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POLCY: HDHPs, employer insurance and regulation the Cato Way | SignalHealth

Over at Signal Health Tom Hilliard has been having an entertaining time with Mark Pauly and the boys from Cato. Go over there and take a look at the latest round of back and forth. Suffice it to say that if Mark Pauly had to buy his insurance in the individual market rather than receiving from the Ivy League Ivory Tower he sits in, I suspect that he would be rather more concerned about the way the individual market works, particularly the 20% he acknowledges doesn’t work well.

Meanwhile, Eric Novack and I are both reading Cato’s Michaels Cannon and Tanner’s latest work which is out today. (I had planned on a pre-publication review but then again…) We’ll be discussing it in another podcast sooner or later, but you’ll get the basic idea from the SignalHealth discussion.

Meanwhile, Health Affairs has some numbers out about the rise of the HDHP and the HSA.  You can see the full article here. But here’s the abstract pull:

Almost 4 percent of employers that offer health benefits offer one of these arrangements in 2005, covering about 2.4 million workers. Deductibles, as expected, are relatively high, averaging $1,870 for single coverage and $3,686 for family coverage in high-deductible health plans with an HRA and $1,901 for single coverage and $4,070 for family coverage in HSA-qualified high-deductible health plans. One in three employers offering a high-deductible health plan that is HSA-qualified do not contribute to HSAs established by their workers.

The last line is by far the most significant (hence my bolding it).  Even though the HSA is supposed to be the employees benefit, in fact in a third of the cases setting up a HDHP is straight cost-shifting to the employee. You were getting something and now you’re getting nothing to deal with the first chunk of medical expenses. So at least those employers have figured out how not to screw over their own risk pools (assuming that they keep some of that money that would have ended up in the HSAs in reserve to cover the expensive cases). You know that the rest of them will go down that path too — in fact a survey that was covered in this THCB article confirmed it a while back. Oh, the joys of a "jobless recovery".

And of course employers are getting out of the game of providing insurance anyway.  Another Kaiser Foundation survey this morning confirms that the percentage of employers offering insurance has gone from 69% in 2000 to 60% in 2005. In effect the HDHP over time offers the employer a way to get out of the game without having to bear the shame of leaving the field completely.

This of course continues to boil the frog….

Finally, it does make me chuckle that in the comments to this post about Medicare Part D, Eric Novack is apparently appalled that a combination of lobbying from drug companies, PBMs, health plans and providers mixed in with the endemic scratch my back corruption of the current Administration and its leaders in Congress ended up with a welfare plan for them all called Medicare Drug Coverage. But it’s a little weird that he thinks that the water-carriers for the Administration over at Heritage are actually surprised. The guys from Cato might be forgiven for being true believers, but Heritage, AEI and the rest sold their souls long ago, and know exactly how they’re dealing with.

CODA: I hate to link to Tech Central Station given how dishonest it is in its lack of transparency, but if the funny Cato boys will insist on writing there, then this one from Randy Balko is worth a chuckle.

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13 replies »

  1. //a shrinking physician workforce//
    It would be in society’s interest to train more physicians, yet we keep buying the line that there is a “surplus” of expensive physicians. The physicians are expensive because this society has allowed the development of a highly exclusive, over-priced physician-education system. We deserve the parasitical elite we’ve created.

  2. I called Brian,
    Brian was unaware that 40% of HSA clients had no previous health insurance. I explained that most people use our stats, including the Bush administration. Brian implied that the Bush administration using our stats means nothing. Brian sounds like Matthew, huh? Brian had to go quickly, figures, but he said he would call me right back, sure.
    I know why Matthew wants community rating because so do the Blue Cross plans in PA. We fight against this and support the PA Governor’s plan instead. Just go here Brian and become more informed about the real issues.
    http://www.assuranthealthpolicy.com/corp/legal/govrel/

  3. Brian, you are correct that group health employee plans are losing market share rapidly but unlike you, I think this a good thing. Employers should not choose the health insurance on the children of their employees. Employers should not fire sick employees and put them to COBRA for insurance termination just to save a dime on their health insurance premiums.
    You write//In my view, the HDHPs – and particularly the 1/3 of employers who don’t contribute to the HSAs – are simply the first real cracks in the levee.//
    Levee cracks huh? Could you be more specific? You say you talk to a lot of important people. Did any of them suggest that modern Americans saving for retirement health care expenses in tax free accounts was a good idea? HSA balances dedicated to retirement health care expenses are never taxed and will last much longer in retirement.
    The first MSAs have been rolled over into HSAs and some have $50,000 balances today. We pay 6% interest so the HSA balance will grow $3,000 this year without a deposit. $3,000 in tax free interest is larger than the annual cost of many family’s HSA insurance. The HSA is a bit magical, ask Matthew, he knows. You know Brian that the average cost of employer provided family insurance is $10,000 per year. Do the math Brian, no wonder everybody is bailing on employer group health plans. The cost for employer provided insurance is way to high and the security is very poor for the consumer.

