February 24, 2005

CHOICE FOLLOWS NO CHOICE:

Health of a Nation: Entrepreneurs are sick of sky-high health insurance premiums, and the government is scrambling for reform. But can Uncle Sam save the deteriorating state of health care? (Joshua Kurlantzick, March 2005, Entrepreneur)

On the campaign trail, President Bush emphasized several potential reforms that he believes could lower premiums and improve access to care. For one, Bush has pushed for the expansion of association health plans (AHPs). AHPs would let business trade groups offer health insurance plans to their members. The association plans would be exempt from state insurance regulations, which can add costs to small employers' premiums; many large employers are already exempt from these state regulations. In theory, by banding together in AHPs, small employers could negotiate with insurers for better rates. Congressional staffers expect an AHP bill to pass Congress this year, since Bush is expected to push for it.

Bush has also focused on health savings accounts, or HSAs. In one presidential debate, he said, "Health-care costs are on the rise because the consumers are not involved in the decision-making process. It's one of the reasons I'm a strong believer in health savings accounts." HSAs combine a high-deductible health plan with a savings account so employees can save the money allotted if they don't spend it on care. They first became officially available in 2004. By giving consumers the ability to judge the costs and benefits of their health coverage, and to save the unspent money (HSAs can be taken with workers from job to job), HSAs may prompt consumers to use care more wisely, thereby cutting costs.

In a March 2004 study by Mercer Human Resource Consulting, nearly 75 percent of employers said they are very or somewhat likely to offer their employees a high-deductible health plan with an HSA by 2006. Employees may not welcome the news. According to a study by Washington, DC, benefit consulting firm Watson Wyatt Worldwide released in January, less than one third of workers who have health insurance know what HSAs are. Once respondents were given an explanation of the plans, 57 percent said they did not want to pay higher deductibles.

Bush plans to expand HSA utilization, partly by offering tax credits to small companies that contribute to employees' HSAs. He has also proposed extending tax credits for low-income health-care purchasers and has suggested capping the amount employers buying traditional insurance can spend tax-free--a means of encouraging them to shift to HSAs.


The paradox is that choice will only work if folks don't have a choice whether to be in HSA's in the first place. Make them universal and start them at birth.

Posted by Orrin Judd at February 24, 2005 7:35 AM
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