Insurance or Health Savings Account?

By: Mormon Heretic
November 12, 2012

It is open enrollment time for many companies. We get to choose what insurance benefits we want to participate in. For the first time, my wife’s employer is offering the option of a Medical Health Savings Account. Is this a good option for us, or for you? Well, I didn’t know much, and I don’t claim to know everything. I may present stuff wrong, but I hope you will help me decide if this is a good option. Here’s how it works (as I understand it.)

My wife was offered 3 options: (1) Cadillac coverage, (2) Toyota coverage, and (3) Medical Savings Account. Here’s the cost breakdown of the 3 options.

Cadillac Coverage

(1) Costs about $220/month for our family.

(2) When we visit the doctor, we pay a copay of about $25-$40 usually.

(3) Our family deductible is about $750/year in network, $1500/year out of network and

  1. then the plan pays 85% of in network coverage, 60% for out of network coverage.
  2. Max out of pocket is $6400, then the plan pays 100%

Toyota Coverage

(1) Costs about $165/month for our family

(2) No copay is offered. I’m not sure how much we would pay to visit the doctor

(3) Our family deductible is about $2000/year in network, $3750 out of network

  1. The plan pays 80% for in network coverage. If you go out of network, it pays 60%.
  2. Max out of pocket is $8000 in network, $12000 out of network, then the plan pays 100%

Medical Health Savings Account

(1) Costs just $11/month for our family

(2) You pay the full doctor bill when you visit

(3) The family deductible is $3000 per year

  1. The plan then pays 80% for in network coverage, 60% for out of network coverage
  2. After you pay $9000/year in network, $13,500 for out of network, then the plan pays 100%

So the first apparent advantage to a Medical Health Savings Account is the low cost. But you are expected to set aside money each month tax free (kind of like a 401k). So it has the benefits of a 401k. You can invest it in mutual funds, stocks, or whatever you like. However, you can only withdraw funds to pay for medical expenses. If there is money in the account at the end of the year, you keep the money. But if you don’t set aside enough money and end up with a large bill, you’re going to have to fork over at least $3000 before the insurance starts to kick in.

So is it a good idea to set aside say $200 each month instead of paying that to the insurance company? Well, I decided to review my medical bills for this year and last year and see if it would be a good idea for us.

This year

Through September, Here is what we paid in medical expenses and insurance

$1728 in monthly premiums (it was just $192/month this year)
$230 in copays (doctor visits)
$210.56 for a CT scan for my daughter recommended by doctor (turned up negative)

$2168.56 Grand total outlay (for 9 months of care.)

Now, let’s see how the insurance helped me.

I was billed by my doctors $2904.52. (I call this the “retail price.”) However, they didn’t receive the full amount. My insurance company paid just $1212.76, and the doctor collected the $410.56 from me for a total of $1653.42. So my insurance company negotiated for me down the retail price from $2904.52 to a “wholesale” price of just $1653.42. In essence, even though the doctor billed me $2904.52, he only received 57% of that ($1653.42). Wow, my insurance company knocked down the bill by 43%. That’s pretty cool. In essence, the doctors were shorted $1251.20. (I bet they don’t like that, but it sure seems the price is quite inflated if they only accept 57%.)

And the insurance company made money on me. They collected $1728 in premiums from me this year, but only paid $1212.76 to the doctors. So they’ve made about $500 on me, and the year isn’t over yet. So is it worth it to me that the insurance company dropped my bill by $1200? I think so. I mean they are in business to make money, so I guess it is fair that they make $500 off of me. Would it have been better to be in a medical health savings account? Well, let’s see.

If I saved $200 for 9 months, I’d have just $1800. But with a medical health savings account, I have to pay everything up to my $3000 deductible. So, I’m on the hook for $2904.52, but I have just $1800 in the account to date. Somehow, I’ve got to come up with another $1100, and the year isn’t over. I don’t get the wholesale price that the insurance company negotiated above—I’m paying retail for my doctor visits. How is this a good idea?

UPDATE FOLLOWING MORMON COWBOY’S COMMENTS BELOW

If I saved $200 for 9 months, I’d have just $1800. But with a health savings account, I get my insurance company’s wholesale price.  Instead of paying the whole $2904.52, I get a discount and only pay 57% of that.  But it’s still under my $3000 deductible. So, I’m on the hook for $1655.58, but I have $1800 in the account to date, so theoretically if all the bills came in September (which they didn’t), I may have enough money to cover. In reality, some months I’m probably going to come up with money to pay the doctor before my HSA has enough money, and the year isn’t over.  At this point of the year, I’ve spent $2168.56 on the Cadillac plan in premiums and copays, but I would have spent just $1655.58 with the HSA.  I’ve saved myself $413.98.  Ok, maybe there is something to this.

Now, last year I had greater expenses. We were involved in a serious car accident. My wife had a broken collar bone. We were driving near Beaver, Utah. I didn’t have a choice what hospital we would go to, so we were out of network. Let’s look at how last year’s expenses played out.

Last year

Here is what we paid in medical expenses and insurance

$2040 in monthly premiums (it was just $170/month last year)
$1125 in copays (doctor visits)
$0 out of pocket

$3165 Grand total outlay (for 12 months of care.)

Now, let’s see how the insurance helped me.

I was billed by my doctors $5439.52. (“retail price.”) However, they didn’t receive the full amount. My insurance company paid just $1963.06, and the doctor collected the $1125 from me for a total of $3088.06. So my insurance company negotiated for me down the retail price from $5439.52 to a “wholesale” price of just $3088.06. In essence, even though the doctor billed me $5439.52, he only received 57% of that ($3088.06). Wow, my insurance company knocked down the bill by 43% again! That’s pretty cool. In essence, the doctors were shorted $2351.78. (Is there a doctor out there that can explain this to me?)

