There was a telling moment in a forgotten hearing on a bill that went nowhere in this past session of the Texas Legislature.
Andy Homer, director of government relations for the Texas Public Employees Association, the largest state employee advocate, testified that not only did health savings accounts have no benefit for his membership, not a single one of them had asked for one.
Just before finishing his remarks, an agitated Homer told the Senate panel health savings accounts were nothing but a political tool. “They’re going to be back here next session, if you pass this, telling us we have to be doing this,” Homer said, referring to the support of the previous speaker representing the conservative Texas Public Policy Foundation.
Optional health savings accounts never made it out of the committee.
High-deductible health savings accounts are among the fastest growing options in the private insurance market. Their multiple tax benefits and control over where health care money goes have been a boon and a money saver for policyholders and employers.
And yet five years after conservative Indiana Gov. Mitch Daniels called his health savings accounts plan a victory for state employees and the state, skepticism of the benefits of and political opposition to the accounts runs deep.
For all of the success with Senate Bill 7, a Legislature-driven health care reform bill that passed easily in the last special session and promises a potential $450 million in state savings, Rep. John Zerwas, R-Simonton, who worked hard on the bill, considers the inability to pass an optional health savings account for state employees one of his big disappointments.
“Everywhere we’ve seen health saving accounts take off we’ve seen the cost curve bend down considerably,” Zerwas, who is also a doctor, said. “My big concern in all of this, the primary thing that needs to happen in health care is for consumers to have some skin in the game, to go out and be rational buyers of health care.”
More than 10 million Americans are now getting their insurance coverage through a high-deductible health plan offering a health savings account option, nearly 640,000 of them in Texas, according to a 2010 study by the health insurance trade group America’s Health Insurance Plans.
By comparison, health savings accounts now make up 13 percent of all private insurance health insurance, compared to preferred provider organizations, by far the most popular private option at 58 percent, according to a Kaiser Foundation annual survey. Since 2006, while PPOs have remained essentially flat, the percentage of high- deductible insured has more than tripled, according to the survey.
The market for the high-deductible plans in large groups grew by 33 percent and in small group coverage by 22 percent from the previous year, the AHIP study said.
The rise in their popularity is inextricably bound to the tax advantages written into the health savings account language that was part of the Medicare Prescription Drug Improvement and Modernization Act passed in 2003.
A policyholder can bank up to $3,050 tax-free for an individual and $6,150 for families, in their accounts. The money not spent on medical expenses stays in the account and moves with the policyholder. Policyholders can save 20 percent on their health plan in the first year and as much as 5 percent in each year thereafter, according to a study by the American Academy of Actuaries.
Money you put into your account is deductible against your adjusted gross income. The growth in the account is not federally taxed. All Medicare expenses, long-term care, alternative care, vision and dental care are paid with pre-tax dollars.
Even better, nearly half of the current health savings accounts include some kind of contribution from the employer, in which case both the policyholder and his company reap tax benefits.
PRAISNERPraisner and Duncan Van Dusen started Tango Health Inc. in 2008, “I wouldn’t say for altruisitic reasons but in an area where we could feel good about a problem we were solving,” he said.
Business is much better than brisk.
If there is a persistent criticism of health savings accounts, it is that the high deductible and maintenance of a cash balance in the account, keeps low-income and sick people away. The non-profit consumer advocate, Consumers Union, in 2008 testified before Congress its opposition to health savings accounts and the creation of what has become known as adverse selection:
This is the hidden secret that the supporters of high deductible tax breaks tend to leave off of their talking points: Instead of increased choice in the marketplace of health insurance options, over time, the ‘choice’ of high deductible coverage is likely to crowd out low deductible choices. … When consumers are given a choice between high and low deductible coverage, a small percent will elect the high deductible option. People with high incomes and low health care costs are most likely to be attracted to the high deductible/HSA option.
What’s more, once a policyholder reaches her deductible, all other charges are included with no copays, like a PPO, he said.
