Health Savings Accounts

You're switching to a high-deductible health-insurance policy! You're going to go broke!

You have it backwards. My high-deductible policy will save me money. And it allows me to set up a health savings account, which might make me a bunch of dough.

You're going to have to explain.

Did you know America's health costs have risen 140 percent in the last decade? We spend $2 trillion on care every year — twice as much per capita as other industrialized countries.

How come?

There are lots of reasons, but the chief reason is this: health care consumers are completely divorced from health-care costs.

Divorced?

Before World War II, health insurance was designed to protect people against catastrophic events. People paid for doctor's visits and prescriptions out of their own pockets.

They paid for that stuff!

Yes, and because they spent their own money, they shopped around for the best quality care at the lowest-possible cost. They helped keep the cost of care in check.

What did World War II have to do with health insurance?

During the war, the government imposed wage and price controls. Companies were unable to raise wages. To keep employees, they began offering health insurance.

That's why everybody expects their employer to provide health insurance?

Yes, and as the economy boomed after the war, powerful unions were able to demand ever-better policies for their members. Pretty soon, health care consumers didn't have to pay for anything.

Sounds good to me.

It WAS good while it lasted. But it took away the incentive for consumers to shop around. Once nobody cared what things cost, nobody shopped. That's when costs began to soar.

We should bring back shopping?

Exactly. Instead of unleashing more big-government programs that are run by Washington politicians, we need to unleash individuals and give them more control over their care.

That's why you're switching to a high-deductible policy?

Correct. I'm 45 and self-employed. I buy my own health insurance. I just applied for a new policy that has a $1,200.00 deductible. I'll pay 10% of all care up to $10,000.00. If I become ill, the most I'll be out of pocket will be $2,200.00, plus the cost of my premium.

But your premium has to be high.

Nope! It's only $135.00 a month. Here's what's better: I'm able to sock away up to $2,850.00 each year in a health savings account — my contributions are tax deductible.

And you can only spend that money on health care?

Until I'm 65. Then I can use the money for anything. And if I take care of myself and keep healthy, there will be a lot of money in that account.

But what if you get sick and need to go to a doctor?

Then I'll draw out some of the money. And because it is my money, you better believe I'm going to shop around for services and goods. I'll do my part to keep doctors and pharmacies honest.

But won't people avoid getting needed care if they have to pay for it with their own dough?

You don't have much faith in the average person. Most people will do what is best to take care of themselves and their families.

But don't health savings accounts attract healthy people? And won't that drain big bucks out of insurance companies, forcing sick people to pay more?

As more people move into high-deductible policies, insurance companies will SAVE money. As for people who are ill, we need to reform current health-savings-account laws so they can afford to buy high-deductible policies, too.

I don't know. I'm afraid I'm not smart enough to make all my health-care decisions.  

Look, you have car insurance, don't you. Your policy doesn't pay for gasoline, brake pads, tune-ups and transmission repairs. You had to figure out how to take care of these things.

If only the government provided universal car insurance!

The way some of our politicians are talking, it's only a matter of time before they will.

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  • Guest

    I work for a health insurance company which was bought out by a parent company last year.   We, the employees of the insurance company, now only have the option for one of these Health Savings Accounts (or consumer-driven plans, as they are frequently called).  The costs for diagnostics, office visits, etc in my area are comparable, so shopping around doesn't provide us with any benefit or savings.  The only way we save is by not accessing healthcare, which can potentially be very dangerous.  I took a paycut to take this job at the insurance company because the benefit cost was low enough to make up for the paycut.  Not so now that our only option is for the consumer driven plan.  For now, we have decided to go on my husband's health insurance.  People ask me why I work for an insurance company yet have coverage under my husband.  Good question.  Thank God I had his coverage this past summer when I was pregnant.  Because of my high-risk pregnancy, my specialist recommended frequent ultrasounds and monitoring.  These didn't change the outcome of my pregnancy, but they could have (for example, if they had indicated a preventable problem, which could have very well been possible).  If we had been on my insurance, I would have probably declined frequent monitoring.  Currently the only memento I have of motherhood after 3.5 years of trying to get pregnant and trying to stay pregnant is my ultrasound pictures and DVD of my identical twins.  I still can't bring myself to watch the DVD, but I will someday, and I will always be thankful for the chance to see the last babies that I will likely parent biologically.  