And once again, the insurance company made money on me. They collected $2040 in premiums from me this year, but only outlayed $1963.06 to the doctors. So they’ve made about $80 on me, a much more modest sum. So is it worth it to me that the insurance company dropped my bill by $2350? You bet!!! I mean they are in business to make money, so I guess it is fair that they make $80 off of me and take care of all the hassles. Would it have been better to be in a medical savings account? Well, let’s see.

Most of the expenses occurred in April. (The accident was Easter Sunday.) I would have paid the $3000 right off the top at retail price. At just $200/month, I would have just $800 in my account at that time, so I’ve got to come up with another $2200 just for the deductible. Since the accident occurred in remote Utah and I didn’t have a choice of the hospital, I am now out of network, so the plan pays just 60% of the costs. Now perhaps the insurance negotiates it down to 57% of the excess of $3000, so rather than paying on the entire $2439.84, the doctors will accept just $1390.71, of which I am responsible for 40%, so I need to come up with another $556.28. That means I am out of pocket $3556.28. Insurance still seems like a better idea to me, and I am glad I have the Cadillac coverage.

UPDATE FROM MORMON COWBOY’S COMMENTS BELOW.

Most of the expenses occurred in April. (The accident was Easter Sunday.) I get the wholesale price of $3100.71 (57%) instead of the retail $5439.84.  At just $200/month, I would have just $800 in my account at that time, so I’ve got to come up with another $2200 just for the deductible. Since the accident occurred in remote Utah and I didn’t have a choice of the hospital, I am now out of network, so the plan pays just 60% of the costs. I have to pay an additional $40.28 for the amount in excess of $3000.  My total outlay is $3040.28, but I paid $3165 for the Cadillac coverage.  I would have saved $124.72 which I could invest for next year’s expenses.  Hmmm, maybe there is something to this after all.

We are lucky enough to have been to Hawaii on a few occasions. On one occasion, my wife started bleeding. She had already experienced a miscarriage, and we were concerned. (Lucky for us, everything turned out ok this time.) Once again, we were out of network, so the coverage was very helpful. On another occasion in Hawaii, my daughter acquired a terrible earache. We knew she couldn’t fly home with that, so we paid the doctor with our credit card. Once again, we were pleased to receive a refund for a good portion of that expensive doctor visit.

So is there anyone out there that can tell me if I made any calculation errors? (Even though I have updated this, I will leave this as originally written.  If you would like to see my calculations:  See insurance2.) I just don’t see where a Medical Health Savings Plan is at all helpful. Perhaps if I was single with no children, I could save up enough money so that my medical savings account would have had enough money to cover the accident, miscarriage, and earache. But this just doesn’t seem to be a viable option when I have to pay retail price instead of the insurance negotiated wholesale price. I know there are tax advantages in the fact that I don’t get taxed on money invested in an MHSA, but I think those tax savings will get eaten up by the retail price of health care.

I am grateful that my wife works for a very large company with excellent benefits. My previous employer was a very small organization (approx. 9 employees) that didn’t offer health insurance. I wonder if the MSA is an option for them. It would have been better than nothing, but surely insurance is a better option than an MSA. When I worked at Wal-mart, I was appalled at how expensive the insurance was and how little they covered. There have been videos made where Wal-mart shows employees how to obtain government health care. They are not at all interested in providing good benefits. As large as that organization is, it is appalling how poor the benefits package is for their employees.

Medical Health Savings Accounts may be a good idea for these people, but for those who work for large employers with good benefits, I just don’t see how a Medical Health Savings Account is a good idea. I just don’t see it. (I would be especially interested to hear from people that work in small companies.  Is it being offered to you as a benefit?) If it works in your situation, can you describe it? Comments?

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32 Responses to Insurance or Health Savings Account?

  1. Stephen M (Ethesis) on November 12, 2012 at 4:24 AM

    I am really interested to see the comments on this.

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  2. Jenn on November 12, 2012 at 5:29 AM

    You’re right- a savings account is only helpful for those who don’t expect major medical issues, or for those whose only OTHER option is super high premiums.
    When my husband was a school teacher and I was a SAHM, the only group plan we had access to was through his work, and the premium was quite literally more than 2500/month. No, that’s not a typo. It was over half his salary. So we opted for private 3rd-party coverage instead, which was 800/month and didn’t have maternity coverage (we paid for my daughter’s birth out of pocket). Basically, if you’re screwed no matter which way you go, a HSA may not be the worst option.

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  3. anita on November 12, 2012 at 7:09 AM

    thanks for posting this, we have to decide on our plan this week so it’s on my mind as well. we did the savings account plan this past year but it hasn’t been a positive experience, and has involved a lot more paperwork, hassles, and phone calls with medical billing offices to straighten things out. we hit the full coverage point in july, due to some unforeseen medical adventures, but as you pointed out, did not yet have that much saved up in the account by then. and since then, haven’t had much that has required coverage. i think we’re heading back to cadillac coverage (don’t have a toyota option). thanks!

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  4. Mormon Heretic on November 12, 2012 at 8:18 AM

    One of the “attractive” things about a MSA is the fact that you can invest it in the stock market. Perhaps, for a young, healthy person with no better way to get insurance, then this might be an option. However, since you’re paying retail everytime you go to the doctor, I don’t see an MSA giving you a 43% return on investment. As we can see from the numbers, insurance lowers your bill by 43%. If one is constantly digging into the principal of the savings, there’s no way to get your money to grow fast enough (unless you’re Bill Gates or Mark Zuckerburg.) And if you gamble on the stock market, you could lose your investment. If you’re sick at the same time, well, you’re up a creek. I just don’t see an MSA as a wise option, and I don’t think investing it is wise either. It’s better than nothing, but I don’t see it as a solution to reasonable health care, especially if the patient pays retail for health care.

