Dr. Alan Preston
Revamped health savings accounts, portable employee plans would ease financial burden on consumers
By Alan Preston, For the Express-News January 21, 2017
One of the campaign promises of the Trump administration is to repeal and replace the Affordable Care Act, and Congress is working on precisely that. As with most legislation, the ACA has parts that are helpful and parts that are hurtful. Some of the good or bad of the law depends on whether or not you benefit from it.
The name of the legislation provides a clue to the objective: The Patient Protection and Affordable Care Act. According to the authors of the legislation, patients were to be protected from the big, bad insurance companies. This is bogus, but there were two major complaints by the authors of the legislation:
- Insurance companies imposed an underwriting technique on individual policies (not group policies sold to employers) called pre-existing condition limitations. The ACA removed this, which increased the price of insurance for everyone. Under the old law, if someone was going to purchase individual medical insurance as a protection from a future financial loss, that person would not be covered for certain previously existing medical issues.
An analogy: You can’t get in a wreck prior to purchasing car insurance and then ask the automobile insurance company to pay you for an accident that occurred before the policy was in effect. It should be obvious why eliminating pre-existing condition limitations — as happened under the ACA — would not work on individual coverage unless one wants to pay extremely high rates.
- The Democrats who designed the ACA felt insurance companies charged too much for too little coverage and made too much profit in the process. Their solution was to mandate a robust insurance plan that covered nearly everything. This forced people in the marketplace to abandon the purchase of what was characterized as low-end insurance policies. And Democrats limited the amount of money an insurance company made in profit and the amount it could spend on administrative expenses. And as it turns out, most insurance companies over the last 10 years have only made 3 percent to 5 percent net profit on average.
This is an unprecedented mandate in any case. This tactic should frighten everyone because your business could be next. When the federal government takes on the role of it-knows-best, seldom does it turn out well for the recipients of this “wisdom.” Health care premiums have increased, making the ACA anything but affordable.
Half of the country would like to see this piece of legislation scrapped. The remaining half are either receiving a premium subsidy or obtaining a real benefit by obtaining insurance for a pre-existing condition that otherwise would have cost that individual dearly.
There are those who like the “idea” of “free” health care and think somehow that the ACA will evolve into such.
What will a replacement look like, and will it reduce the cost of health care? One of President Donald Trump’s ideas is to allow insurance companies to compete across state lines to make insurance more competitive. In many circumstances, competition will reduce costs and make things better. I oppose this for health insurance, however. Let me explain.
Health insurance companies already operate in multiple states if they want. United Healthcare, for instance, operates in all states in one or more of their product offerings. It contracts with more than a million physicians and 6,000 hospitals. “Federalizing” health care insurance companies will not make them more competitive.
The Constitution specifically created the federal government to be limited and small. Every time legislation attempts to transfer a part of commerce regulated by each individual state to the federal government, we diminish the states’ rights as guaranteed in the 10th Amendment. And I have seldom seen the benefit of “one size fits all.” To put it simply, this is a classic power grab by the federal government to centralize power over 20 percent of our economy.
And I hate to be the bearer of bad news, but health care costs will continue to increase year after year. No politician, Republican or Democrat, will be able to reduce the cost.
All is not lost, however.
Trump’s other idea is to reintroduce health savings accounts. HSAs are not insurance products per se; they help consumers with the out-of-pocket costs they are responsible for. If I were the HSA architect, I would recognize that the cost of health care will continue to rise, so I would make sure that consumers are adequately prepared financially to manage the increase.
Right now, HSAs have limited contribution levels with too many stipulations. Remove the maximum amount one can put into an HSA. Deductibles are likely to increase as a way of decreasing the rise in health care premiums. I would not make it conditional and would tie it to a qualified high-deductible health plan, or HDHP.
Unlimited contributions to the HSA will prepare consumers for the limited and excluded items under their insurance.
We should also continue to make the contributions tax-free and allow consumers to lower their gross taxable income by the amount of all contributions. Also allow employers to lower their taxable income for any matching contributions into the employee’s HSA.
Allow the consumer at age 65 to withdraw an amount of money out of the HSA, tax-free, for nonhealth care services. Allow consumers to accumulate an unlimited amount every year with no penalties if they do not spend a penny on health care costs. Allow consumers to leave to their beneficiaries, upon death, the amount of the HSA without any estate tax consequences. Allow the HSAs to be portable, and continue to attach it to consumers.
However, also have their employer-sponsored insurance product become portable. The health care exchanges already exist; thus, it would not be difficult to allow employees to select an insurance product off the exchange of their choosing as opposed to the employer’s selection.
This last suggestion — allowing health insurance products to be portable and attach to the employee as opposed to the employer — is crucial. Over time, the employer will no longer dictate to an employee that he or she must be with insurance company XYZ when the employee wants to be on the ABC plan. Insurance companies will think and act long term to keep the member healthy. They are likely to pay doctors more in the form of bonuses for improved outcomes of the member as opposed to limiting a doctor’s income to a straight fee-for-service model.
Creating a system that has as the objective long-term strategies to improve health, adequate financial savings to manage increased costs, and alignment of goals and objectives will go a long way in “protecting” the patient from financial harm when accessing health care services.
Let’s keep the regulation at the state level and allow the federal government to act as a facilitator by expanding access and financial protection, not by creating restrictions that produce little to no value in a thriving marketplace. The health care marketplace will thrive if we allow a pathway for consumers to save money in a responsible manner and quit micromanaging every aspect of health care.
Dr. Alan M. Preston has been a professor for five years in San Antonio specializing in epidemiology, biostatistics and health care policy. Most of his career has been spent as a CEO for managed care companies and physician organizations.