Health savings accounts may be one of the catalysts that force the health care industry into a consumer driven market.
“Health care is the last significant sector of the economy in which transparency isn’t apparent and everywhere,” said Jim Frogue, state project director for the Center for Health Transformation, an organization founded three years ago by former House Speaker Newt Gingrich.
In an article published on the Web-based TheStreet.com, Frogue also added that publicly traded companies that “embrace” transparency in health care “will be fine, and those who try to fight it … resist it, are going to get hurt.”
According to an article on the Center for Health Transformation Web site, Frogue also said that health savings accounts are an “extraordinarily important first step in the transformation of American health and the health care system.”
The transformation he predicts is in line with the new buzz phrase “price transparency.”
According to the Twin Cities Business Journal, President Bush first used the term “price transparency” in January, and employers are applauding the concept.
A key finding of a September survey by United Benefit reported that the majority of employers believe the federal government should require all hospitals, physicians and insurers to publicly disclose all information and costs related to health care.
Knowing the costs and comparing health care costs – price shopping – could change how consumers react to health care issues.
According to HSAinsider.com, a Canopy Financial company and an online source for consumer-driven health care options, health savings accounts allow consumers more control over how they spend their health care dollars.
The HSA starts with a high-deductible insurance health plan. The insured then opens an investment account from which he or she can withdraw money tax-free for medical care. If the money is not withdrawn from the account for medical care, the money can accumulate with tax-free interest until the person retires. The account holder can withdraw the money for non-medical purposes, but the money is taxed as income and a 10 percent penalty is incurred if it is withdrawn before age 65.
“Think of it as auto insurance or home insurance,” said Scott Stafford, employee benefits consultant with Van Gilder Insurance Corp. “You pay everything out of your pocket until you meet your deductible.”
The minimum deductible for an individual is $1,050, and for a family the minimum is $2,100, according to the U.S. Department of Treasury. The contributions to the health savings account are limited as well. In 2006, an individual may contribute up to $2,700 to his or her HSA, and a family is allowed a total contribution of $5,450.
Stafford said those who choose a high deductible HSA don’t have to fund their account at all and aren’t required to keep a certain amount of money in the account. However, the advantage, he said, to funding the HSA is that all health care expenses paid from the account are tax deductible.
In the long run, Stafford said he believes HSAs will be advantageous to the health care system as a whole.
“If people opted to pay – through a health savings account plan – for some of their own care, things might change,” he said. “If someone breaks his finger, they may not feel entitled to an MRI (a more expensive procedure than an X-ray) if they have to pay the full cost. They’ll go for the X-ray if they are paying for their own care. If they had to pay the full cost of an emergency room visit, they wouldn’t be going in for headaches. People are hidden from the true costs of health care, which leads to misuse of the system.”
Stafford said he is definitely seeing an increase in the number of employers offering health savings accounts to their employees. According to a March 17 CSBJ article, an America’s Health Insurance Plans census indicated the number of people enrolled in an HSA has quadrupled since March 2005.
The promise of lower premiums is attractive, but the real savings will be realized as more people enroll in HSAs, Stafford said.
“Right now, the savings are not significant enough for people to jump ship from traditional health plans, but … with every new product, there is an adaptation period,” he said. “As people get on board with this (the HSA) and claims go down, the premiums will go down. Health savings accounts are a way for people to take responsibility for their health. If people took ownership in their health care, it would incent the providers to administrate services more efficiently – they would have to compete.”
While Stafford thinks the HSA is a step toward health care reform, C.J. Moore, public affairs coordinator for Kaiser Permanente, said the concept eludes a certain portion of the population.
“The high-deductible plans are great for the businesses, but tell me that your average Joe is going to have $2,000 to $5,000 saved up to cover a deductible for hospitalization,” she said. “No way, he is going to buy that plasma TV he has been eyeing, and then he will scream when his daughter is hospitalized and he has to pay the deductible.
“It’s about buyer beware. Too many of these plans will ultimately benefit the businesses … rather than the employees. Businesses … are sinking so much into health coverage for employees – the more they can shift on to their employees, the better their bottom line.”
Andrea Coleman, chief operating officer of Penrose-St. Francis Health Services, said she is concerned that HSAs will prevent people from seeking proven value screenings, such as mammograms or colonoscopies. “It (HSA) is a big trend, but it’s going away from first-hour coverage,” she said. Coleman said HSAs might be advantageous if proven value screenings were covered – exempt from the deductible plan.
Whether health care is consumer driven or first-hour coverage, Stafford maintains that something’s got to give, and everyone is going to have to give up something. “It’s too easy to take advantage of the system,” he said. “There’s got to be a better way – it’s important that all of us take more responsibility – or else health care is going to eat our country alive.”