Mr. Speaker, I wish to bring the following article on associated health plans to the attention of my colleagues. We must continue to work to bring health care coverage to the more than 45 million Americans who are uninsured. This article…
Mr. Speaker, I wish to bring the following article on associated health plans to the attention of my colleagues. We must continue to work to bring health care coverage to the more than 45 million Americans who are uninsured. This article clearly shows that associated health plans are not the solution. I will continue to push for the adoption of a truly comprehensive and universal, single-payer health care program.
[From the Los Angeles Times, May 23, 2005]
Insurance Option Has Workers Pay More
(By Ricardo Alonso-Zaldivar)
For years, they were the kinds of health insurance plans
one found at small businesses or among the self-employed,
plans that had huge deductibles and required workers to pay a
lot of medical bills themselves--such as allergy shots, chest
X-rays and the cost of a new baby.
They weren't the policies most people preferred, but they
were the best some people could afford, better than no
insurance at all.
Now, as medical costs keep climbing, those high-deductible
plans are spreading to the giant corporations that have long
been the backbone of traditional job-related, low deductible
health insurance. And if the trend continues, it could
reshape the medical insurance landscape and sharply
redistribute costs, risks and responsibilities for many of
the 160 million Americans with private coverage.
A number of large employers, including defense contractor
Northrop Grumman Corp.,
the Wendy's hamburger chain, high-tech conglomerate Fujitsu
and office supply retailer Staples Inc., are adding what they
call consumer-directed health plans to their menus of
insurance options.
In a recent survey, 26 percent of large employers said they
would offer such plans in 2006, up from 14 percent this year.
Another survey found that about half of large companies were
considering adding them.
A few companies are pursuing a ``full replacement''
strategy that leaves workers with no other choice. But even
where such plans are optional, they are proving popular with
workers who might once have scorned a plan that could leave
them with several thousand dollars in medical bills each
year. At Fujitsu, about half of 5,000 eligible U.S. employees
have signed up for the option.
What suddenly makes such plans attractive to workers is
that many are caught in a painful bind: In recent years, pay
increases have been small at best. At the same time,
employers have been requiring workers to pay a larger and
larger share of their health insurance premiums. It's not
uncommon for higher payroll deductions for health care to
more than offset any pay raises.
With the high-deductible plan, workers pay lower monthly
premiums and their employers commonly help them build up a
special savings account to cushion the impact of a larger
annual deductible. The accounts are controlled by the
employees, which has led insurers and employers to label the
plans ``consumer-directed.''
Even if high-deductible plans offer immediate relief for
many workers, and big cost savings to employers, the allure
may not last. And the plans may do little or nothing to solve
the basic problem of soaring health costs.
``You're beginning to see a lot of growth in these plans,
not because they're going to solve America's health care
challenge, but because it's a way for employers to cut their
out-of-control benefit costs,'' said Robert Laszewski, a
consultant to health insurance companies. ``Any time an
employer can raise deductibles from $200 to $1,000, it is
going to reduce their costs. But will it reduce U.S. health
costs generally? The jury is still really out on that. ``
The reason, he said, is that 10 percent of the people--the
sickest Americans--account for 70 percent of total health
care costs. ``Once the sick people have gone through their
deductible, they're back to regular health plan--the
incentives for them don't really change,'' Laszewski said.
``This is a cost shift device, and not a means to
fundamentally control health care costs.''
Moreover, the willingness of workers to sign up for less
generous plans may change over time, as workers and their
families get older and more likely to encounter serious
medical costs.
``To make these plans truly work, they have to work for the
sickest population--it can't be a plan that only works for
the healthy,'' said Joe Walshe, a principal with the
consulting firm PricewaterhouseCoopers. ``It's very
difficult, but that's where the challenge is.''
In the meantime, the short-term appeal of high-deductible
plans is easy to see. Employees get a bit more take-home pay.
Employers get some relief from higher health care costs.
For big companies, the new plans represent an upfront
savings of about 10 percent and the expectation of more
gradual cost increases over time. Last year, large employers
spent an average of $5,584 per worker for coverage through a
high-deductible plan, compared with $6,181 for a worker in
the typical preferred provider network, according to a Mercer
Human Resource Consulting survey.
Employers say the new plans are not designed primarily to
shift costs to workers. The ultimate goal, they say, is to
cut health care costs by changing consumers' behavior--
teaching them to be more cost-conscious about things such as
generic drugs.