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  5. Paul on November 12, 2012 at 8:23 AM

    Like your wife’s, my large employer also offers a range of plans. We chose an HMO with higher premiums for the very reasons you are suggesting — the deal from the HMO covers more cost and results in a lower total annual cost to me.

    I can see why younger, single employees might choose an HSA rather than my HMO. I have a bunch of kids and I’m of an age where more testing is becoming routine, despite my healthy Mormon lifestyle. ;-)

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  6. hawkgrrrl on November 12, 2012 at 8:34 AM

    MoHer – on my company’s HSA, you still get the discounts of your “insurance” provider (you still have an insurance card) – you just pay out of pocket vs. the co-pay. If they only charge you for the co-pay, you get a bill for the rest from the insurance company. We were using HSA the last 2 years I was in the US. It’s a bit of a gamble because you could come out ahead either way depending on what happens in the course of the year, but our company also put money toward the HSA to get you started. It was very forward thinking. There was also full coverage for wellness visits and free checkups and consultation provided at the office a few times a year, even including mammography. The focus was on preventive care.

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  7. Mormon Heretic on November 12, 2012 at 8:41 AM

    Hawk, good to know. Just to be clear, were you paying “wholesale” price for the first $3000 (or whatever your deductible was)? If so, that would change my numbers quite a bit and make it a better deal. Are you paying just a copay at the time of visit and then have to pay the balance later? Did you invest the savings in the stock market?

    As for preventive care, my wife’s company pays 100% for that with all 3 plans, so that wasn’t an issue for me. Did you invest the money for your MSA (or HSA)?

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  8. PaulM on November 12, 2012 at 9:15 AM

    You do not pay retail with an HSA program. You pay the rate negotiated by your insurer.

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  9. Mormoncowboy on November 12, 2012 at 9:42 AM

    Mormon Heretic:

    I’m probably not the only one…but I am a resident group health insurance “Producer” here, so allow me to clarify a couple of points.

    First a question on terms – are we talking about “Medicals Savings Accounts”, or “Health Saving’s Accounts”? Functionally they are both very similar, however MSA’s aren’t as common since HSA’s have been on the market. Also, if you don’t mind mentioning, who is the health insurance provider/carrier? Blue Cross Blue Shield, Aetna, Cigna, UHC, etc?

    I would assume you are talking about HSA’s, so I will comment accordingly:

    There is some confusion on terms when talking about health insurance. “HSA” plans are really two things:

    1) Insurance: A specific legally defined health insurance policy (major medical) called a Qualified High Deductible Health Plan (QHDHP).

    This is still insurance, meaning the policy has annual deductibles and co-pay’s, albeit higher than the historical limits, and they have provider contracts and networks. A key point here, because of these networks the member still recieves the insurance discount rate when accessing care. So in your examples, you can still ignore the retail pricing and count on the negotiated rates when planning out for years.

    A key distinction about QHDHP’s is that the medical deductible includes all pharmacy expenses also! I didn’t see anything in your analysis about pharmacy, which is probably a separate benefit with it’s own co-pay’s and deductibles on the Cadilac and Toyota options.

    2) HSA: A tax benefited savings account dedicated to certain “qualified” health care expenditures.

    In order to have an HSA, you must have a QHDHP as your sole source of major medical coverage. If you have any other source, such as a secondary policy through a spouses employer OR Medicare, you are not eligible for the account. If you have an account, you may be offered some investment options, but the money must be spent on medical expenses or you will be taxed ordinary income plus a 10% fine. When you turn 65, the fine goes away, and you may use the funds for non-qualified expenses subject to income tax only.

    Making a decision – Jenn is sort of right, but it really is just a matter of cost and personal risk management factored against health care consumption needs and habits. In other words, we’re just opportunity costing options. Let’s compare options Toyota & HSA (MSA):

    Annual premium savings by electing option 3 vs 2: $1,848.00

    Less $3,000 deductible: $3000 – $1848 = $1,152.

    So, right out the gate you would save up $1,848, assuming you did not have health expenditures during the year. If you went with the Toyota option that $1,848 would be a sunk cost to you, plus you would have a $2,000 deductible.

    So from the standpoint of deductibles you would be better of with the HSA (MSA) option. Remember, you should get the provider discounts either way, and they are probably the same, though I would double check with the HR just to be certain (sometimes there are network differences, though it’s rare).

    So now the only consideration is annual Out-of-pocket limits. The difference is $1,000. However, with the HSA (MSA) option you still have a differential of $848 in favor of the HSA (MSA) plan ($2,000 Toyota Ded – $1,152 remaining balance on HSA Ded). So we’re really talking about $152 right here ($1,000 – $848). Besides, in order to even reach a point where this matters you would have to have annual claims in excess of $30,000 ((8,000 Out of Pocket – $2,000 Ded)/20% Coinsurance rate).

    Needlesss to say, based on the information you have provided, the HSA plan offered by your employer offers minimal risk compared to the next highest option available, plus it gives you the option to potentially save money. I would “probably” recommend that plan.

    Important point – there are some potential problems to opportunity costing this way, I’m making note of those problems below.

    1) Pharmacy benefits – If most of your expected claims for the upcoming year are related to pharmacy expenses, then this analysis may not hold. That would be particularly true if the pharmacy benefits are for only one member of your family

    2) Medical deductibles – Most plans similar to the Toyota and Cadilac options have a two-tiered deductible option – single/family. This generally means that each individual has their own deductible, and then there is a family maximum deductible. I would bet that the Toyota option is an individual deductible of $1,000 up to 2x family, ie, family $2,000. This also generally applies to the Out of Pocket maximum, which is probably a $4,000 single up to 2x for family.

