A new Obama administration rule could drive out of the market the low-cost, high deductible plans that are supposed to be available under ObamaCare [HR 3590]. That would likely mean a sharp jump in taxpayer subsidies.

The problem stems in large part from contradictions in the hastily written health care overhaul.

Starting in 2012, ObamaCare requires insurers in the individual or small group (small business) market to spend at least 80% of premiums on medical costs, leaving 20% for salaries, advertising, fraud prevention, profit, etc. For large groups, this medical loss ratio (MLR) must be 85%.

Read the whole article: New HHS Regulation Will Endanger HSA, High-Deductible Plans, Make ObamaCare More Costly – Investors.com.

Via the Galen Institute.

[B]efore the current era, the most common form of health insurance — other than Blue Cross plans — was indemnity insurance with a fee schedule. A typical benefit consisted of so many dollars a day for each day in the hospital. Since the benefit was independent of what hospitals actually charged, this type of health insurance did not interfere with the ordinary workings of the hospital marketplace.

Can we replicate that idea in a way that meets the financial and health needs in the modern era? I think we can.

In thinking about how to design a radically different type of insurance we have to come to grips with two principles that seem to invariably clash:

Principle One: Efficient, high quality health care requires that providers compete for patients on the basis of price and quality and that will not happen unless patients can unilaterally decide how their health dollars are spent.

Principle Two: Since all third-party insurance involves a pooling of resources, the more discretion individuals have to unilaterally draw from the pool, the more wasteful and costly the insurance will be. …

So how do we get around these seemingly irreconcilable principles?

Find out by reading the whole article: A Radically Different Approach to Health Insurance.

(via FIRM.)

To the extent possible, arrange to pay for your medical care directly rather than through an insurance
policy.
- Health savings accounts
- concierge medicine
- medical tourism

Assume full responsibility for your personal health.
- Eat Well and Exercise Regularly
- Treat Government-affiliated Health Recommendations with Extra Caution

In your own thinking, and in conversations with others, place the blame for America’s health-care problems where it properly belongs: on bad government policies and on those who have advocated them.

Advocate the repeal of ObamaCare and the implementation of free-market reforms in health care.

Read the opening paragraphs here. (Subscription or article purchase [$3.95] required to read full text.)

The hotly debated healthcare reform bill signed into law in March has killed a local insurance company.

At least that’s according to a brief letter Richmond-based nHealth sent to insurance agents explaining the reason behind the shuttering of the once promising local startup. …

The letter explained that “considerable uncertainties” in the health insurance market caused by the recent federal healthcare legislation made the two year-old company’s business model unsustainable.

“Despite a product that was gaining increasing acceptance among companies throughout the Commonwealth, the uncertainties in the regulatory climate coupled with new demands imposed by national healthcare reforms have made it challenging to sustain the level of sales required to remain viable over the long run,” Slabaugh said in the letter. …

“People got skittish about writing any more checks,” Nezi said. …

“The most prudent and sensible conclusion for us is to discontinue the sale of healthcare policies and withdraw from the healthcare business,” Slabaugh wrote in the letter.

Founded in 2008, nHealth was built around a high deductible insurance plan model that utilized health savings accounts and kept costs down making consumers more involved in their healthcare decisions. …

The linchpin within the legislation for nHealth, Kitchen said, was related to pending requirements that would raise loss ratios for insurance companies, a ratio related to premiums versus claims.

Kitchen said the quick decision was based on a long-term outlook that showed healthcare reform would have a fatal effect on nHealth.

Read the whole article: Startup health insurer shutting.

nHealth’s CEO Paul Kitchen wrote an excellent op-ed last year about what’s wrong with the current unfree market in health insurance, and how free-market reforms would empower patients as both consumers and customers.

This might be a trend. As Michael Cannon of the Cato Institute has noted, ObamaCare’s Price Controls Threaten HSAs.

Also check out the commentary in Investor’s Business Daily on nHealth’s closing: Road to Single Payer.

