Wednesday, November 28, 2007

What is the value of bringing together small employers into a "pool".

Proposals to improve health insurance coverage often include the idea of bringing employers together into a large "pool". The idea - it will lower costs. However, that is not the case and this note shares two points about such pooling:

First: Bringing together a natural group of individuals e.g. all working for the same organization will initially save some amount of administrative costs. On the other hand studies show when you bring together separate organizations the savings go away since the pooling organization still has to interact with each of the individual organizations.

Second: Connecticut Business Industry Association has developed a video on health care reform. It is an informative discussion of health care reform and includes some points about the problems with pooling .

Sunday, August 19, 2007

Consumer choice plans - high value for employers and individuals

One of the most effective consumer choice plans is a Health Savings Account. (HSA) It's a cost containing approach to medical insurance and is often perceived to have a high value by those enrolled.

One of the attractive features, not available in other group or individual plans but provided in some HSAs, is 100% coverage for a broad variety of Preventive care such as:
• Annual preventive care office visits
• Screening tests including coronary artery disease – colorectal cancer prostate cancer – diabetes – osteoporosis – mammograms – pap test
• Various immunizations including a flu shot

The best way to think about the first part of a HSA account is as financial protection for routine medical expenses. A special savings account with an easy to use debt card is used to pay day-to-day medical treatment expenses. The account can also be accessed by writing a check.

Another good feature of HSAs is they get people involved in questioning the need for and cost of medical treatment services. Then too, since most people have limited expenses each year the HSA is a higher value approach to medical insurance. In a short time the savings part of the HSA will build up and provide 100% coverage.

Note: IRS regulations tell us contributions can be made regularly or periodically and are limited during 2007 to not more than $2,850 for Single and $5,650 for Family coverage. Individuals 55 or older can contribute an extra $800. Funds grow tax-free, and come out tax free when used for medical expenses. Amounts remaining at the end of the calendar year stay in the person’s account. Contributions made by payroll deduction are tax-free and those made periodically throughout the year become an above the line deduction, at tax time, and are also tax-free.

Whether through an employer or set up by an individual each person “owns” their own special account. It can be established at various banks or what are called HSA Trustees.

Funds in the account can be used to pay medical treatment expenses before the HSA plan’s 100% major cost insurance coverage begins. For example, going to the doctor when sick and getting medication for two weeks. All covered expenses, except the defined preventive care, such as a primary care or specialist office visit; diagnostic work; medication; outpatient surgery and procedures; or hospitalization are combined and applied toward the plan’s major cost coverage annual deductible. Other medical related expenses listed in IRS Section 213(d), not covered under the insurance plan, such as eyeglasses and dental can also be paid from
this account.

The second part of the HSA is the major cost insurance. It often has a premium much lower than co-pay based plans so the savings can be contributed to the special medical savings account. It is your financial protection for situations when there are significant medical expenses. A common HSA plan deductible is $2,000 for single and $4,000 for dependent coverage. In one sense, HSA’s are a return to the real purpose of insurance – coverage for unexpected medical expenses.

IRS regulations require the major cost insurance to meet certain coverage requirements to be a qualified HSA High Deductible Health Plan. (HDHP) An individual must be enrolled in a qualified HDHP before they can open the special savings account.

Wednesday, June 20, 2007

Real world points about government run health care

Instead of an observation or comment from me I am sharing information form a recent press release:

Stuart Browning of The Moving Picture Institute has created
a new internet movie which - "attacks one of the central premises of the propaganda in Michael Moore's new docutribe Sicko : that 45 million Americans have no health insurance - and no access to health care.

Browning also said - "Michael Moore
is set to unleash a torrent of disinformation about the U.S. health care system that will play into the hands of those who wish to turn our entire health care industry over to government bureaucrats".

Consequently Browning indicates he is
"firing back with a new 9-minute film which examines the facts behind the oft-repeated cries of an "uninsured crisis"."

Uninsured in America can be seen at a new website:

Free Market Cure is a collaboration between Stuart Browning and noted author, scholar, and physician David Gratzer of the Manhattan Institute. It is a website that features video and commentary - and which offers a capitalist, pro-liberty perspective to the current debate about health care.

Saturday, June 02, 2007

Having Connecticut provide medical insurance is unrealistic

Connecticut's General Assembly is considering two medical insurance proposals for which there is no obvious reason to implement. One bill specifies all municipal organization employees will receive “the same coverage provided to state employees”. Some observations:

• If the idea is – establishing a large self insured group will save lots of money the assumption is wrong. Medical insurance costs have little to do with size of a group. Costs come from the claims of enrolled employees and are driven by the groups demographics and the benefits provided. Municipal employees are older, which means more costs, and required benefits are much richer than most commercial plans thus, savings, if any, will be small.

Note also: Research tells us the reasons larger employers have lower administrative costs would not be achieved by such a pool. It would still have to deal with diverse individuals and all the many municipal organizations on an individual basis.

• If the idea is – Connecticut's Office of the Comptroller can select coverage, hire an administrative organization, and do a better job than medical insurance companies the assumption is wrong. There is much more to medical insurance today than paying claims.

• If the idea is – to help towns lower their tax rates why not just provide funds instead of returning one third of the premium they pay?

Note: The last available analysis of this bill indicates this expensive overhead organization and inefficient system could cost $400, 000, 000. What value will that provide?

The bill also creates a pilot program to evaluate whether non-profit’s and small employers can participate. What value would these employers gain from more expensive coverage?

The second bill specifies the Office of the Comptroller will contract for health insurance policies for individuals “not covered by employer sponsored insurance” and deem, “each employee - - whose employer offers – health insurance - - to be insured under such insurance.” This is a very complex proposal, which creates an inefficient approach. In addition, it encompasses the Medicaid and Husky program. However, it does not address the real issue of costs in the medical treatment and payment system. Some facts to consider:

• Connecticut has the third highest number of mandates in the US thus the benefits required in this coverage, including guaranteed coverage, will result in a higher premium than the New England average used to determine the “benchmark policy” and employee contributions.

• The last available analysis of this bill indicates annual administration costs in various state agencies to do things such as run the program; “educate state residents”; and “establish health consumer assistance” could range from $150, 000, 000 to $660,000,000. What value will that provide?

• Having costly administrators decide the benefit options means people “not covered by employer sponsored insurance” would no longer be able to select coverage that meets their needs from the many, much less expensive, choices available in the individual medical insurance market.

The problem many uninsured people face is not a place to buy coverage – it’s affordability. Consequently, a much better and significantly more economical approach is to provide subsidies, based on income for coverage individuals select in the private market.

A couple more points about these two proposals:

• Experience in other states tells us government managed health insurance systems are ineffective. There are many reasons they do not work but the common one is there is never enough money for coverage.

• There is no example where a employer mandate to provide medical insurance has worked. In fact evidence tells us mandates like this are often determined to be illegal because of ERISA regulations.

Bottom line - both propsoals take away the right of employers to select coverage for their employees; expend significant funds; and do nothing to address the real issue, which is cost’s in the medical treatment and payment system.