         Yes, car insurance does not pay for gas, brakepads, etc.  In the same way health insurance doesn't pay for ancillary measures that ensure health, such as food, shelter, etc.  Should there be more competition in healthcare in order to drive costs down?  Maybe.  However, the largest factor in healthcare costs is liability.  The cost of liability insurance gets passed down to the consumers.  This was much less of an issue in before World War II, which is why back then mere mortals could afford to pay the full cost of an office visit and diagnostics.  (Also, many of the high-tech, lifesaving and costly diagnostics we have now did not exist back then.)

  • Guest

    You hit the nail right on the head. The health care industry is a false economy and the only people who realize it are the people who have to pay for it themselves or the staff who have to collect out of pocket expenses that people are reluctant to pay. 

  • Guest

    Katy, what do you mean by "false economy"?  If you were a doctor and the threat of lawsuits hung over your head, wouldn't you want to pay for good malpractice insurance, and then consequently be forced to pass on the cost to your patients in order to make a living?  I don't think the American people are in denial about how exorbitant healthcare costs are.  It's no secret.  That's why premiums, copays and deductibles have skyrocketed, and the insured are well aware of this.

  • Guest

    Thanks for a great, thought-provoking article. Mary S.

  • Guest

    I have to weigh in. First, I do believe that if (and that is a BIG "IF") we can get our health care system back into a consumer-driven model (which may also require some limitations on liabilities), prices will come down. My husband owns his own small company. We had a PPO plan with low co-pays and a reasonable deductible. When our premiums rose to over $1,300/month for our family (just 4 of us), we shopped for something else. At $550/month, the High Deductible coverage for 3 of us (our then 5-year old son was considered high risk and uninsurable) was a bargain, even with the $5,200/year total deductible. In this plan, we pay 100% of covered expenses until the deductible is met, after which insurance pays 100%.  But, guess what, by the second annual renewal, that premium had risen to almost $900/month. If we increased the deductible to $10,000 we could get a lower premium, but our financial risk at that level was too great. So, we shopped around and applied for new coverage with another company. Voila, our premium went back down to $531/month. But, here's the catch. We are in our 50's, to get coverage, we had to agree that any medical expense related to my husband's high cholesterol was excluded. Now there are medical issues I am afraid to seek treatment for because we could be shopping for coverage again every two  years, and what if we can't get coverage at all because of something else? I thought the Health Insurance Portability act protected people like us from pre-existing issues – it doesn't. Providers can either deny coverage all together (like they did with our son — whose big medical issues were allergies and a needed tonsilectomy), or exclude those pre-existing problems that would increase their risk of paying claims. In addition, to make the Health Savings Account work, money needs to be in the account, a potential problem for a family struggling to make ends meet.  I still can't afford to take our family to the dentist, among other things.

    It is a huge problem. We are "too rich" for assistance (not that I want that), and I find myself leaning toward hoping for some kind of government intervention (Horrors!) out of desperation as I see a time in the not too distant future when we can't afford any health insurance.

    Of course, I also learned that premiums in our state are among the highest in the nation. That may be related to the high number of uninsured (in this case, illegal residents) people here. Someone has to pay their medical bills, I'd wager those of us who pay, are charged a bit more to cover those who do not pay.

     

    "The Catholic Church frames the Christian life as one in which you must exercise virtue—not because virtue saves you, but because that's the way God's grace gets manifested." Dr. Francis J. Beckwith

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