(via the Galen Institute)

Look, if I’m a self-employed person who right now can’t get coverage or can only buy the equivalent of Acme insurance that I had for my car — so I have some sort of high-deductible plan. It’s basically not health insurance; it’s house insurance. I’m going to — I’m buying that to protect me from some catastrophic situation; otherwise, I’m just paying out of pocket. I don’t go to the doctor. I don’t get preventive care. There are a whole bunch of things I just do without. But if I get hit by a truck, maybe I don’t go bankrupt. All right, so that’s what I’m purchasing right now.

Sorry Mr. President, a product that is equivalent to insurance you buy for your home or car, but pays for unexpected medical expenses is health insurance. As for not getting necessary care or preventive care, The American Academy of Actuaries wrote the following about HSA-qualified (catastrophic) health plans:

Generally, all of the studies indicated that cost savings did not result from avoidance of inappropriate care and that necessary care was received in equal or greater degree relative to traditional plans.  All of the studies reported a significant increase in preventative services for CDH participants.

As for bankruptcies connected with medical expenses, the connection is questionable.  As I wrote in the post linked in the previous sentence,

Not that I am defending the status quo health care policy in the United States.  It needs some real reform to bring down costs to consumers.

The president is not alone in confusing what most people call health insurance with real insurance. What most people have should really be called (and sometimes is called) a “health plan.”  As economist Arnold Kling writes in Insulation vs. Insurance:

The health coverage most Americans have is what I call “insulation,” not insurance. Rather than insuring them against risk, most families’ health plans insulate them from paying for most health care bills, large and small.

In short, the consumer is not the customer, which is a huge problem.

(Obama quote via Cato)

Twenty-seven percent of Colorado and Wyoming employers surveyed by MSEC recently said they now offer Health Spending Accounts as an option for their employee benefit plans, up from 21 percent in 2009, 18 percent in 2008, 15 percent in 2007 and 7 percent in 2006.

President Obama guaranteed Americans that after health reform became law they could keep their insurance plans and their doctors. It’s clear that this promise cannot be kept. Insurers and physicians are already reshaping their businesses as a result of Mr. Obama’s plan.

The health-reform law caps how much insurers can spend on expenses and take for profits. Starting next year, health plans will have a regulated “floor” on their medical-loss ratios, which is the amount of revenue they spend on medical claims. Insurers can only spend 20% of their premiums on running their plans if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers. …

Restrictions on how insurers can spend money are compounded by simultaneous constraints on how they can manage their costs. Beginning in 2014, a new federal agency will standardize insurance benefits, placing minimum actuarial values on medical policies. There are also mandates forcing insurers to cover a lot of expensive primary-care services in full. At the same time, insurers are being blocked from raising premiums—for now by political jawboning, but the threat of legislative restrictions looms.

Read his whole article:
No, You Can’t Keep Your Health Plan – Insurers and doctors are already consolidating their businesses in the wake of ObamaCare’s passage.

States with the HDHP/HSA option currently in place include: Arkansas, Florida, Georgia, Indiana, Kansas, Nebraska, Pennsylvania, South Carolina, South Dakota, Utah, Virginia, and Wyoming.

Note: Colorado should be on this list, as it offers an HSA-qualified plan.

In March the Wall Street Journal published Indiana Governor Mitch Daniels’ summary of Indiana’s success with HSAs. Some excerpts:

In Indiana’s HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker’s permanent property. …

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America.

…In the second straight year in which we’ve been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay. (Even if an employee had health issues and incurred the maximum out-of-pocket expenses, he would still be hundreds of dollars ahead.) HSA customers seem highly satisfied; only 3% have opted to switch back to the PPO.

The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option. …

… There is no evidence HSA members are more likely to defer needed care or common-sense preventive measures such as routine physicals or mammograms.

…It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: “Is there a generic version of that drug?” “Didn’t I take that same test just recently?” “Where can I get the colonoscopy at the best price?”

See also this report by the Texas Policy Foundation: Health Savings Accounts for State Employees and Retirees.

(Via State House Call)

Despite enactment of the Democratic health law, one reform Republicans and market advocates should fight to keep alive is the Health Savings Account (HSA), which allows people to put pre-tax money into an account dedicated to health-related expenses.

