Wednesday, July 19, 2006

Serious Concern with Health Savings Accounts

Many people are hoping that health care reforms, such as health savings accounts (HSA's), that encourage consumers to pay more attention to their medical costs will help to slow the rate of medical inflation. Health benefit plans featuring HSA's combine a high deductible health insurance benefit with a pre-tax savings mechanism that permits unused savings to be carried over into future years. This differs from flexible spending accounts, which must be used by year's end.

Those who are hopeful about such options should be concerned by information passed along by health care consultant Joe Paduda, who has researched and found that many of the current HSA programs being offered to employers do not allow the patient to make use of PPO or other managed care negotiated rates for care that is paid for using the HSA, with the result that the patient is responsible for paying billed charges until they reach the health insurance deductible. Explaining why that should cause consumers to be concerned, Paduda writes:

...[T]he contracted rates are likely less than half the "retail" rate.

As to why a health plan would do this; not require their providers to accept contracted rates, that's a mystery to me. As a couple of commenters have noted, if the insureds pay the higher rate, they are going to pierce their deductible layer much faster, thereby incurring claims expense and costing the health plan money. To say nothing of the consumer backlash when people find out their coverage through a national plan does not give them better rates.

I will note that Paduda is a frequent critic of the value of these programs, as he believes that they are a waste of time and that universal health care is inevitably the only solution to the nation's health care coverage problems. Regardless of whether one agrees with that, those on all sides of the debate over health care reform should agree that the failure to allow HSA users to receive negotiated rates seriously undermines the program.


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