Health Affairs Study: No News; No HSA Flaw
A Commonwealth Fund study in the current issue of Health Affairs finds that high-cost patients with Health Savings Accounts (HSAs) actually spend less out-of-pocket than they would under traditional health plans. A Bloomberg wire service story treated this as a newsworthy discovery of a “flaw” in design, since if less is spent out-of-pocket, incentives to conserve costs under HSA plans must be weaker.
The Answer: There is no news and there is no flaw.
HSA type-plans have been on the market for a decade in the United States and for more than a decade in South Africa. Everyone familiar with the plans knows that they typically lower out-of-pocket expenses for high-cost patients. This fact is not only well documented, it has been hashed over in the trade literature, at health care conferences and in numerous think tank pieces, including studies by the RAND Corporation, the Urban Institute, the National Bureau for Economic Research (NBER) and the National Center for Policy Analysis.
The only people who will find this recent “discovery” surprising are HSA critics who have been saying for years that HSAs would harm the sick, especially the chronically ill, and who (despite being quite vocal) tend to have very little familiarity with actual products on the market.
Far from being a “flaw,” most HSA plans are an improvement over traditional insurance, which has co-payments (sometimes without limit) for expenses over which patients exercise no discretion (e.g. inpatient hospital costs). Most HSA plans, by contrast, allow patients to manage health care dollars for expenses over which they can exercise discretion and where it is appropriate for them to exercise discretion.
Here’s a news flash: The goal of HSA plans is to allow patients to manage their own health care dollars, not to see how much financial pain we can make them suffer.
Read the Health Affairs article
A survey of the literature on the same finding, made 10 years ago, is in the NCPA Backgrounder, “MSAs can be a Windfall for All.”
Professors Remler and Glied point out, for example, that maximum out-of-pocket payments (MOOP) for HSA-eligible, high-deductible plans are often not very much higher than they are in traditional health plans.
Fair enough, but this is because the federal government has put restrictions on maximum out-of-pocket costs for those plans but not traditional plans. We don’t know how patients will respond to a truly high-deductible, high MOOP HSA-qualifying plan (for example, $10,000 deductible and $50,000 MOOP) because the government forbids them. However, we can be sure that they would have very low premiums! The government must loosen its restrictions on these plans.
Also, while Professors Remler and Glied know that HSA-qualifying health plans have deductibles between $1,000 and $2,000, and MOOP of $2,000 to $5,000, they model an implausible plan where both the deductible and the MOOP are the same: $2,500. I doubt whether such a plan exists, because it would exhibit the failings that the authors demonstrate.
John R. Graham
Director, Health Policy Studies
Pacific Research Institute
San Francisco, CA
Your conclusion is on the mark. I have a chronic condition, Type 1 insulin-dependent diabetes. Due to rising premiums I changed to high-deductible coverage with a Health Savings Account. The HSA plan allows me to save time and money by managing my own health care dollars. If the maximum allowable HSA contribution is increased, the net savings will be far greater.
Exactly true! I’ve promoted these plans for years, and every seminar includes the idea that they contain out-of-pocket costs the best for those individuals who need them the most. The “sicker” you are, the better they look. Leave it to the press to try to paint this as a negative!
Brian Liechty
Plymouth, Indiana
An interesting question, though is, why one would have deductibles at all in a health insurance plan, if one had the dual objective of (1) making patients have a financial interest in the cost of their health care and yet (2) protecting patients fiscally through an upper limit on annual total out of pocket spending for health care. If that be one’s dual objectives, would it not be more effective to dispense with deductibles altogether and simply have 50% cost sharing, up to the maximum out-of-pocket limit?
What is the obsession with deductibles all about?
Uwe Reinhardt
Professor of Economics and Public Affairs
Princeton University
We are focusing on deductibles because Congress has decided it knows more about how to design insurance than the market and it has designed a plan with an across-the-board deductible.
Absent the interference of the tax law, I believe insurers would avoid both deductibles and co-payments whenever possible and sort procedures into those totally paid by the patient and totally paid by the insurer.
For example, when testing for cancer, the patient should pay (because people’s attitudes toward risk and diagnostic procures is different), but once cancer is discovered, the plan would pay all costs from first dollar and be very involved in decisions (because the plan has a self-interest in efficient care).
John Goodman
NCPA
Prior to installing a high deductible/HSA plan our group's loss ratio was 113%, and we were facing a high double digit rate increase from our carrier, United Health Group. By converting to the high deductible plan we cut our premium by 37% AND freed up enough money that the company could almost fully fund our employee's HSA accounts. When we got our renewal notice from United in March (the plan is on a 5/1 anniversary), they were estimating that our loss ratio would end up at around 67%, now that the year is completed, our actual loss ratio is 48%!!! We saved 37% on our plan's premium to United, fully funded our employee's accounts and cut our health plan expenses by over 60%!! Pretty good result don't you think. CONSUMER CHOICE PLANS WORK- I remain amazed that more companies aren't taking the plunge. Benjamin Cutler, USHEALTH Group
August 13, 2011 at 7:35 amHi, I ( we, husband, wife, child ) live in south ceatnrl Pa. Fulton Co. With these ins plans do we need to visit Pa doctors only ?? We only live 2 miles from Maryland and about all of our work & shopping & current doctors are there. Thanks, Jack
Wow I think maybe John is in the wrong field here. I thought htlaeh care workers went into htlaeh care because they WANTED to help people. I have several medical problems. I can’t get insurance coverage at this time. I can’t get disability yet and can’t work at this time. I am 55 years old. I am not young enough to get State medical help and not old enough to get medicare help. No job means no money for me to afford my medications I need to survive let alone medical insurance. There are a lot of people out there like me. Don’t kid yourself that there aren’t. I am not a free loaded. I worked for years and paid my bills, insurance and etc. Sometimes things just happen to people that is beyond their control. When I have a bad attack I have to go to the emergency room or die. So if I make you have to work harder in order to live .well John tough.