Tuesday, March 18, 2008

Cannon Fodder

FoIB (and MedWonk Biggie) Michael Cannon has an interesting article in this month's Forum for Health Economics & Policy journal. In it, he proposes his solution to the health insurance issue:
What he's talking about here are so-called "Large HSA's" with deductibles starting at $8000 ($16,000 for familes). His contention is that these plans, with ultra-low premiums, will allow employers to funnel more cash away from insurance carriers and into their employees' pockets.
A laudable goal, to be sure, but I have some issues with it. Last year, Michael was kind enough to share with me the "white paper" on which this was based. I found the idea intriguing (after all, I am a major proponent of CDHP and HSA's), but had some reservations, which I shared with him at the time.
I am absolutely thrilled for Michael to have been published in such an august journal, and hope (and presume) that his piece will spark a much-needed discussion.
I'd also like to share with our readers my response to Michael last year. Hopefully, this too will help move the ball forward:
1) I've always been a believer in "rising tides raise all ships" (paraphrase): when folks talk about the inequity of the employer write-off, they always talk about deleting or capping it. I've always wondered why it wouldn't make more sense to expand it; that is, enable everyone who buys their own cover to deduct it. I see that you've taken some of that with your bigger/better HSA idea, and that's a good thing.
2) Your idea about basically taking the whatever the e'er/e'ee pay for h/c insurance and running the whole thing thru an HSA is intriguing. Seems to me that this is a variation on (expansion of?) "cafeteria plans." I really like that.
Putting those two together (plus whatever else I haven't gotten to yet), I can see where there would be some significant progress. My only reservation is one of pragmatism: how likely is it that the class-warriors would embrace this (or even consider it at all)? Obviously, that's not a reason not to pursue it, but do you have a strategy in mind for dealing with the inevitable obstructionists?
ADDENDUM: In subsequent correspondence, I also pointed out to Michael the feasibility conundrum such a plan would face. Briefly, insurers know that there is an absolute premium "floor," below which they cannot go. These include fixed and administrative costs, morbidity and reserves. In other words, no matter how high the deductible gets, there's really only "so far" the premiums can be trimmed, until there's no savings to be had. That's why, for example, you save (say) $100 going from a $3000 to a $4000 deductible, but only $25 going to the $6000.
The other problem is that, while I remain convinced that HSA's are a potent weapon in the fight against health care costs and consumer apathy, I don't believe that it is the only such. While "Large HSA's" may appeal to some "large employers," I'm not convinced that they'll play well with smaller groups (or in Peoria, as they say).
Nevertheless, Michael's made an impressive beachhead in the ongoing battle to solve the health insurance "crisis," and we applaud him for that.
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