Thursday, January 20, 2011


The Wisconsin AFL-CIO released a statement on Governor Walker's proposed tax credit for contributions to health savings accounts (HSA's). I don't know how to describe it any other way than to say that their stance strikes me as archaic and out of touch with a modern global economy. I don't find anything in their preferred approach to health insurance attractive and I don't see how it benefits workers in today's economy.

They write:
We are concerned about the unintended consequences of further encouraging the proliferation of high-deductible insurance plans tied to health savings accounts. This approach is projected to have an adverse effect on the cost and quality of comprehensive employment-based health coverage.
Employer sponsored coverage in part grew out of WW-II era wage controls. I can't be the only one that thinks it strange that your health coverage is determined by what occupation you choose, can I? As far as the comprehensive nature of coverage goes, that is not insurance. Insurance is intended to hedge against loss from uncertain events. I believe that including routine care in "insurance" distorts the prices of that care. The burden of those distorted prices hurt the least well off the most.

They continue:
Affordable group insurance relies on a broad and mixed risk pool. It is anticipated
that younger and healthier employees will be attracted to the HSA/high-deductible coverage and take their chances.
People covered by high deductible plans haven' left the pool of the insured. They have just chosen lower premiums in exchange for higher deductibles. Yes that means they will pay more in the event of medical claims, but in exchange they pay lower premiums. You have to look at both of these together.

And finally:
Older workers, those with families, and others with chronic health problems
are more likely to need the traditional, comprehensive health coverage. Over the long term, the remaining pool of people in the traditional plans will have higher medical costs, the cost of those plans will soar, and that option will become even more unaffordable for employees who need comprehensive coverage.
I assume "older workers" mean folks not yet old enough for Medicare. In addition to having higher medical costs than, say, a 20 year-old, these folks are likely to earn more, have more savings, and have lower expenses. Additionally, what is the case for a person of average health needing comprehensive coverage? Why can't they plan for some level of medical expenses, just like they would for housing, food, and anything else that you need as part of the natural course of life. Insurance could then be purchased in case of a large claim.

I do believe there is gap in the insurance market, but it is not one the AFL-CIO acknowledges here. This is the group of people who we don't expect to have major medical issues, but do. These are the children with cancer or rare genetic diseases and the 35 year-olds in need of an organ transplant. I agree we need to find a way to address these cases as I don't think that anyone in a country as rich as ours should go bankrupt because of their health.

The Obama reform addresses this by simply prohibiting insurers from denying coverage to these folks. How well this will work remains to be seen, but this approach doesn't strike me as particularly transformational.

For the poor we have Medicaid, for the aged we have Medicare. For the vast majority in between, who are largely healthy, an HSA plan could be the right choice. For Wisconsin to handicap these plans through our tax system, when the federal government and so many other states do not, is a backward approach to health care. The Wisconsin AFL-CIO is doing workers a disservice by opposing Walker's tax credit for HSA contributions.


Joe B said...

Intel is self-insured when it comes to providing health insurance (I think most large companies are). Based on maximum out of pocket expenses, the least expensive option was the high-deductable plan with HSA. The premium for that coverage through Intel is $0. So I put an amount of money into my HSA to cover the yearly maximum out of pocket expense. If we need to use the coverage, it will come out of the HSA up to the yearly out of pocket max. If not, then it rolls to the next year.

In the traditional model, I would pay a premium whether I needed services or not.

I think the coverage of the yearly exam, prenatal and well baby visits is a hedge by the insurance companies to serve as an early detection for potential costlier procedures later. For example, early detection and treatment of illness is probably cheaper than letting something small develop into something large.

Eh, but what do I know?

Jack Lohman said...

Yes, HSA's pass most of the health care costs to employees, and save companies money. But they encourage patients to stay away from the doctor until their disease is more difficult to treat or becomes untreatable. The best, most efficient form of healthcare is Medicare-for-all. But our politicians take campaign bribes (Egads!) to make sure that does not pass.

Jack Lohman

Dad29 said...

But they encourage patients to stay away from the doctor until their disease is more difficult to treat or becomes untreatable

You may have statistics to prove that, Jack, but all they REALLY prove is that half the population has a below-average IQ.

Anonymous said...

A few thoughts:I

suspect that those who oppose HSA's very much want more government control. They can not stand the idea of people being independent of the all-seeing, all-knowing goverNMEnt. The WANT weakness and dependency, because without it, the left would have no power.

I wonder why so many docs are refusing Medicare patients?

And a lie told convincingly and repeatedly is still a lie.


Anonymous said...

Clearly, with the state facing an unprecedented budget crisis, the best use of $50 million is to give it to 1.3% of Wisconsinites (who already receive a federal tax break for their HSA's).

And, before you go nuts about "that's not the guvmint's money, it's my money," please justify why this tax break rather than any other is the way to make Wisconsin "open for business."

Jack Lohman said...

No, Dad, it proves that 1/2 the population has a below-average INCOME.

And Anonymous, the only docs that turn down Medicare are those who have built their practice and no longer NEED Medicare. Otherwise it has about a 5% profit margin even after their salaries. And 59% of doctors prefer a Medicare-for-all system.