03-02-2005, 09:41 PM
The Medicare Modernization Bill is crap, but there was one tiny rider in the bill that allowed for Healthcare Savings Accounts. It will revolutionize the world
(back story...I'm not staffed on a project right now, so I'm helping writing a whitepaper on these things -- I hadn't heard about them before)
They're like an FSA (where you can pre-tax money and have it pay for medical expenses), but unlike the FSA, if you don't use the money, it rolls over to the next year. It grows with interest, so it's identical to an IRA, with an added bonus that you can take the money out for medical expenses and never have to pay a cent of tax on it.
Why its going to change everything, is that it has to be tied to an insurance plan with a high-deductible. So you personally have to pay for the first $1,000 (as an individual) or $2,000 (as a family) of your medical expenses, no matter what they are. Then after that, your insurance company pays. So you pay for the incidental stuff, and if anything major happens, your insurance company pays for it.
You put $1,000 in, but it's really only about $500 because you're saving the tax. Also your company can put money in, instead.
So that's reason #1 why it's going to change the world. Instead of your company paying $5,000-$10,000 a year per employee for insurance (where that cost is wasted for about 50% of the people who don't ever go to the doctor), they can pay like $3,000 a year for high deductible insurance, and put $1,000 into your account. They'll save money, and you'll get $1,000 asset.
Now reason #2. You have $1,000 that you have to spend. It's your money. When was the last time you asked a doctor (if you have insurance) "how much does this cost?". Because it's not going to be a "I pay the first $10 and anything after that is covered by my insurance company, no matter how much" people are going to start putting pricing pressure on doctors and hospitals and drug companies.
For instance, my company offers vision coverage. Up to $1,000 a year. I have no need for glasses. But I went the other day and bought a pair because why not? I gave them my insurance card. Didn't ask how much the frames cost; didn't ask how much the visit cost; didn't ask anything about the lenses. Wouldn't you know it...the glasses cost $992.56. It's people like me that are driving costs so high. No one gives a shit about how much anything costs.
If I had an HSA, I probably wouldn't have even gotten glasses. And if I did, I would have been more jewish about the prices, and even haggled a bit. As more companies start to realize the savings you can have with these things, and more people start adopting them (Bernstein Research projects 25% marketshare by 2010), it will start putting pricing pressure on all the members of the healthcare system.
Sure, it won't be overnight, but as more people start spending their own money, it will have an effect.
Worries from the commies who don't like it:
"People will horde their money and not go to the doctor, thus causing longer-term, and more expensive problems later in life." Not a worry. the high deductible plans cover preventative issues like yearly checkups, prenatal and shit like that
"It's going to cause more unemployed". I don't know why, but that's what people have been saying. 1/4 of the people who started HSAs in '04 previously had no insurance
There really is no downside to these HSAs. If you own a company, you should look into it. If you are at a small company, you should tell your HR department to look into how much they could save by going to High Deductible plans and putting the difference into your HSA account.
(back story...I'm not staffed on a project right now, so I'm helping writing a whitepaper on these things -- I hadn't heard about them before)
They're like an FSA (where you can pre-tax money and have it pay for medical expenses), but unlike the FSA, if you don't use the money, it rolls over to the next year. It grows with interest, so it's identical to an IRA, with an added bonus that you can take the money out for medical expenses and never have to pay a cent of tax on it.
Why its going to change everything, is that it has to be tied to an insurance plan with a high-deductible. So you personally have to pay for the first $1,000 (as an individual) or $2,000 (as a family) of your medical expenses, no matter what they are. Then after that, your insurance company pays. So you pay for the incidental stuff, and if anything major happens, your insurance company pays for it.
You put $1,000 in, but it's really only about $500 because you're saving the tax. Also your company can put money in, instead.
So that's reason #1 why it's going to change the world. Instead of your company paying $5,000-$10,000 a year per employee for insurance (where that cost is wasted for about 50% of the people who don't ever go to the doctor), they can pay like $3,000 a year for high deductible insurance, and put $1,000 into your account. They'll save money, and you'll get $1,000 asset.
Now reason #2. You have $1,000 that you have to spend. It's your money. When was the last time you asked a doctor (if you have insurance) "how much does this cost?". Because it's not going to be a "I pay the first $10 and anything after that is covered by my insurance company, no matter how much" people are going to start putting pricing pressure on doctors and hospitals and drug companies.
For instance, my company offers vision coverage. Up to $1,000 a year. I have no need for glasses. But I went the other day and bought a pair because why not? I gave them my insurance card. Didn't ask how much the frames cost; didn't ask how much the visit cost; didn't ask anything about the lenses. Wouldn't you know it...the glasses cost $992.56. It's people like me that are driving costs so high. No one gives a shit about how much anything costs.
If I had an HSA, I probably wouldn't have even gotten glasses. And if I did, I would have been more jewish about the prices, and even haggled a bit. As more companies start to realize the savings you can have with these things, and more people start adopting them (Bernstein Research projects 25% marketshare by 2010), it will start putting pricing pressure on all the members of the healthcare system.
Sure, it won't be overnight, but as more people start spending their own money, it will have an effect.
Worries from the commies who don't like it:
"People will horde their money and not go to the doctor, thus causing longer-term, and more expensive problems later in life." Not a worry. the high deductible plans cover preventative issues like yearly checkups, prenatal and shit like that
"It's going to cause more unemployed". I don't know why, but that's what people have been saying. 1/4 of the people who started HSAs in '04 previously had no insurance
There really is no downside to these HSAs. If you own a company, you should look into it. If you are at a small company, you should tell your HR department to look into how much they could save by going to High Deductible plans and putting the difference into your HSA account.