    Obviously if this is the case, then the analysis I did above will not hold as well. It would entirely depend on how the health care needs are spread among your family. If expected care is isolated to one member, you may be better off with the Toyota plan. I realize this is asking you to look into a crystal ball, but that is one of the challenges to these types of comparisons. Historical medical experience reviews, such as the one you did in your post are the best indicators on how to plan for this.

    QHDHP’s usually (notice that word “usually”) have one deductible only for families. All members of the family are treated as one unit, or with one deductible account. All combined expenditures are applied there. Once the deductible is met, it is met for everybody.

    3) Maternity and grandfathered status – In some small businesses (fewer than 20 employees) were not required to have any coverage for Maternity. Generally this doesn’t happen, but if this were the case I’d steer clear from this plan. Additionally, a number of reforms have occured in the past few years related to maternity,preventative and contraception care. Some plans that were in place before these reforms were in place, opted to forgo those reforms and were allowed to do so under a grandfathered status. I’d recommend getting the details from your plan administrator specifically related to Maternity, prevention, and contraception (if it matters to you).

    Sorry for the long post – I don’t mean to come across too strongly here, but I am happy to answer any questions on this subject. Out of respect for privacy and WheatandTares, if you would like, please email me at mormoncowboy@hotmail.com.

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  10. Mormoncowboy on November 12, 2012 at 9:46 AM

    I should also make one point of clarification for a little legal protection, as well as to ensure that people behave “smartly”.

    My advice is general advice based on the information provided in the post. It is not specific advice, because I would need access to the plan information in order to give it. I would recommend that anybody with questions, direct those questions to their HR departments and/or plan administrators.

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  11. Mormon Heretic on November 12, 2012 at 1:30 PM

    Mormon Cowboy, thanks for adding your input. I’ll correct my analysis, and I can see that for last year, a HSA would have actually been a better deal, though not painless. But before I get into that, what exactly is the difference between a Medical Savings Account and a Health Savings Account. I thought the terms were interchangeable, so I’d like to know what the differences are.

    Also, I want to say that these decisions are not easy to make. I called both the company HR department and the insurance provider (United Health Care) and neither one were very helpful. UHC told me I could look at my old transactions, so I came up with this analysis. Nobody told me that the $3000 was a retail or wholesale price (though perhaps I didn’t ask that. Until I did the analysis myself, I hadn’t thought to ask it, and they didn’t seem very helpful on the phone. It felt like I was on my own, so I appreciate the info.)

    As for prescriptions, it appeared to me that there was no difference among the plans, so I excluded discussion for the sake of brevity.

    As for the “sunk cost”, I have pretty small children. The idea that I won’t go to the doctor is a pie in the sky assumption. I’d be shocked to go a year without some sort of a problem, whether it’s stitches, earache, or something else. My kids are relatively healthy, but my daughter seems to have a predilection for ear problems and urinary tract infections. As for me, it seems like I get a really bad sore throat every 2 years that requires antibiotics to solve. Otherwise, I never visit a doctor.

    Maternity is another issue I didn’t discuss. Cadillac plan pays 85% after deductible, Toyota pays nothing, and HSA pays 80% (assuming in network.) So, if you’re going to have a baby, Cadillac looks like the best option.

    I will update the post with a spreadsheet to look at calculations, and fix the erroneous assumptions about the $3000 deductible above.

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  12. Mormoncowboy on November 12, 2012 at 2:54 PM

    Medical Savings accounts were funding options that were available and a little more common prior to 2003, when HSA’s sort of took over.

    I don’t know the specifics because I have never managed or sold an MSA, but the general idea is related to how the accounts are funded. There is some restriction on whether the accounts must be funded by employers and employees. Also, I believe the funding limits are based somehow on income, rather than fixed federal limits. I think there are also some eligibility distinctions, ie, who can participate. Occassionally the terms are confused, but technically MSA’s and HSA’s are similar but separate animals.

    My point about the “sunk cost” was that in the Toyota option it is money you are guaranteed to spend, and just in premiums. I realize that many people can expect to have costs in excess of $1,848, but even if you do, it is money that would have been spent in either plan. The difference is simply accounting. Do I pay it in insurance premiums, or do I pay it bills.

    Everybody’s need’s and consumption habits are different. I have three little kids as well, and we usually can avoid needing to go to the doctor (so far???), that is of course if we don’t count last Saturday when my three year old daughter swallowed a penny!

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  13. Will on November 12, 2012 at 3:30 PM

    Health Savings accounts are the answer for the simple reason they interject competition and personal responsibility back into the equation. The only way costs will ever come down is when you can get doctors, dentists and hospitals competing like plumbers and electricians for business. This also means allowing the consumer to get bids just like you would for a construction project. Competition works, centralized control does not.

    It is really pretty simple, as illustrated. A Pregnant mom calls several doctors asking how much to deliver a baby and what the package includes. Likewise it would include calling the hospital, anesthesiologist and the like. This does not solve all the problems, but is a good start in the right direction.

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  14. Bob on November 12, 2012 at 4:13 PM

    #13: Will,
    It just doesn’t happen this way. No doctor is going to talk to you on the phone without seeing you. He will not give you a quote for getting you well. Your wife is not going to have a baby by the lowest bidder(?) We all want the best when our life in on the line.

