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Life Health > Health Insurance > Life Insurance Strategies

Looking For The Silver Bullet

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Once again, the presidential sweepstakes are off and running, with candidates alternately relating how terrible things are and extolling the virtues of their own proposed solutions to all our ills. One thing you can always count on is the denigration of our health care delivery system and the magical cures the candidates will offer up. The problems with the system are not usually clearly defined; rather, we are left to ponder the time-worn clich?s that punctuated previous election cycles. I have also observed that you usually hear more about these alleged solutions before the election, than after it is over.

One such solution that was the hope of candidates in previous elections was the concept of Health Savings Accounts (HSAs). Early indications are that HSAs will continue to be featured in one form or another by some of the present field of candidates. This, despite the fact that a June 12, 2007, lead article in The Wall Street Journal stated that HSA plans are starting to falter. The article points out in 2006, 2.7 million workers were covered by HSA plans versus 2.4 million in 2005 – a very slight increase, given the attention given to this product.

The article goes on to point out that most workers who are covered had no choice in the matter. Where an HSA was offered as an option, only 19% of workers chose the plan. The most striking example of this can be seen in the health care plan for federal workers where an HSA is an option: out of 8 million covered workers, only 50,000 chose an HSA, according to the article. The Wall Street Journal article also cites the experience at Osram Sylvania, where only 5% of the employees enrolled in their HSA in 2006, their first year.

Interestingly, 25 years ago, I thought about using such a concept for the 135 employees then covered by the NALU health insurance plan. I contacted several insurers and requested bids on a high deductible plan (bottom coverage to be provided by employee and employer contributions into a savings account). I could not get enough of a discount by going “high deductible” to justify changing the present plan format – so I discarded the idea.

Other writers have pointed out there is a big risk in an HSA not often considered. In their deal to build up a savings account for later use, employees and their dependents may skip or ignore minor medical conditions that may later become major problems and more expensive to treat – or worse yet, prove to be disabling or fatal. To be fair, it is also possible people would be more judicious in the use of the fund if it were their “own” money. I am sure there would be some of both factors at work.

Rudy Giuliani says he will have a proposal to deal with the so-called health care crisis. Exact details have not yet been disclosed, but enough hints have been dropped to suggest he is being given bad advice on the subject. It would appear that the central thrust of his plan would be to shift health insurance from employer plans to individual coverage. This, I believe, is a severely flawed concept.

Group plans are far more efficient than coverage by individuals: They can be experience-rated and more readily shopped among competitors. Employers have far more bargaining power than individuals. The idea that an individual can negotiate the prices of providers is absurd – like trying to bargain for a lower price of a dozen eggs at the supermarket. It may sound like a good idea, but when you are ill, you are not looking for the cheapest doctor in town. Reminds me of the astronaut – I believe it was John Glenn – who said his main worry, as he was orbiting the earth, was the knowledge that his capsule was built by the lowest bidder.

While I agree with Giuliani on many–if not most–issues, on health care, he needs to get better advisors.

We don’t know much about Barack Obama’s proposal, which he claims will clear up the mess and which he appears to blame on the insurance industry. He favors rate regulation of health insurance despite the fact that most insurers earn less than 3% profit. He decries the lack of competition without recognizing many companies left the business because it was unprofitable and they were tired of being a whipping boy for personal injury lawyers and politicians. He criticizes the industry for lack of efficiency, again without giving insurers credit for the many innovations they have created. He also appears to believe the myth that individuals can negotiate with providers. Barack should realize most insurers are essentially financers of health care. If the price of cars were out of line, it is not likely Congress would attack the banks. Sorry, Barack, your plan ignores the facts of the market.

Hillary Clinton has yet to reveal details of her plan, but past experience suggests it will be some form of universal coverage with government playing a leading role. So far, we have heard nothing from Ira Magaziner, the genius who engineered her health care flop during the Clinton administration. At least he proved that brilliance is no substitute for practicality.

None of these ideas will be the silver bullet many are seeking. Health care is one seventh of our economy and is a very complex business. Rather than rehashing old bromides and popular myths, it would be more productive if the real causes of our problems would be seriously addressed. For example, we could start with tort reform. No other health care system in the world bears the burden of supporting a large segment of its legal system. Lawsuits, malpractice insurance and out-of-control juries all add enormous costs to our health care system. But what’s the good of finding a silver bullet if you are afraid to bite it? Will any of the candidates try?


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