll have more on this in subsequent posts.

|

<< Home

This page is powered by Blogger. Isn't yours?