My contention is that what most people think of as "health insurance" is no such thing. What they really want is to have all the health services that they and their doctor want paid for by someone else.
How did we get into this situation? This article gives the history of health insurance in America, as well as interesting results for direct purchase health insurance.
Bottom line is that there are a lot of myths about non-employer provided, non-government provided, individually purchased health insurance. My belief is that high deductible, directly purchased health insurnace, paid for with after tax money, would solve most of the problems with health care in this country, but that it would be extremely umpopular because people have such unrealistic expectations when it comes to health care spending.
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18 comments:
Buzz -
Although I agree in premise with what your saying I will add two pieces that you may not have considered - that I think are a barrier to HSA adoption. Further, for a healthy person - the ability to retain and invest those premiums is very attractive.
1. The HSA plans are not priced attractively right now. IMO what you give up in benefits is not worth the total cost savings. This may vary state by state, but I put in about 20 hours of research each year at renewal time and conduct that research in two very different states (from insurance regulation perspective.) I have not found something that has enticed me enough to switch plans. [Now this is really for my own case - with a family I am much more risk-adverse with regard to health care than if I were single. On a national level this may still be an attractive option to a large % of the population]
2. HSA's should also change so that the deductible is applicable to the trailing 12 months rather than the calander year. There is a risk that a hospitalization event that occurs in December, that still requires hospitalization or test or similar in January will require two payments of the high deductible. That could be a tough hit to take.
One thing I would like is a truly catastrophic health insurance. Which only covers the big stuff - hospitalization, cancer treatment, etc. HSA still cover some of the preventative stuff - and if you reach your deductible (the low end is $2500) they will still pick up the expenses. If they dropped this coverage than small business could (and I think would) self-insure and be able to pay the premium and some of the unreimbursed medical expenses at a pretty significant cost savings. Alas, I have found no such plan.
Federalist, I did find one such company. I even attended a seminar last week to better understand exactly what you are talking about.
See http://claimlinx.com which is based in Cincinnati. The local representative is actually Porter Township (Porter County Indiana) trustee Ed Moralis.
They administer a program that uses a legitimate major medical at $5,000 or $10,000 deductible. The employer (or even private) can then do exactly as you suggest and pick up some of the expenses below that deductible.
They reported cost savings from a real company here in NW Indiana of 30% net after the company paid for legitimate expenses under the deductible.
Federalist, I own the company that Briefs is talking about. If you are looking for true catastrophic health insurance I have what you want. Our company Northwest Indiana ClaimLinx and our sister company ClaimLinx (out of Cinn. Ohio) have the answer to the health insurance crisis. Feel free to check out our website www.nwiclaimlinx.com and our sister company www.claimlinx.com
Please contact me via my website and I would gladly show you exactly what you are looking for.
To be clear, the HSA component of catastrophic plans is a gimmic to try and put this type of insurance on the same basis as employer provided plans (i.e. paid with pre-tax dollars).
The biggest distrortion in our health care system is the implicit subsidy that paying with pre-tax dollars is. It has to be eliminated. Thus, I think that, long term, HSAs will not be part of the package. Again, we simply can't afford to subsidize health care, long term.
Buzz I'm not following you. Is your concern pre/post tax status of the insurance.
Aaron, there are probably 4 or 5 reasons that health care costs so much in America, and that costs are exploding. One major reason is that employer provided insurance is tax advantaged, being paid for with pre-tax dollars. This is a subsidy. Anything that is subsidized gets used more.
Most people probably think that more health care spending is better than less. However, health care spending is often wasteful, doesn't lead to better health, and crowds out other spending, especially saving. The loss of saving results in lower economic growth across the board. Essentially, we're investing too much in the health care sector, and too little in other, more productive sectors.
Buzz I love the idea of health care being deductible. Especially for individuals, any way I can send less to Washington the better. I would guess the high cost of healthcare has more to do with the consumer not being the one actually paying. If my company provides 100% insurance it doesn't effect me whether I go to the ER or wait til morning for my doctor. It will effect the cost to the insurer and the party actually paying premiums. If each person had major medical but paid for their basic care they would certainly spend wiser. Then we would begin to see the real cost of healthcare.
Aaron, no doubt, third party payment is one of the other major drivers of health care costs. Catastrophic insurance plans address that by getting the consumer to pay most health care costs out of pocket.
But don't discount how much of a subsidy the deductibility of employer provided health insurance is. A perfect world would be where the deductibility is eliminated, and tax rates are lower as a result. It would be revenue neutral, and thus you wouldn't be sending any more money to Washington.