``In three to five years, every company is going to offer
them,'' predicted Alexander Domaszewicz, a Mercer senior
consultant based in Newport Beach. ``People are going to be
coming over from companies that have them, and they are going
to want them.''
When the city of Las Vegas began offering a consumer-
directed plan to 2,200 eligible employees last year, 60
percent signed up.
``When I was growing up in the 1950s, no one had insurance
for day-to-day going to the doctor,'' said Victoria Robinson,
the city's insurance manager. ``You covered those expenses
yourself and had major medical if you had to have your
appendix out or something like that.
``It's almost like going back to the future,'' she said.
Yes and no, analysts say.
When employers began offering health insurance, it was a
way to attract workers by offering them something of value
without directly raising their pay. Today, in purely economic
terms, shifting insurance costs to workers amounts to
reducing compensation.
Although workers may think they will only face the high
deductible if serious illness strikes, those receiving
routine medical care can also face fairly hefty medical
bills.
Many of the new plans ``confront people with a lot more
cost sharing than they are currently experiencing,'' said
Sherry Glied, a health policy professor at Columbia
University. ``If you are the kind of person who can't keep
$2,000 in an account, it could be a really bad idea for
you.''
The experience of Mark Pung, a general contractor in Grand
Rapids, Mich., shows why such plans can be enticing.
The father of four children, Pung says he would never dream
of going without health insurance. Yet he and his wife, Dana,
paid for the births of their two youngest children out their
own pockets--$3,600 for each healthy baby girl. That's
because their medical insurance carries a $5,000 deductible
for the family.
Since their premiums are $180 a month, or $2,160 a year,
they could find themselves with as much as $7,160 in out-of-
pocket health care costs in a single year.
On the other hand, the Pungs face much lower monthly
premiums than they would have to pay for a traditional plan:
between $800 and $1,400 a month for family coverage--at least
$9,600 a year in premiums alone.
Initially, Pung said, ``I felt more exposure. But it wasn't
enough to stop me from doing it, because I could run the
numbers and see how much sense it made.''
The numbers would not be so dramatic for workers in company
plans. Employers help pay premiums and the deductibles are
lower. In 2004, the median deductible for a family in a
company-provided plan was $3,000. The employer contributed
$1,200 toward that through a special account, according to
Mercer, leaving the employee responsible for $1,800.
Proponents of consumer-directed health care say another
advantage of the plans is that higher deductibles encourage
consumers to shop smarter.
The two major firms that administer the plans for large
employers--Lumenos Inc. in Alexandria, Va., and Definity
Health Corp. in Minneapolis--also supply employees with ideas
for saving money, online health care information and related
services.
``The key thing is the whole concept of getting the
consumer engaged,'' said Doug Kronenberg, chief strategy
officer for Lumenos. ``We've got to see behavior change for
us as a country to be able to address the escalating health
care costs we've got.''
When patients have no ``skin in the game,'' he said, they
don't think about how to save.
In Washington, Republican policy-makers have encouraged the
trend toward high deductible insurance plans.
Congress expanded tax-sheltered medical accounts and
renamed them health savings accounts, or HSAs, in the 2003
Medicare prescription drug bill. A year earlier, the Treasury
Department had quietly issued a ruling that enabled employers
to offer a plan known as a health reimbursement arrangement.
The savings accounts are available to people who buy health
coverage with deductibles of at least $1,000 for individuals
and $2,000 for families. Employees and employers can make
pretax contributions to cover the deductible. The accounts
belong to employees, who can take them along when they switch
jobs. With reimbursement accounts, employees don't own the
health care accounts. They can roll over unused balances at
the end of the year, but they cannot take their accounts with
them if they switch jobs.
In a typical reimbursement account, an employer would
create an account for an employee and family, and commit to
cover the first $2,000 of their health care costs. The
employee would then be responsible for the next $1,000.
After that, traditional health coverage would kick in, with
the policy paying 90 percent of the costs and the employee 10
percent. Both the reimbursement and savings accounts have
caps on how much an individual can be required to pay in a
year.
Still, financial incentives can change--especially as
individuals realize they need greater levels of health care.
``The real concern is that people will want to switch out
of these plans when they get sick,'' said Glied, the Columbia
professor. ``Then it will be very expensive for employers.''