HSA – The Zion Chronicle

When I wrote about declining enrollment for CHIP in Utah I did some research on the requirements for CHIP. I learned that even though I am fully employed – meaning I make a comfortable living – my kids would be eligible for CHIP if I did not have the option of insurance through my job. More interestingly I learned that there is another program, Utah’s Premium Partnership for Health Insurance (UPP), which my family would qualify for if I chose a traditional insurance plan. (Actually, my company just switched insurance and I could have enrolled in a traditional plan that would have allowed me to have my full premiums paid – partially by my company and the remainder by the state.) This program helps pay the costs of health insurance premiums for working families.

As I looked at the requirements for UPP it shows some interesting biases that are not good for our health care system. The one that makes the least sense is that they explicitly will not cover High Deductible (HD) plans that qualify for Health Savings Accounts. This essentially discourages people from using the best vehicle we currently have for becoming cost conscious and driving down the real costs of health care. If they wanted to encourage people to get the kind of insurance that is better for the whole system they would give the same amount of money – deposited directly into an HSA – for those who have an HD insurance plan as they give for comparable coverage under a traditional insurance policy. Of course the rules would be the same for qualifying plans whether they were HD or traditional.

I’ve already admitted that Health Savings Accounts are not the full solution to our health care system, but they are among the most powerful tools that we have today. The example of Whole Foods grocery really illustrates the point.

Five years ago, the Whole Foods grocery chain switched to a high-deductible plan. If an employee has a sore throat or a sprained ankle, he pays. But if he gets cancer or heart disease, his insurance covers it.

Whole Foods puts around $1,500 a year into an account for each employee. It’s not charity but part of the employee’s compensation. It’s money Whole Foods would have otherwise spent on more-expensive insurance. Here’s the good part for employees: If they don’t spend the money on medical care this year, they keep it, and the company adds more next year.

It’s called a health savings account, or HSA.

CEO John Mackey told me that when he went to the new system, “Our costs went way down.”

Yet today, some workers have $8,000 in their accounts.

The same articles states that:

If people paid their own bills, they would likely buy high-deductible insurance (roughly $1,000 for individuals, $2,100 for families) because on average, the premium is $1,300 cheaper. But people are so conditioned to expect others to pay their medical bills that they hate high deductibles: They feel ripped off if they must pay a thousand dollars before the insurance company starts paying.

From my own experience when people really understand the program they like it. Here are the numbers that our company found as we have been shopping for insurance lately. We chose one high deductible plan and one standard plan that each employee could choose from. The high deductible plan was $2500 a year cheaper in premiums. We calculated that the worst case scenario for the high deductible plans – paying every penny of the deductible without receiving a cent from the insurance company – would cost $884 more than the same medical care under the standard plan (this assumes that much of the deductible is used in preventive care where the standard insurance charges a copay for each visit, if it were some accident that cost the whole deductible for the HD plan the difference is no more than $700). On the other side – the person on the HD plan has to spend a minimum of $3900 (okay it came out to $3899.99) before they have spent as much – including premiums – as the person on the standard plan.

When we started discussing the plans as employees there were 2 of us who were already planning on getting HD plans. By the time we made the decision on what plans to offer 70% of the company had decided to switch to HD plans.