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  15. Douglas on November 12, 2012 at 5:58 PM

    #14 (Bob) – everyone wants the “BEST”, but allowed the AMA et al. to monopolize health care, get Medicare, ObamaCare, and any sort of “care” (where their rather healthy incomes are certainly “cared” for!). Certainly competition is essential. I had to switch my 12 y.o. daughter from the Pediatric dentist (not in my plan) to my own dentist (in plan) because frankly, the out-of-pocket cost for her treatment plan is over twice that of my own dentist, w/o any discernable diference in quality of service. The consumer must be both informed and able to make cost-benefit decisions with regard to their own healthcare, rather than submit to the all-knowing wisdom of the common bureaucrat. The whole concept of an HSA and/or MSA is to take advantage of being able to pay out-of-pocket with pre-tax dollars, which is of itself nothing more than tacit admission that tax rates are excessive.
    It appears that there’s too much of an expectation that health care is a “right”, that is, any level of effort and expertise is somehow OWED every Tom, Dick, Harry, and Jane (or Hakeem), regardless of not only ability to pay (an issue which the medical community solved itself for centuries w/o the need for Government-sponsored “charity”), but also regardless of one’s own lifestyles and/or habits. I can think of no greater moral hazard than the promise of “free” health care (re: other citizens are robbed of their earnings in a perverse form of enforced “charity”) w/o the requirements to be accountable to maintain one’s health. Or, even worse, the all-knowing “Gubmint” gets accountabilty…tax french fries, pizza, and burgers, fine people for being fat or out-of-shape, etc. All fine if we have a Citizen Force of the “Domination of the Draka” (S.M. Stirling’s fantastic trilogy about an uber-South Africa that takes over and enslaves the world) where every citizen is a soldier that must be honed physically to be a well-tuned fighting machine…but last I looked, this is the U.S. of A. Like Dennis Leary’s character in “Demolition Man”, I want to eat lobster and fried chicken and run naked through the streets covered in Jello because I like it!
    Freedom means being left alone to solve my own problems instead of demanding that others solve them for me.

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  16. Cowboy on November 12, 2012 at 6:33 PM

    Will:

    What you describe in comment #13 was part of the rhetoric that sold HSA’s to the public, but as Bob has stated, that’s not actually how it works. First, there are two, maybe three, constraints preventing any meaningful “competition” between the buyers and sellers of healthcare services.

    First, insurance provider contracting. Your own health plan prevents you from negotiating with providers because they have already done that for you. The whole thing has become so automated that your provider doesn’t even know what you are going to pay for a service many times. The “real” impact is that members are choosing to either recieve care, or not recieve it, not to negotiate prices. Theoretically the argument is that this should drive down prices, but I am aware of no studies that actually show this. There a number of studies however that show consumers in HSA plans (particularly if they have low employer contributions to the HSA accounts) are reverting back to the pre 1990′s behavior the precipitated in the managed care initiatives of HMO’s and gatekeepers.

    Second, professional physicians groups. Fewer and fewer physicians are practicing in the sole proprietor model, but are rather grouping together for a variety of reasons…not least of which is to leverage mass provider pools to give themselves a better bargaining position against insurance provider contracting.

    Third – HSA’s are just an accounting contrivance. In other words, the rhetoric that went part and parcel with your comment in #13, was that members should take the premium savings of moving to a QHDHP and use those savings to fund the HSA. Now, if I do that, what’s the difference unless my HSA account isn’t sufficient to cover the added liability? I don’t have the true consumer incentive of choice and opportunity cost, rather I have a tax favored account that is held hostage for strictly medical care use. So what am I going to do with that account? Am I going to get crazy about trying to bargain with my provider, or am I just going to keep swiping cards? The only distinction is which card, ie, instead of swiping my insurance card and paying a copay, now I swipe my insurance card and then swipe my HSA card. It’s all the same thing.

    There are two problems with the “consumer models” of health care. First (sorry for so many numbered arguments), we can’t have an effective market competition model with excludable goods. In other words, if we aren’t willing to let people die in the hospital parking lot because they can’t pay, we can’t pretend to have a free-market product. I’m not suggesting that we should allow for people to die, just pointing out in a worst case scenario, that is what would be required. Even if some ultra libertarian wants to argue for that, the fact is, as a broad society we have already refused that option. Whether you agree with it or not, the fact is, you won’t sell that argument to modern America.

    Second, the employer model would have to go. I have been listening for years as every commentator has been blaming the issues of health care overconsumption on the “consumer”, by which they mean the “employee”. “Why would they care about healthcare costs when they’re spending someone elses money”, and other such inane arguments. Let me ask, who’s money are they spending then? The implication in the argument is that they are spending the employers money. It’s just not true. The employer doesn’t pay for health insurance, but rather they take money that would otherwise be paid in wages, and make a purchasing decision on behalf of all their employees. You tell me, who makes the decision to accept 17% annual employee benefit increases without putting up a fight? I would argue that this is the kind of behavior that occurs only when one group is spending another groups money, ie, employers spending employee money! Employees are disempowered in the system to be able to act like true consumers who finance and manage their personal financial risk independent of arbitrary bureaucracies. You could only bring market forces to bear if you have a market where the consumers of a good are also the purchasers/financiers of a good.

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  17. Jenn on November 12, 2012 at 7:03 PM

    #14- Actually, many women DO have a baby by the lowest bidder. Or they call in advance to see the doctor’s induction and c-section rates, because when they aren’t medically necessary can cost an arm and a leg (aside from frequently putting baby and mom at unnecessary risk). I had a homebirth in part because we didn’t have maternity coverage and a homebirth cost a quarter what a hospital birth would, but also because for someone very low-risk like me, with the right trained professional, I was statistically less likely to have expensive (and scary) complications. We NEED more women to put more serious thought into maternity providers, and costs and risks associated with procedures, BEFORE they’re in the last weeks of pregnancy.

    My maternal care soapbox aside, a lot of savvy consumers DO shop around for healthcare. My old employer signed up for a consumer advocate service that existed solely to help employees make smart medical decisions- a nice perk for employees, and I suspect it helped my employer cut back on bills too. An expensive doctor does NOT mean a good doctor- not by any stretch of the imagination. It may just mean one who overtreats patients, is in the right bargaining group, or hand-picks their patients.

