CDHPs and HSAs Will Heal Health Care

HDHP’s and HSAs are for the wealthy.

When I was an employee benefits insurance agent, the only people who bought HDHPs were my wealthiest clients. In effect, they self-insured for deductible amounts of five to twenty thousand dollars a year because they could afford an occasional year like that.

However, they wanted an insurance company to pick up the very unlikely, but possible, health expenses that could run into millions of dollars. And, their average cost of health care insurance plus deductibles was lower than for people who could not afford to self-insure.

HSAs were designed to give people tax breaks on non-covered medical expenses such as high deductibles. That seldom benefits many working class families.

I disagree. HSAs and HDHPs don't benefit working class families. In many cases, these plans help employers offer insurance to them in the first place. Low-deductible or copay policies actually encourage use, and more importantly abuse. Check out the study the author of the article references. It's obvious these are good things.

The bottom line is Americans need to do a better job of educating themselves on how to manage the costs of their own health care. One option is www.healthcarebluebook.com, the first free national consumer pricing guide to fair pricing for health care treatments, services, etc. If people know what they should be paying, they can do a better job of making sure they do not overpay. This service provides them with the average prices that PPOs pay their providers in their markets.

I have had a HDHP with an HSA for over one year now and only wish that I had this 20 years ago. I think how many years I have paid big money into the insurance companies and never had a claim. I could have easily saved up some substantial money to take care of myself as I get older. Everyone should take advantage of the opportunity. I am maxing out my allowed HSA contributions while I still can.

The HDHP sounds like a good idea for consumers who don't use their health care very often. It sounds like a bad deal for the chronically ill.

Whether you agree or disagree with the value of HSAs, getting the consumer back into the healthcare transaction is critical to our reform efforts. Involvement reduces the cost when a transaction occurs, but more important, it can reduce the number of transactions.

This is the home run, not public options, exchanges, and all of the reform efforts being addressed in Congress.

HSAs are great for the chronically ill. First, HSAs are the only type of insurance plans that are required to have annual limits on out-of-pocket expenses, and these limits must apply to all medical expenses, including prescription drugs. Most insurance plans have no out-of-pocket limits on prescription drugs. Second, most of chronically ill people don't realize how many out-of-pocket expenses they have, especially for prescription drugs, that they are paying with after-tax dollars. The HSA provides a great way of saving taxes dollars on the money they would already be spending. Third, the evidence clearly shows people with chronic conditions who enroll in these plans use more preventive care and have higher compliance with recommended treatment, resulting in lower use of ERs and inpatient admissions.

HSAs and CDHPs have enormous potential to control escalating healthcare costs, but Americans are very dependent on the current system of using insurance to leverage one's health-care dollars. Health-care costs would need to come down first, which isn't happening soon. By the way, how about health-care reform that increases the supply of doctors, hospitals, clinics, etc., rather than focusing on the demand side?

Appreciate the comments, but still looking for a little more. I am currently transitioning my employment from a company that has not offered a CDHP/HSA to a company that does. My situation is this...I have been paying near $2,700/year into a traditional medical plan for my family. I now have the option to pay $540/year for a CDHP which carries a $2,400 deductible. My employer will add $1,200 to the HSA account. This seems logically like the best way for my family to be insured. I doubt, thankfully, that we've incurred the $2,700/year in medical expenses year-after-year that we've been paying into a traditional insurance. I recognize the first part of the year we will likely be shell-shocked by the costs, but isn't putting pre-tax dollars aside and only paying for what is truly incurred the way to go? I sound as though I've talked myself into this CDHP, right? Here are my concerns. (1) We have two small children, ages 18 months and 4 years, (2) let's be realistic. If my doctor says my kids need something, anything, I am not going to refuse it regardless of whether or not I can afford it, (3) let's even be more realistic...I do not have the time or the desire to research medical journals or peruse the local yellow pages calling on quotes for costs of certain procedures. My husband and I certainly may be more willing to delay an evening trip to urgent care due to a sore throat, but will our need to take care of our children's well-being be the downfall of us financially if we sign up for a CDHP?

Excellent questions, Jamie. I now find myself in a very similar situation. I would like to hear someone respond thoughtfully to your questions and comments.

The reason reason CDH plans show lower costs is because the health consumer cannot pay for any non-covered higher cost services, and the average is pushed lower as a result. This means those people don't get the health care they need, and their quality of life is poorer, and also they die younger, and suffer financial disaster, regardless.

I work for a company that is switching salaried employees to high deductible plans. Here are a few things about it that I did not learn until we had employee meetings to discuss the plan. In our case we can pick similar plans from 2 insurance administrators. We are now supposed to be "smart consumers" however: 1) Although we can choose any doctor in either network, the administrators will not tell us what doctors charges will be with each network for each doctor, as I understand it each practice negotiates with each insurance company so the rates vary from doctor to doctor and plan to plan. So now you can choose a doctor but you will not know what it costs until you get the bill, it is like going to store and purchasing something and not finding out what it costs until the credit card bill arrives. 2) We are required to purchase prescriptions from a single mail order company if we want the prescription cost to count towards the deductible (we can not shop for a lower price). Another item of interest, I spoke to a friend who is a doctor who pointed out that these plans are a lot more work for them (explaining bills and sending out bills to individual patients). Also since consumers pay fully for most services there is less incentive for the insurance companies to negotiate with providers.