Briefs/Sara:
Thanks for the info, I did take a look at this and would like to encourage a dialogue on this.
Let me know if my math is incorrect. I reviewed some quotes I received at the end of the year that had high deductible plans on it. All my employees are on a family plan so the quote on a $250 OP was ~$1300. The quote on a $6000 OP was $900 for a savings of $400/month. My exposure is $5750 and I agree in most cases my employees won't hit that number.
However, I only pay 60% of the premium. So my share of the savings would be $2880. We took a look at the EOBs and the average per family was about $1500 last year. So I would have come out ahead - last year. But that gap is too small for me. My total exposure is still the $5750 and to take that risk in order to save $1300 seems to me like a sucker's bet. Especially since each employee is a couple of childbearing age. Even 1 big hit / employee every 5 years puts me at break even.
Now I suppose with more employees this option will look better. Since we're hiring now I will reevaluate at the end of the year so I am grateful for the information. But right now I'm simply not impressed with the savings that you can get with these high deductible plans. I'm no actuary but a $6000 deductible plan has got to be like printing money. Who hits that number? I'd like to see that plan drop to $400 / month and then self insurance becomes attractive. Does it have to be that low - no. The savings has to warrant the increased paperwork, and my total exposure can't be more than it is right now. I don't like gambles.
Buzz -
I fell for that before on the home mortgage issue. Make sure you clarify the elimination of the deduction with a decrease in tax rate otherwise its going to be objectionable.
I still think the driver is to get a plan out there were the patient pays. Tax-deductible or no. But the pricing has to reflect a total savings in the short-term or no one will go for it. Employees or employers.
I like the HSA concept but I think it needs to be cheaper. The benefit is it uses the existing infrastructure and puts the decision where it should be on the patient. Further it does it without increased paperwork like the MERP discussion above. The patient will be wary of spending money because once they use up the fund they are completely out of pocket. Use after tax dollars with a lower tax rate if you like, that just shifts the weighting of the variables on the total cost.
I think the issue with the high-deductible plans and the HSA plans is that the insurance companies are not pricing them according to the decreased risk of exposure on their part. My sense is they're trying to keep some of that savings to increase margin (and I don't blame them.) If those plans are going to be adopted the spread on the premiums has to increase.
Buzz fair enough, I'd prefer the tax burden were low enough that Washington doesn't have to pick winners and losers.
What was more exciting about briefs and Sara's comments was a solution coming from the private sector not government. Left alone the market will solve excessive costs. I hope someone responds to Feds last question regarding numbers.
Why would you change what your employees pay keep them at the same premium and you take the risk. Look at a 5k/10k hsa product only. If you really want to save use individual health insurance. Not everyone will qualify so they go on the high risk plan. Most people who use this idea save 70 to 80 percent on health insurance.
Federalist,
Im a little confused, I would like to ask a couple of questions before I go any further with my answer. Is the 250.00 op/the deductible or is that the out of pocket? What is your deductible? What is your out of pocket maximum?What is your co-pay?
How many employees do you have?
Are you able to write your own plan for your employees?
Your risk is what is left over after these expenses have been paid which wouldn't be a risk of $5750. Without accurate numbers I can only give you basic info. Our stratey uses 5000/ 10000 HSA product and by implementing the Federal 105 tax code we're able to buy back benefits which lowers the premium. In the begining when this Stratey was created the biggest challenge was finding someone to administer the program this is why ClaimLinx was created; to handle the employee claims and paper work. There is no extra paper work for the employer or HR person. Our firm makes money only if you save money, not based on premium like traditional health agents. Why would an owner of a company give away free money funding a traditional HSA. This way the owner keeps the money and only pays the claims as they happen up to the deductible. After the deductible has been met the insurance company picks up 100% from that point on. This is nothing new its been in place since 1954 but health insurance was not expensive through the 70's or 80's it was in the early 90's that health insurnace costs went up. Technology, drug patents and mounting liability drove up the cost of health care, we are also living much longer now through advances in medicine which raises rates. Lets look at some interesting facts; in 2003 United Healthcare CEO Bill McGuire made $94,200,000 Salary+Bonus also in 2003 Pfizer, Inc spent more on drug marketing than the entire United States Armed Forces spent on ammunition. And Pfizer did't win a war.
We have a lot of companies that have been using this strategy and are very happy with the savings that they are receiving.