    Douglas (#15)- What a miserable fictional world you live in. I wonder how you’d feel if you had a child born with congenital health problems; maybe then you’d have an ounce of sympathy or compassion on people whose circumstances don’t afford them the same amount of control over health decisions that you have.
    Yes, people make bad choices with their health. And currently, we’re already paying for that, because the level of care they get is decided by two things: employment status (rather than fitness), and our society’s unwillingness to say to anyone “sorry, you made a bad health choice a few years back, you aren’t allowed into this ER” (imagine what that would do to our population).

    Back when our only option for group coverage was through my (well-educated, middle-class) husband’s employer (public schools), it would have cost over half of his already meager salary. I did not feel ENTITLED to anything, I merely wanted access to pay into the same system everyone else was paying into- without sending us into deep poverty- especially once kids enter the picture. I did not want anything for free, or for anyone to pay for me. But our system is built around being part of a “group”, which rather than encouraging a free market or fair system, greatly LIMITS freedom in choosing coverage.

    Unfortunately, our employer-based system makes it nearly impossible to “shop around” for good access to insurance. We went with a private third-party (non-group) plan and paid 800/month for mediocre coverage- and that was fine, except not a single non-group plan had maternity coverage. Period. And had we had pre-existing medical conditions, even that would not have been an option.

    If I hadn’t been game for a homebirth, we would have paid 10k+ for our birth. And NOT because having baby takes that many resources from the system- no, expenses for labor/delivery in the US is 3-4 TIMES what it costs in other civilized countries- because the system is broken and doesn’t give doctors any reason to do what is either safest or less expensive for patients.

    Either way, the public schools of Texas are down one awesome teacher because getting insurance benefits for our growing family became more important than the job itself. This nearly kept me from joining a job-creating tech start-up company, as well, but we figured we had already paid an arm and a leg to have our last kid, we could stick it out until the start-up could afford to offer group insurance (I say this as I knock on wood that God doesn’t send us any surprises because we can’t afford another out-of-pocket baby).

    The system is broken, the system is abused. Not many people would argue that. It doesn’t currently reward those who make healthy decisions any more or less than it will under obamacare. We don’t currently leave the poor or stupid to die, so why not put some accountability into the system to get those people coverage rather than leaving loopholes to be exposed and pretending like it’s “more fair”?

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  18. hawkgrrrl on November 12, 2012 at 7:57 PM

    The shopping around that comes with an HSA is very eye-opening, for sure. I had an employee who needed an MRI scan done during the first month we had as a company gone to an HSA. She called 5 different Houston clinics and got quotes anywhere from $100 to $500. All of these were options to her. And, as she found in this case, her insurance negotiated rate (in network) wasn’t the lowest available. I kind of pictured some guy in a van with an MRI scanner and stolen watches, but as it turned out, it was the same procedure for $100 as it was for $500.

    The point in #14 that I think has some validity is that people aren’t always good at self-diagnosing and then shopping for procedures. The consultation requires a doctor’s visit in many cases. This too is changing a little bit as WebMD and other self-diagnosing sites are increasing public awareness, but one way I’ve cut my own costs is that I accept the lower cost of a nurse practitioner rather than insisting on a doctor. I find NPs to be very good at what they do with even more practical experience and better listening skills.

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  19. Juliathepoet on November 12, 2012 at 8:17 PM

    I have worked for insurance companies, supervising claims reprocessing and coordination of care departments in Oregon. HSAs were becoming popular when I left, but I did watch two years worth of implementation. During that time, most businesses were putting in a fairly large “beginning of the year contribution which was usually about half the deductible that was deposited in the HSA on January 15th. A few businesses were doing their lump contribution in January and July, or once a quarter. There was almost always a minimum monthly amount required to be put in by the employee as well, which usually was about the same amount as a monthly premium. Since then, not very many employers have kept doing those lump sum payments, if state insurance laws don’t require them.

    (We were lucky that our state required those lump sum payments or else the $5K deductible would have ruined us. As it was we hit the maximum out of pocket of $10K between pregnancy complications, an arm broken on the school playground, and 3 family members with bronchitis, one of which turned into pneumonia.)

    Having had an HSA and a “regular” insurance plan from UHC, I may be able to answer a few of the questions that you are having difficulties getting answers to. (Personally, I found the lack of solid answers, and that the answers often changed between departments particularly difficult when dealing with UHC.) They figure the deductible, co-insurance, and out of pocket maximums based on their negotiated rate, no matter what kind of plan. Their non-HSA plans generally accept bills directly from providers, and while there can be headaches occasionally, I had many fewer things I had to follow-up on than when we were switched to the HSA.

    The number of out-of-network services is also smaller for the regular insurance plans, because many providers are part of the national network that many insurance companies, including UHC, subscribe to. It can take more legwork to get them to apply that network costing, because if you don’t ask UHC doesn’t run the claim through that network (Aetna, which we have now does this automatically so that while you are paying the out of network percentage, you pay that percentage of a nationally negotiated lower rate.) They also have completely seperate ways of figuring those amounts for in and out of network costs. This means that if you meet the in-network deductible, and then need an out of network service, it starts at zero from the deductible for out of network.

    Depending on your state, an HSA may or may not have co-pays for medications, which means your pharmacy costs may be significantly different. If you live in Utah or Idaho, that allow prescription, medical (even mayernity can be split which seems strange to me, but states setting insurance regulations make for a lot of strange things like that) and psychiatric care to be split into seperate deductibles, out of pocket maximum and co-insurance amounts, you may want to look pretty closely at those costs and how they are handled. If you don’t have family members on regular monthly medications, knowing exactly how medication coverage is done can be important, especially because some plans even include medications administered at a doctor’s office, hospital or ER and immunization under that category. It is also good to know whether their cost will apply to your deductible or maximum out of pocket. If your state insurance laws allow them to seperate, you may not have any cap on those prescription cost, either as co-pays or co-insurance.