The Patient Protection and Affordable Care Act will require an estimated 30 million people without insurance to obtain it beginning in 2014. But while the industry waits for the Department of Health and Human Services to define “acceptable” minimum coverage under the act, Praisner said the law already includes a minimum plan that looks a lot like a health savings account.
“When we saw the outline for the bronze plan included in the health bill, we were hopping up and down,” Praisner said. “I think that if you force people to go out and get insurance, you’d think what most of them will go with is the minimum.”
ANTONGIOVANNI“I think it is the single most cost-effective health care plan on the market,” Antongiovanni said. “High-deductible insurance plans combined with an HSA should be at the center of our nation’s efforts to expand health insurance coverage. Participants have an incentive to avoid paying for unnecessary services because they keep the money they don’t spend.”
Recognizing their effectiveness, conservative Indiana Gov. Mitch Daniels included a voluntary HSA program for the state’s 28,000 employees among his first orders of business after taking office in 2005.
In 2006, the first year they were offered, about 4 percent of the state workforce entered the program, Anita Samuel, assistant general counsel and policy director for the Indiana program, said. Currently, 85 percent of state workers have an HSA, Samuel said.
A study by human resources consultant Mercer commissioned by Indiana showed that consumer choice in health care led to better and less expensive choices, Samuel said. And while the final numbers are being tallied, Samuel said the state HSA program may have saved taxpayers as much as $23 million and policyholders as much as $8 million last year.
A year ago, the state sweetened its deal offering to match 50 percent of whatever an employee put in his or her account from their very first paycheck.
“This was something the governor was very passionate about, helping consumers to have a direct role in their health care choices and, because we fund 100 percent of all preventive services, to help our state workforce be healthy,” Samuel said. “And at 85 percent you can say this has been very popular with our employees.”
Indiana has been a leader, and roughly two dozen other states offer their employees some form of high-deductible health savings account. Encouraged, the idea has been championed in Texas as a cost savings measure, mostly by conservatives.
With nearly 240,000 state employees, more than eight times the size of the Indiana workforce, there were visions of health savings account cost savings in the hundreds of millions of dollars.
Those were not the numbers opponents cited before the State Affairs Committee back in May. They pointed to the fiscal note attached to HB 1766 prepared by the state Legislative Budget Board estimating the state would save a total of $1.2 million over the first two years of the program.
The Budget Board’s note assumed that just 3 percent of the Texas workforce would choose to leave a plan in which the state pays their entire premium for one with a much higher deductible. The logic behind the 3 percent estimate is not part of the fiscal note.
It was Wohlgemuth’s testimony that Homer and others sought to undercut. When contacted recently, Homer was still peeved that conservatives continue to bring back the health savings account legislation after it has failed to move in the past three sessions.
“You’d think they’d recognize that old rule, three strikes and you’re out,” Homer said. “It’s a cost-shifting mechanism as far as we’re concerned.”
The cost shifting, Homer says, is onto state employees who live paycheck to paycheck and can hardly afford to keep thousands of dollars in an account, much less afford a deductible in the thousands.
Homer said studies have shown these accounts appeal to young, healthy employees and people who make a good deal more than the average state employee. This tends to create separate risk pools for the healthy and unhealthy.
Stanford economist Victor Fuchs made this case in a 2009 article published in the New England Journal of Medicine. Oddly enough, the Rand Corp. study Homer cited during his State Affairs testimony concludes that health savings accounts do not treat high- and low-income people differently. Its major finding was that people tended not to take advantage of preventive care because of the high deductible.
Homer was not persuaded by an amendment to the bill specifying the overall risk pool would not be divided.
“All I know is that no one in our association is asking about it, and when they hear about the high deductible they don’t want it,” Homer said. “ “From our perspective, the push is ideological more than anything.”
Zerwas says the push is only ideological if the impulse to save taxpayer money on health care costs is ideological.
