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HSA Reviews A Good Check And Balance
The Alliance for Health initiative to evaluate area financial institutions' health savings account proposals is a good program monitor likely to provide confidence.
The alliance's president, Lody Zwarensteyn, put it succinctly during a recent interview. "We're kicking off something that really has the potential to affect the market." Backing him up was Ed Ozark, of Varnum Consulting, helping in the study: "We're getting out in front of the curve … we're setting market expectations."
The Alliance plans to amass and publish comparative data through which area employers, initially, and consumers later can assess HSA plans that vendors bring to West Michigan. This seems critical because of such plans' potential to bring under control the escalating costs of minor health-care decisions.
The theory is that HSAs will profoundly influence minor health-care costs by placing decisions directly in consumers' hands.
First, it's believed a consumer spends his own money with much more deliberation than he does an insurance company's money, thus bringing a certain amount of market discipline to the process.
Second, it's believed that eliminating third-party payers from minor health-care procedures will sharply reduce onerous administrative costs.
When a consumer pays directly for a minor medical service through an HSA, the provider will generate a single bill and the account will effect a single disbursement. That's it.
In contrast, insurers and the health-care providers currently operate in a deeply tangled administrative environment, particularly if multiple insurers are involved.
A fairly typical course of events involving a minor office procedure, for instance, finds a doctor's office sending a bill to Insurer A. Insurer A then generates explanations of benefits (EOB): one each for doctor, consumer and Insurer B, if there is one. With the doctor's EOB, Insurer A encloses a check for its share of the procedure's cost.
That EOB likewise informs the doctor the patient owes, say, a $30 co-pay. The doctor's office then generates a bill to the patient for the co-pay. Meanwhile, if there is an Insurer B, the physician generates a bill to that firm, based on Insurer A's EOB. If the patient has yet to meet his deductible, it gets more complicated; likewise if multiple billings are required for phased payments. If a clerical error occurs — say a typo in a procedure code — Insurer A may deny payment, and the whole cycle goes back to resume at Square One.
Estimates vary, but studies indicate each billing — and, again, these are for minor and, therefore, relatively inexpensive procedures — costs $10 to $12 a pop: a sum that becomes part of the cost of doing business, so that fees for minor procedures rise. The insurers — incurring similar expenses for hundreds of thousands of minor procedures — take the same necessary steps. Premiums rise.
Administrative snarls and patients' casual attitudes toward insurance benefits certainly aren't the only push behind rising health-care costs. Yet they have radically inflated provider and insurance costs at the low end of the health-care scale.
But if the HSA is a potential better mousetrap, the corporate world isn't exactly beating a path to its door. The difficulty is that the prospect of moving away from health insurance is scary. HSAs intimidate employers in part because the notion intimidates employees.
Thus, it becomes doubly important — as Ozark put it last week — "to get it right the first time" so that no horror stories occur.
The alliance's move to assess HSAs is very welcome. It implicitly promotes HSA products that will inspire confidence rather that produce fear.