    For UHC in particular, I found the HSA option to require a lot more paperwork, and we had at least 20 claims that had to be paid and then later (sometimes much later) reimbursed. We had three months when we had paid the deductible, but because there was a question on exactly what the contracted rate was for parts of an ER visit, so none of the ER visit was applied to the deductible. Until it got cleared up in June, we did not have access to any of the rest of the HSA funds. We still had to pay out of pocket for all of the other health care costs, many of them up front since we had an HSA plan. You also have to be aware that you will need to keep all your receipts, because you have to turn them in to prove it falls in “legitimate” medical expenses, and most states require you to have them for seven (7) years, because they can be audited by the IRS, either with a tax audit or in a random HSA audit.

    Many doctors require you to pay their listed rate at the visit, and then the will reimburse you, if, when the claim is processed it shows you owe a lower amount (when you are in your deductible part) or when they got payment from the indurance company and know what your co insurance amount is. Our family doctor worked with us during that time, but the specialist dealing with the broken arm would not provide treatment without payment at the time of the visit because we were on an HSA plan.

    Let me know if you have questions. I hope this have you a little more to think about. :-)

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  20. Juliathepoet on November 12, 2012 at 9:39 PM

    Hawk #18 – so the places she called knew what their contracted rate with your health insurance was? I tried to comparison shop several things that were monthly testing that was being done, and the only people I was able to get prices from were those who were not contracted with UHC.

    Those who did have contracts generally said that between their national association contracted fees, their regional contracted fees, and their specific state contracted fees. I called one of my friends, who still worked for my former employer, to see if that made sense to him. He said that over the last five years, national insurance companies often have more than one contracted price with a hospital or health system, and the state the person’s insurance is bought in, and the insurance laws in that state may change what is paid.

    The simplest example is maternity care. A large regional hospital may be serving people from several states, especially when they near a state border. If one state requires maternity coverage, then the contracted rates for people from that state will be lower, because the hospital knows that they will have fewer people without coverage. The negotiated rate for someone with maternity coverage, from a state that doesnt require maternity coverage will be higher, because there is more likely to be people who are unable to pay their bills, or who pay those bills over a longer period of time.

    I live in Oregon, near the border with Washington. My OB/perinatologest changed his “home hospital” but it wasn’t any farther to drive than the hospital my other kids were delivered in, so I had my daughter there. Oregon requires maternity coverage and so the negotiated rate for the hospital system reflects that. Someone who is from Utah, who has maternity coverage, and ends up having their baby at the same hospital with the same doctor will have a higher rate, both because they would be under regional pricing, and because that regional pricing takes into account all of the people in Utah who do not have maternity coverage, but who still are required by federal law to get the sane care, as a mother in labor.

    The only place this is corrected for is in Medicare, since there is no state bias of coverage, and only the cost of living in the place that care is received, impacts the contracted amounts. One long term advantage to Obamacare is that over ten years, the state quirks of coverage will be phased out, bringing most states up to higher guaranteed care.

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  21. Mormon Heretic on November 12, 2012 at 9:44 PM

    Will, I like competition and can agree with that idea, but with the group policy pricing, who knows what the price really is? Doctors never post prices in any office I have been in, and insurance companies make these decisions incredibly complex. I mean with all the options, it is really hard to know what is the best option for each family. I think insurance companies make it intentionally complex so that comparison shopping is impossible. With that said, I think Cowboy raises some excellent points as to why HSA’s (and the health care industry) don’t work the way a regular market works.

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  22. MH on November 13, 2012 at 10:04 AM

    I thought for sure Mike would comment on this post, being the health care expert…..

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  23. Mormoncowboy on November 13, 2012 at 10:57 AM

    Re Hawkgrrrl #18:

    This actually happens a lot. A situation that I ran into a number of times was the Wal-Mart $4.00 prescriptions. Often this rate is lower than the contracted rate for the same drug. The difficulty in this is with Deductible credit. If you can find that an out-of-Network provider charges a lower rate than the contracted rate for an MRI, using Hawkgrrrl’s example, you can use HSA funds to pay for that, but you won’t get any credit towards your In-Network Deductible. If it is just an isolated service, and you don’t anticipate claims that year to exceed either your In-Network Deductible, or your available HSA funds, then that isn’t a problem. However, MRI’s are diagnostics that often result in expensive follow up procedures. In that case, it “may” actually be to the members advantage to pay the contracted rate and get Deductible credit. This of course is one more reason why the whole “consumerism” argument is lacking.

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  24. hawkgrrrl on November 13, 2012 at 11:39 AM

    Good point, Cowboy – I forgot that it wasn’t counting toward her in network deductible, but that’s one disincentive to go with the lowest price.

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  25. Mormoncowboy on November 13, 2012 at 12:14 PM

    Agreed – the specific details surrounding a individuals needs and expected annual claims would determine whether the issue of Deductible credit is something to worry about or not. In many cases it’s a non-issue, it just depends.

    I just find it interesting that HSA’s are sold under the philosophy of “consumerism” or “Consumer Directed Health Plans” (CDHP), when the health plan is the very thing that ties consumer hands.

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  26. Douglas on November 14, 2012 at 10:45 AM

    Anyone stumping for Obamacare should ask themselves if the Government’s pathetic record with Tricare for the military or Medicare for the elderly is what the rest of us should be subjected to. It boils down to this: those that favor it do so with the expectation that someone else will pay. That’s why the current regime may finish this country off; they’ve promised the moon and now they have to deliver.

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  27. MH on November 14, 2012 at 11:15 AM

    Douglas, despite the rhetoric about choice, the fact of the matter is that many would prefer to have Medicare or Tricare rather than NO CARE. When you think of it that way, Medicare is a whole lot better than faced with dying because you can’t afford to get the chemotherapy. But conservatives pretend people with NO CARE don’t exist, or are functioning just fine. Surely Medicare and Tricare ration health care, but health care is currently rationed between the wealthy and the not wealthy. I suspect you are not a diabetic who can’t afford health care, am I right?