“We have to do a better job of explaining the benefits,” Zerwas said. “You have to reach a critical mass, 30 to 35 percent of your employees have to sign on. Once you hit that, things really start to snowball. But first you have to at least make it an option.”
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org or on Twitter at @marktxwatchdog.
Follow Texas Health Care Report on Twitter, and fan us on Facebook. Texas Health Care Report is a project of Texas Watchdog.
Photo of wallet by flickr user docpop, used via a Creative Commons license.
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Comments
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James Anthony
Wednesday, 08/10/2011 - 11:28AM
If I was a member of the Texas Public Employees Association and I knew what I know now about HSAs, I would ask Andy Homer, director of government relations for the Texas Public Employees Association, to resign as he has no idea what he is talking about.
I spoke to another Andy Homer in another state that reps. state workers, who told me, "I dont care if the HSA plan would benefit or increase the benefits to the workers or lower their out of pocket expenses, our members believe it is a give back, so there is no way I will recommend it"
How can you argue with that logic....... |
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texasslm
Thursday, 08/11/2011 - 11:09AM
The article does raise the question: why WON'T the TPEA at least give its members a choice to own an HSA? Does the lobbyist or other association officials believe their members are not smart enough to make a reasonable decision on their own? That's pretty insulting. |
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Patrick Skinner
Thursday, 08/11/2011 - 11:17AM
It reminds me of a comment I heard Kay BAiley made about coallitions - when told they are generally a death spiral and don't work, she commented, it doesn't matter if they work or not, it's what the people want. And our legislators are supposed to be smart? |
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Gritsforbreakfast
Tuesday, 08/16/2011 - 10:59AM
This is hardly news. More like olds - "a forgotten hearing on a bill that went nowhere."
Like HSA proponents, this story seems to give short shrift to the concern that "people tended not to take advantage of preventive care because of the high deductible," which increases costs in the medium to long run. The expenditures on preventive care are precisely where the so-called "savings" comes from, and the long run cost from deferring preventive care is significant. (The biggest reason countries with single payer systems like England or Canada have lower per capita healthcare costs is a focus on preventive medicine.)
Finally, if the bill didn't pass this session, the only ideology standing in its way must have been conservatism. Rs had 101 House members and, what was it, 19 of 31 senators? So it's a bit hard to blame the union; it's not like the TPEA has any clout in the Texas GOP. |
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Mark Lisheron
Tuesday, 08/16/2011 - 12:25PM
Grits, Enjoy and respect your work. With this story I set out to reconcile the growing popularity of HSAs and opposition from state workers. I think both points of view are amply represented in the story. I am not persuaded from my reporting, as are you, that these plans have no value as an option in the public sector. Although its was the TPEA and other representatives of state employees who spoke up most forcefully at the hearings, it was the silence of the Legislature that allowed HSAs to wither without a vote. I would suggest the clout to maintain the silence came from somewhere other than the TPEA or ideology. A few days before we posted our story, there were a flurry of national stories outlining the success Indiana has had with HSAs for its state employees. It is hardly old news to ask why this isn't happening here or elsewhere. Thanks for taking the time to craft a thoughtful critique. |
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Gritsforbreakfast
Tuesday, 08/16/2011 - 01:46PM
Mark, with respect, I don't think this story was intended to lay out "both points of view." Instead it's an argument in favor of the idea and a rebuttal of HSA critics. That's fine. I don't believe in "objective" or "balanced" journalism any more than I believe in the Chupacabra, so I don't criticize you for writing an advocacy piece, just for mislabeling it as either a balanced presentation of "both points of view" (as if there were only two) or as "news," when in fact it was really an opinion essay without a newshook. |
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Echodad
Monday, 02/06/2012 - 11:34AM
The only reason state employees would not utilize preventive services with a HSA is because they are not well-informed.
With a HSA the employer typically contributes a monthly amount into your HSA account, say $100. That amounts to $1200 per year that your employer contributes into your account that you can use for whatever medical services you want/need. Why would the employee not be willing to use that money for preventive care? |
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