Experiences my wife and I have had this week illustrate the power of paying for one’s own health care, which an HSA encourages. Rather than pay a hundred plus dollars each to a doctor and an out-of-state testing facility, we each paid King Soopers $20 to test our blood cholesterol. I’m not saying this is a good substitute for seeing a doctor, but we wanted to get a test between regular doctor visits. Our actions illustrate the fallacy of claims that self-payers don’t get preventive treatment. We are highly committed to doing what we can to prevent long-term health problems by taking care of ourselves and paying for preventive care.

Yesterday we checked out Good Samaritan Exempla in Broomfield (more on this later). When we asked for referrals for local doctors, the hospital’s representative told us, “You’ll probably want to pick a doctor based on what your insurance allows.” I proudly replied, “No, we will pick a doctor based on who we judge is the best doctor.”

Paying for one’s own health care encourages the health consumer to be active-minded and pro-active. It encourages the consumer to seek good value for the money. In short, it promotes better long-term results for lower costs.

Read the whole post: Keep Pushing for Health Savings Accounts.

(Via FIRM)

Offering consumer-driven health plans to Land O’Lakes employees is helping to keep health care costs in check, while maintaining or improving care quality. For Land O’Lakes, this approach supports our commitment to employees, while at the same time ensuring that we remain highly cost efficient.

Reporting on a new study by Cigna, Greg Scandlen adds that “Eight out of ten workers at Land O’Lakes are choosing the CDH plan over traditional managed care plans.” Cigna’s press release of the study reports:

• Immediate and sustainable cost savings: CDHP medical costs are 14% less than traditional plans the first year, cumulative cost savings rise to 19% in the second year, 23% in the third year and 26% in the fourth year.
• Higher levels of care: People with CIGNA Choice Fund received recommended care at compliance rates that were similar or better than those covered by traditional CIGNA health plans. Key indicators such as use of preventive care, evidence-based care and disease management program participation were measurably better among those in CIGNA CDHPs than those in PPOs and HMOs.
• Less cost for those with chronic conditions: Medical cost trend was substantially less for CIGNA Choice Fund customers with hypertension (27% less), joint disease (21% less), and diabetes (15% less), than for individuals with either of those diseases in traditional CIGNA health plans. According to the study data, these cost savings were achieved without sacrificing care.

(Via FIRM)

On January 9, the AP reported that:

House Democrats want to require insurers to spend a minimum amount of premium income on benefits, thereby limiting what is available for salaries, bonuses, advertising and other items. The House bill sets the floor at 85 percent; the Senate-passed measure lowers it to 80 percent for policies sold to small groups and individuals.

Depending on how actuarial value is calculated, HSA-qualified plans (those with high deductibles) may become illegal.  This is especially true if the calculation does not include contributions to an HSA.

Some background: A high-deductible insurance plan combined with a tax-free health savings accounts (HSAs) allow you to save money to spend on future medical costs, rather than throwing your money “down the premium hole” on a more expensive insurance plan that you may not want.

Democrats have tried to kill this insurance option before (e.g., here).  Last fall the Wall Street Journal reviewed how the Senate Health Care Bill (HR 3590) & House health bill (HR 3962) aim to restrict both HSAs and Flexible Spending Accounts (FSAs) – both are ways to buy medical care with tax-free income.  Note that HSA-qualified high-deductible insurance plans have been successful in keeping premiums low and encouraging patients to seek proper care.

So what’s the latest?  Well, there are lots of details. Over at John Goodman’s blog, Roy Ramthun reviews what the House and Senate Bills say about HSAs and FSAs.  Lots of details and differences between the House and Senate Bill, but in general, expect:

• “As of 2011, expenses incurred for over-the-counter (OTC) medications and products will no longer be eligible for payment or reimbursement from any of the health care accounts.”
• FSA contribution limits: “Both the House and Senate versions of health reform legislation would limit [FSA] contributions to no more than $2,500 annually. The limit would be indexed to inflation for future years.”
• preventive care:”…all insurance policies will be required to provide first dollar coverage for preventive care services”
• minimum actuarial value for the benefits covered: This could kill HSA-qualified accounts, depending on what value set the minimum to be, and how to compute “actuarial value.”
• limits on out-of-pocket expenses: Again, politicians want to limit how much of your own money you can spend on medical care, and hence dictate that you spend more on insurance!

Read the whole post: Status of HSAs and Consumer-Driven Health Care in Health Reform.