Friday, September 08, 2006

Should Gutknecht require Health Savings Accounts for all FEHB participants ?

In last week’s eline, Congressman Gutknecht discussed Health Care.

The Problem as outlined by Gutknecht :
The increasing cost of health insurance prevents individuals and families from purchasing policies and causes many businesses to drop health care as a benefit. According to the Kaiser Family Foundation, 70 percent of uninsured adults say cost is the main reason they are uninsured.

The Solution as outlined by Gutknecht :
Prescription Drug Importation
Medical Liability Reform
Medicare Part D
Health Savings Accounts

Since I have already discounted the first three solutions, Health Savings Accounts is left.

Health Savings Accounts (HSA) have been portrayed as the panacea for all that ails the health system.

HSA is a great program … if you’re healthy and wealthy. On the other hand, even the Government’s website states : If you have significant medical expenses that do not approach catastrophic limits, you are probably better off in a traditional plan. (Source )

So who does take advantage of a Health Savings Account?
Let’s say you have a net worth of $20.9 million dollars, would you want a Health Savings Account ? Well, one of the advantages is that it offers tax-preferred aspects. According to The Washington Post, President Bush disclosed in his annual financial report a health savings account worth as much as $15,000 … and I thought he got health coverage as part of his job !
(Source )

HSA by design are a high deductible insurance program which allows the individual to also invest up to the deductible amount into an investment vehicle. Let’s say, you’re a family and select a policy with a deductible of $5,450, then you could also put away $5,450 (assuming that you have the available cash) into an investment fund that would grow tax-free. The monies could be invested much like an IRA - including stocks, bonds, mutual funds, and certificates of deposit. The value of the HSA at death is income to the estate or other entity.

Essentially, this is a catastrophic health insurance plan – since you pay all expenses until the deductible is satisfied. Catastrophe plans may make sense for home owners insurance since we do not normally experience disasters every year (unless you live in the hurricane belt) … maybe once in our lifetime; but most of us have health expenses every year.

The unanswered question cited by Gutknecht and the Kaiser Family Foundation is, does this make insurance affordable ? Yes, the insurance premium is less than a traditional policy with a lower deductible, but you are responsible for the medical expenses. These types of policies were available before HSA … the big new feature is that you can establish your own savings account for future medical expenses. But if you didn’t have the monies before, how does this help?

HSA do not address the underlying problems of rising healthcare costs in the U.S.

Former Republican Senator David Durenberger and the Minnesota Citizens Forum presented a study that said one of major problems with the health care system is that we do not have universal participation. HSA may not be available to if you have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last three months. Nor, if you are active-duty military and have Tricare coverage. Nor, can you establish separate accounts for your dependent children. Nor, if you are on Medicare. Nor, if you have insurance plan coverage through a spouse. And I suspect there are other exclusions.

Now, if Gutknecht believed that HSA is such a great program, why not require it as the only option for the Federal Employees Health Benefits program (FEHB)? With the rising cost of government under the Bush Administration, wouldn’t this help ? Congressman Gutknecht has repeatedly approved pay increases for himself (most recently $3,300 which he could easily slide into a HSA), so why not offset this by asking him to take responsibility for his own health care? But to do that could expose that HSA do not serve working families that happen to be federal employees.

In summary, the establishing Health Savings Accounts as the solution is non-responsive to the problem ... just another tax break for those that may not need it.

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Next up : The Status Quo
Then : My suggestion

1 comment:

Anonymous said...

You have to remember it is possible to lower you maximum out of pocket with an HSA. I am a perfect example.
I was paying almost $1000 a month for a healthy family of 4 because I work for a small (under 10 ) person company. That means I paid a minimum of $12000 per year plus $300 per person deductible for a maximum of $13200.

By switching to an HSA with a $5000 deductable I am paying $300 per month or $3600 per year. If I hit the deductable the maximum I would pay is $8600 per year.

Thats a worst case scenario of saving $3600 and a year a best case of $9000 per year.

Guess which plan I'm on.