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  28. Tatiana on November 14, 2012 at 11:39 AM

    Both my son and me are very sick with chronic problems, so our medical bills are through the roof. I am lucky enough to work for a big company with excellent benefits. When I was no longer able to work, they put me on a disability leave of absence, which means we still qualify for most of the coverage. The health care savings account wouldn’t work for us, though it might have been a good idea if I had started it back when I first got out of college and was young and healthy. I do like some of the features.

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  29. Douglas on November 14, 2012 at 5:24 PM

    #27 – well, I’d prefer that healthcare be strictly confined to the private sector for the simple reason that there is no provision in the US Constitution that authorizes Congress to regulate same nor levy tax monies.
    I am sympathetic to entreaties for situations re: health issues and the costs therein. The Lord ALREADY gave the answer: be generous in your fast offerings and similar donations. Comcomittal with free to spend what one has earned by the sweat of his own brow (and resist by all lawful means any attempt by usurpers to take same for themselves or for others that have not earned and likely are undeserving) is the responsibility to remember the infirm and the poor.

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  30. Juliathepoet on November 17, 2012 at 5:39 AM

    Douglas- The idea that the church welfare program, through generous tithing, can take care of the needs of the members of the church, or society, who are poor is not true, and using it as a straw horse, for why we don’t need government programs is mentally dishonest.

    Any bishop, before offering church assistance makes sure that the person or family has applied for all government services and family support before offering church funds.

    In the US this means applying for unemployment, Medicare, Medicaid, food stamps, veteran’s benefits, WIC, housing assistance, all student aid (for families who have a member of the family in college) including taking out the maximum amount of subsidized student loans, social security disability, and state or county energy assistance funds, and any federal funding for COBRA benefits.

    Unless things have changed significantly from when my ex-husbands was laid off four years ago, the church funds are not to be used to pay for medical care, unless it is for prescriptions. Church funds can not be used to make payments on loans, credit cards, medical debt, child care or school expenses, car payments, or anything that the church cannot write a check directly to the business for, like gas, parking, tolls, etc.

    Church funds can help in short-term situations with rent, utilities, or things that if not paid would lead to immediate eviction, or in the case of eviction they can pay for up to a week of staying in a very inexpensive hotel. If there is reason to believe you will have the funds to pay rent once you are moved in, church funds can be used to cover a security deposit on a rental house or apartment. It seems to depend on the area, sometimes car insurance premiums can be paid, others won’t.

    Almost always food can be provided, as well as items from DI, if you live in an area that has one. You are still required/encouraged to apply for food stamps, and if you receive food stamps, then the bishop’s storehouse would be available for non-food items.

    The church does help lots of people, but they do not replace government programs, and the church would not have the resources to meet the needs of the saints if those governments programs are cut. Generous fast offerings are only a small supplement to what the poor, disabled and disadvantaged of the church need to survive.

    (I am not now or have been a bishop. I may be wrong about a few if the specifics, and I am aware of a few exceptions to the statements I made above, but because they were explained to me as single exceptions, not in line with general guidelines, I didn’t feel it necessary to include them. There may also be changes in the new handbook that I am unaware of because no close friends or family have needed help since it came out, and I am not serving in a calling that would require me to know the specifics.)

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  31. Jason on November 17, 2012 at 8:30 AM

    We went to a high deductible health plan (HDHP) last year. It was an easy choice for us because, 1) we don’t spend much for health care ($200 this year), and 2) the price difference between the HMO (Cadillac plan) and HDHP was greater than yours (~$2500).

    Having selected the HDHP, we put the cost difference between the two plans into the HSA. It is nice to know that money is mine and carries over to the next year to be used in a medical emergency rather than being paid to the insurance company.

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  32. Douglas on November 17, 2012 at 8:50 PM

    #30 (Juliathepoet) – thanks for the clarification. I mentioned about the fast offering but also OTHER donations (and notice that I didn’t limit it to what’s on the Church’s donation slip) simply meaning that CHARITY, by simple definition, should be private. Other forms of what the voting public has been duped into believing is a form of Government-sponsosred charity, but in fact amounts to taxation plus the government usurpation of choice for patients and providers in the healthcare arena. I suspect that a great deal of the skyrocketing increases in healthcare cost (runaway litigation also being a signficant factor) is the ability of the Congress to extract trillions in tax monies for that purpose. A bit like the $600 hammer that the Air Force bought in the 80s.
    True, IF particpation in healthcare were voluntarily universal, it’d be a lot easier. That isn’t human nature, and we Americans are very much, as the fictional Sarek of Vulcan would say, “So Human”. Insurance, whether it be casualty, health, or life, works best when the amount of payers is maximized (to spread out the costs of benefits, obviously). In the case of BOTH life and health insurance plans, it involves getting the young earners in on it early, when the premiums from that group ought to well exceed the payout to same. The trouble with the free market, of course, is that it’s good personal and social policy, but it’s a damned tough sell! So the only benefit of something like Obamacare is that in effect, we don’t allow “free riders”. It’s just that history shows that Government complusion and good intentions almost inevitably go awry. And there’s a stronger principle to uphold: Freedom. THat’s includes the “freedom” to suffer the consequences of poor choices. I hear all these sob stories about how folks have tough medical issues, and even allowing that they’re true, I still ask: did these same folks have a realistic opportunity to insure against these calaminities? If they did, they how can I possibly feel that sorry for them? It’s like the endless call for “flood insurance” in areas that have repeated disasters of this nature…why should I subsize flood damages in Lousiana or the Eastern Seaboard anymore than Lousianans (the state of my birth) or Nor’Easteners pay for earthquake damages in California?

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