If this is something you would like to explore with accurate numbers then please send me an email.
sara@nwiclaimlinx.com
Sara - thanks for the follow up. Those were deductibles. I used those numbers because it from a quote that I had that compared multiple deductibles from the same company with the other benefits being equal. I don't have a similar comparison for our exising plan - so I have no idea what the premium on my plan would be with a 5K or 10K deductible. If you wouldn't mind running the numbers, I'd be interested in seeing what you come up with. May as well do it here so everyone may benefit from the exercise.
The current plan runs $1020/month / employee with no deductible. But there are a bunch of copays:
Day surgery / maternity: $600
inpatient $2400 ind / $4800 family
emergency $75
Everything else covered in full.
6 employees now - 2 coming on at the end of the month and expect 6-8 additional by the end of the year.
My questions on the documentation is that it sounds like from the employee perspective it works like an FSA. Please advise on that (you only mention employer and HR). There was some mention that there are some reporting requirements on these plans though.
Additionally, would a transition to this type of plan be transparent to the employees. Meaning that they have no disruption of service, no change of procedure, no swapping of cards etc. - otherwise to anon's question if it passes a burden on to the employees I would offer them a reduction on the premium as an incentive to switch to this (if there were a savings)
Two additional questions:
1. On your website there is something about taxing the benefits - what that about?
2. We're about to add dental - is there a way to roll this into it.
Looking forward to seeing what you come up with.
Thanks.
Federalist,
I would be more than happy to give you a quote and if you are comfortable with doing this on this blog then I am comfortable too.
Although to do this I do need some information from you.
1. A copy of your current plan.
2. A $5,000/$10,000 HSA quote from your current provider.
This is not an FSA (flexable spending account). Your employees will have coverage just the same way they currently do. They go to the doctor show 2 cards - the doctor files the claim the claim gets paid. The only change your employees would incur would be showing 2 cards so if they are use to 1 card then they have to get use to 2 cards, and as one of my clients said "If my employees have to carry a whole deck of cards just to get these prices down then they will carry a whole deck"
Yes you can roll dental into this. You do not want to sign up for a dental plan. Dental plans are a waste of money just hold tight on the dental. We will include dental in this plan.
All expenses the employer puts out would be tax deductible and if you put in a section 125 all premiums the employee pays would be tax-free.
I would also like to look into individual health plans for your group. Individual health plans can be list billed to a group and also tax deductible and often much more cost effective then group coverage.
If you can get me those two things I listed above I will get you a quote and show you just how much $$$$ can be saved and still offer the same great benefits.
Please feel free to call one of my current clients Lynn @ Gary Jet 219-944-1210 she will tell you how much this has saved her company and how her employees are handling it very well- no complaints at all from her employees.
You can send me your quotes via email sara@nwiclaimlinx.com or fax it to me 219-477-5363
if you need to talk to me please call me 219-928-5799.
Thank you for taking the time to look into this!
Sara,
Here's a link to the plan.
http://www.tuftshealthplan.com/pdf/HMO_basic_25_75_600_10_25_45_19074.pdf
I have an HMO not an HSA, and none of the quotes I referenced before are current. They're at least 8 months old. So this will have to do. If you need anything else, it would be best to make an assumption and just state the assumption in your quote.
Thanks.
Here is a cost analysis example based on your info provided. This is the best assumption I can come up with considering I don’t have accurate information for your company. This quote is based on a company of 8 employees using Anthem Healthcare as a provider and using figures from Northwest Indiana since I do not know where you are located. Under your current plan your cost $1020, a month x 8 = $8160 a month. Using a PPO HDP the cost would be $512.00 x 8 = $4096, a month. This is on the high end for a quote once again I do not know any specifics for your company. I would raise your deductible to $5,000/$10,000 with your employees being responsible for the first $1,500/$3,500 and then an out of pocket of $2,200/$4,400. Your company would cover the $2,800/$5,600 remaining deductible - if your employees were to reach their out of pocket maximum. Please note the National Average for reaching your out of pocket max is 5%. As far as your inpatient / Day surgery and maternity---you will write your own policy to fit your companies need up to the $5,000/$10,000. Once the deductible has been met then Anthem kicks in at 100%.
These figures are based on assumption! We do not know specifics such as age, gender, smoker non-smoker location of company…. these things all must be taken into account and can change rates so to put it in perspective this is JUST an example. It is much easier to explain this with accurate numbers. I hope this example answered your questions.
Federalist,
Actually I think you should also investigate individual plans. Please remember as I mentioned in the first post we would implement a MERP 105 to give you total tax reimbursement for all expenses toward your healthcare for your employees. this is a huge tax savings for your company!!
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