  4. Matthew it makes no difference what you seek. You are not going to get national community rating, what a joke. This has been tried in some states and the costs have exploded and people are paying 200% to 500% more because they believed your advise.
    Bob, there is no FICA tax on employer HSA deposits for the employee or the employer. We call it compensation without taxation. So the 1/3 of employers who don’t make HSA deposits just had poor people explaining it to them. I waited to see if anybody would correct the tax issue but of course no one did.

  5. Eric,
    I beg to differ. I learned a long time ago that a difference is only a difference when its significant. Health care professionals can complain all they want that the system’s failing them, but they keep telling their professional associations to stonewall and to avoid thge very changes that are necessary predicates to the way out.
    We don’t know each other, but I promise you that I have dealt almost exclusively with industry leaders for the last several years. To my knowledge, with the exception of a very few folks around the country with some power, there is little appetite for change that entails compromise. And that’s ultimately the bottom line.
    We can certainly talk more about this in greater detail, if you like. I’m at 904.246.9643.

  6. Great comments all. Essentially Brian and I agree on “what”, he’s just a little more pessimistic on “when”, than I am.
    Eric, we also agree on much. But the state and your mortgage company both say that you must have auto and house insurance respectively. So it’s essentially compulsory (even if hard to enforce) which health insurance is not, and much more importantly…in the house insurance market, you can’t tell which house is going to burn down the way that underwriting screws the ick in the health insurance market. And of course the uninsured driver is the one who gets underwritten against for the same way, which is why we have
    uninsured driver” insurance.
    Joe. It’s not socilized medical care provision that I seek, it’s universal mandatory community-rated pooled insurance. You can call that single payer if you like, but there are plenty of provider and insurer alternatives within that.

  7. Brian- “the conceit among providers” you mention does not exist, if you mean it in the way that providers believe the system (ie federal and state gov’ts) will endlessly respond to requests for funding.
    150,000 pages of medicare guidelines and growing
    medical liability costs soaring
    special interest groups suing for more and more coverage under medicaid
    medicare cuts totalling 30% before being adjusted for inflation
    a shrinking physician workforce at the same time the baby boomers are reaching the age of increased healthcare consumption
    old-line companies being crushed under the weight of retiree benefit costs
    Not one physician I know is confident in his or her own professional future.

  8. As always, Matt gathers and delivers grave info with good wit and cheer. I continue to marvel that anyone can actually consume and digest this much information. But I’m certainly glad he does!
    Ahem, Mr. Holt! Do you remember your skepticism at my January Atlanta presentation of last May’s Bureau of Labor Statistic data: A loss of 32% of private jobs with health benefits in 13 years. Erosion of the percentage of private sector jobs with health benefits running now at 4.5%/year, up from last decade’s erosion rate of 2.3%/year. Only 45% of private jobs now have benefits.
    The KFF data on employers buying benefits is a related metric with validating information. A drop of 9% in 5 years or, said another way, a 13% drop from the base 5 years ago, with a current erosion rate of 1.8%/year. In other words, employers are dropping like flies.
    But what this all really means is that as health care costs price individual, corporate and governmental purchasers out of the market for coverage, the private sector particularly is responding to the market forces by steadily withdrawing its commitment to coverage.
    The public sector, less nimble and more susceptible to perverse wishes of special interests, has simply paid and paid. Now they’re against a budgetary wall, but the culprits are clear. Medicaid, state employee health, state retiree health, public health, prison health and assorted social service programs are reflective of the market and have the highest growths of virtually any line items. Expect significant cuts in states around the country. All tolled, this is probably around 26-28 of total health spending. A 10%-15% cut across the board in this sector would mean a drop of 3-4.5 percent systemically.
    There will be cascading impacts. The inability of the public sector to respond to massive stepwise cost growth has created a conceit among providers and suppliers that everything’s stable and OK, and its also bolstered the financing within those sectors. The combination of continued private sector coverage erosion and the states cutting back their allocations will be a massive shock to the health system.
    So many of you may want to talk about whether this or that tweak will make things work better, but the truth is that unless we 1) rapidly deploy meaningful information management infrastructure that can really help us identify problems and opportunities (i.e., transparency, particularly with regard to appropriateness) and begin to manage cost aggressively, and 2) invest in establishing a floor of coverage of basic care – we have to define “basic” – for everyone in the country, things will get ugly fast. The safety net will fail first, crushed under the tidal wave of newly uninsureds and underinsureds.
    But the hiccups in health care financing will be felt everywhere in the system. With fewer and fewer financial inputs to a system that’s become accomstomed to always having more, we risk going into a market gridlock, where suddenly people don’t get paid for what they’ve done and are being asked to do, and things grind to a sickening stop, like a sloop crunching up against a reef.
    And, of course, since HC is the largest economic sector, things will cascade to the rest of the economy. A bad scene generally.
    In my view, the HDHPs – and particularly the 1/3 of employers who don’t contribute to the HSAs – are simply the first real cracks in the levee.
    My guess is that when the numbers of renewals and re-enrollments are in after January, we’ll see another precipitous drop. The health industry leadership is still making money, and so they’re loathe to collaborate on real solutions, but the rest of business leadership in the nation is getting very antsy.
    Buckle your seatbelts. We’re in for a bumpy night.

