Those leading the charge for more government involvement in health care have been bringing up the formidable costs faced by small businesses in providing health care coverage to their employees. There’s no denying those problems. But the questions is: What’s the solution?
The Obama administration and leaders in Congress are asserting that more government will reduce costs. How that would actually occur remains a mystery to anyone with even passing knowledge of economics and political history.
In reality, reforms that enhance competition, choice and consumer controls are what make real sense.
The Council for Affordable Health Insurance (CAHI) released a report recently that looks at how consumer driven health care – such as health savings accounts (HSAs) – actually have reduced costs.
HSAs are tax-free savings accounts linked to traditional, high-deductible health plans. Funds are deposited into the accounts by employees and/or employers. Individuals, who own their accounts, use those funds for regular, predictable health care expenses, with the high deductible health plans kicking in during years with high costs. While third-party payments (for example, from the government) for health care services drive costs higher, as neither the consumer nor the provider need to be concerned about costs and utilization, with HSAs and other consumer-based plans, the dynamic shifts. Consumers become “value-conscious shoppers in the health care marketplace,” as CAHI put it.
What are the results for employers? The CAHI report noted: “Employers … see dramatic changes with consumer driven coverage, including not only lower premiums but lower rates of growth. Premium savings vary depending on many factors, but adopting a higher deductible generally saves consumers or employers 25 to 40 percent in the price of premiums.” The report highlighted a variety of studies.
It also pointed out that HSAs are not just for the healthy, as critics assert. Findings show that HSAs benefit both the healthy and the unhealthy. Why the unhealthy? “One analysis determined that HSAs would reduce health care costs for people with high medical expenses because the out-of-pocket exposure is limited and people reach 100 percent coverage faster than they do in other forms of coverage.”
So, what makes sense – more government, or more consumer control?
Raymond J. Keating
Small Business & Entrepreneurship Council