  9. There is a bit more to the equation than you let on, Matthew . . .
    While the shift may be on to HDHP vs more traditional plans, you mention the so-called loss of benefits (no more copays) but fail to mention the premium savings. Many employers pay 100% of the employee cost, but the premium for dependent care is often passed to the employee. In some cases this can be as much as a mortgage payment.
    The covered participants may give up some copay benefits but many of the times it is usually offset by the increased take home pay resulting from lower premiums.
    Given the nature of the HSA, I see no reason for requiring or expecting the employer to subsidize the loss fund. I am not a tax expert but given the fact that HSA contributions are not insurance premiums, I suspect an employer contribution to the HSA is treated any other wage. If it is treated as wages, not only is it subject to FICA, but SUTA, FUTA and WC.
    And yes, fewer employers are offering health insurance as part of the package to workers. The drop off is in the under 100 life market where health insurance is not as prevalent as it is in the larger employer market. As you move toward smaller group, fewer than 50 lives and especially under 10, the prevalence of group benefits is almost non-existent.

  10. Matthew- As always, I appreciate the mentions. As I believe I have implied- in my posts, podcasts, and private conversations with you- both parties are guilty of abandoning principles for political expediency and/ or convenience.
    To single out the republicans for ties to interest groups without the obvious ties that democrats have to some of the same and others is, if I might say, more than a little intellectually dishonest.
    I maintain that the government’s tax favored status for employer based health insurance is the cause of the problems in the individual health insurance market. Again, I ask you to explain the vibrancy of the car insurance and home insurance market– neither one of which has tax-favored status through employers and neither one of which is bought in large groups.
    On a personal note- I am surprised I did not get more of a response from my call for W-2 disclosure of health benefits- it would make it much more difficult for employers to do what the survey implied. Remember, they are not “out of the game”– they are just funding the insurance, not the deductible.
    As you and I agree upon- the system cannot exist without substantive change much longer– Medicare (including the drug program) currently has $68 TRILLION in unfunded liabilities. Tell me how the same government that just passed a transportation bill with over 6,000 special projects (up from less than 15 in the early 1980s), how local and state government (LA) spent the equivalent of $600 million on a football stadium instead of on levies, that conducts hearings where the questioners spend more time asking questions than getting answers (Senator Biden’s first question was more than 1000 (that’s right, one thousand) words– is better than you to decide when, where, and how you should spend your healthcare dollars.
    The importance of the debate here is not party partisanship, but a look at what solutions have the potential to succeed.

  11. Matt,
    I can’t understand why you consider any idea more than single-payer as an illegitimate alternative to the present health care system. Hasn’t this failed 40-year natural experiment with Medicare/Medicaid been enough to disavow you of any illusions?

  12. Matthew, the tax free HSA was added to the Medicare Rx Bill so it would be passed. It was illegal in America for a senior to purchase Rx coverage that would cover a $1,500 a month Rx bill. Now that the tax free HSA is passed and the law of the land, we should revisit the Rx in Medicare issue and clean up the pork and give seniors more options in the free and open market. The President knows it’s one step at a time.
    I haven’t heard Eric and the Heritage Dr. yet. Doesn’t Haritage own “townhall.com”? That place is crazy. They link all these conservative websites together. Year after year townhall.com linked sites that had tax free MSA articles but the link at the bottom of townhall.com for insurance was to a UICI company with non-MSA qualifying coverage. They were just trying to make a buck at townhall.com. That was so wrong and they finally quit. Maybe they read BusinessWeek’s “It’s enough to make you sick.”

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