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(HealthNewsDigest.com) – In any major legislative initiative, there are positives and negatives.In most instances, the purpose of public debate is to highlight competing priorities and reach acceptable compromises.
However, as any politician or negotiator will tell you, most negotiations end up in compromises.
Facing the nation today is a plethora of healthcare choices and with them competing agendas and aims.
For most participants in the debate, there are three major objectives:
Reducing the spiraling costs of healthcare
Covering uninsured Americans
Maintaining the quality of care provided to most Americans
How to achieve these goals while not bankrupting the country is the fundamental issue facing lawmakers.
One way is to encourage the growth of Consumer Directed Healthcare programs.
Leaving rhetoric aside, whatever happens, there are reasons to maintain certain characteristics of the present healthcare system.
Under our current system, more than 88 million Americans are covered through employer-sponsored healthcare benefit plans.
More than two in three of these participants work for companies of 500-or-more employees.
For workers in small firms, particularly those 25-or less employees, the numbers drop drastically in terms of percentage of companies offering healthcare insurance and in the number of covered individuals.
The reasons for this disparity are easily explained.
Big corporations have negotiating clout and small firms do not.
But no matter what their makeup, American companies face a common problem.
Despite their size, large corporations face yearly increases in insurance premiums.
For smaller firms, the increases are even more impactful – usually larger and have a more significant effect on their bottom line.
In the past, both large and small companies have dealt with these increases by choosing to absorb the higher charges, passing part of the greater expenses onto employees or cutting benefits.
Even before the recession hit, many smaller companies were finding the burden too much and were opting out of offering healthcare insurance.
The recent recession has changed the playing field even more drastically and reduced corporate options.
That healthcare benefits along with other perks are going by the wayside is clearly evident as shown by recent surveys.
In fact, one report said that large corporations were for 2010 planning for the smallest total salary increase percentages in 25-years.
In the swirl of legislation being offered in Washington DC, smaller firms are not being accorded the attention necessary to help them overcome the challenges of providing healthcare insurance.
As proposed by the House version of the healthcare reform process, small firms may be exempt from certain provisions but will still face penalties for not providing healthcare benefits.
Whether smaller firms will be allowed to form cooperatives and/or join state buying cooperatives is still unclear.
Barring some relief, smaller firms will face difficult choices in terms of healthcare benefit programs.
If the Massachusetts experience is any guide, many companies will opt to pay a tax (for that is what the proposed penalties are) and let their employees obtain individual policies.
In this scenario, the employee will probably facing higher premium costs.
As The Wall Street Journal pointed out in a recent article, this will put the employees at risk, particularly if they have pre-existing conditions.
An example of trade-offs, the proposed bill will require that insurance companies take new individual clients despite pre-existing conditions.
Again, we must look at the final bill to see if this occurs.
A major rhetorical argument in the healthcare debate is that there are 47 million uninsured Americans.
Seldom discussed is the make-up of this group.
While individual cases of hardship are constantly highlighted in the media, there is a large proportion of this population that chooses to voluntarily avoid purchasing healthcare insurance.
For one thing, two of three Americans spend less than $700 a year on healthcare services.
For them, healthcare insurance is a bad buy.
This is why many critics claim requiring them to purchase insurance is a bad deal.
In fact, one might argue that it is another form of taxation, particularly if there is a penalty for not purchasing insurance.
Looking at this part of the healthcare equation, the argument can be made that this is another form of wealth transfer, as public subsidies are being proposed for lower income purchasers.
As the Massachusetts experience showed, the middle-class would be the net loser in this situation.
Healthcare insurance is predicated on the healthy subsidizing the sicker segment of the insurance pool.
Many in the uninsured pool are young and healthy.
As one pundit said, “when your young, you are immortal.”
In contrast, the aches and pains begin as we get older.
Depending on the study, it is generally accepted that about 10 percent of Americans consume a significant majority of healthcare resources, usually at the end-of-life stage.
If one believes this metric, than the recent fears expressed about so-called “end-of-life” commissions is more understandable.
Whether the proposed legislative changes will reduce the rising cost of healthcare and healthcare insurance is a vital question that is not being adequately addressed in all the rhetorical outbursts.
However, over the past decade, there is a rising body of evidence that Consumer Directed Healthcare (CDH) can produce impactful, positive changes.
Of concern to CDH advocates is whether they will remain viable within the new structure the use of Consumer Directed Healthcare plans.
According to lobbyists for CDH interests, how the individual’s contribution to the deductible is viewed by any commission created under the new legislation to define an “acceptable” healthcare insurance policy is critical.
Advocates fear that this contribution will not be included in calculating pricing and costs, thereby ruling out CDH products, which are on their way to becoming the majority of employer provided healthcare insurance.
Under CDH’s three major categories, Healthcare Reimbursement (HRA), Financial Savings Accounts (FSAs) or Health Savings Accounts (HSAs) together cover more than 88 million Americans and their families.
All three programs are available as employer-sponsored options and HSAs are open to individual purchasers as well.
It is important to note, that every study of individual purchasers of HSA insurance shows that one of three did not have healthcare insurance prior to purchasing their current policy.
HSAs are particularly popular amongst small business providers as a means of reducing benefit costs and also providing a retirement nest egg for employees.
They are rapidly growing as an option for large corporations as well.
As former Treasury Secretary Snow said while discussing HSAs, “they are the only retirement program that avoids taxes when the monies are earned, gathering interest and when spent.”
HSAs essentially require the individual to purchase a higher deductible policy, usually $2000 or more and he or she must pay all healthcare expenses until that deductible limit is reached. After that, the coverage is essentially completely handled by the insurer.
All unspent monies carry over until retirement at which point they are not taxed if used for generous medical purposes.
HRAs and FSAs work much the same except that the employer keeps the funds until rolled-over on a one-time basis.
In our studies of small businesses, we have found a growing acceptance of HSAs as a means of reducing employer costs, providing employers with a retirement vehicle and managing insurance usage.
Reports from large corporations as well as small firms tell us that employees utilize insurance benefits less when CDH policies are in place.
At the same time, the growth of wellness programs, usually at no cost to employees, has improved employee health and reduced absenteeism.
This approach is a win-win-win proposition that needs to be continued under any healthcare reform program.
How these programs will fare under the new legislation is of great concern to advocates. They point out that there are now 10 million HSA users in the country and the program is on a rapid growth curve.
Healthcare reform means many things to many people.
For small business owners it can be a curse or a blessing.
We hope it is the latter.
CDH products help Americans reach three major objectives:
Reducing the spiraling costs of healthcare
Covering uninsured Americans
Maintaining the quality of care provided to most Americans
For every American, CDH products offer a viable, less expensive option and should be maintained and supported.
JoAnn Laing is Chairperson of Information Strategies, Inc. (ISI) a media and marketing company serving small and medium size businesses as a management information source, and large corporations as an advisor and marketing channel. She managed +$1B P&Ls involving +10,000 workers in +170 global locations. A Harvard MBA, she has extensive investor, shareholder, analyst and Board experience. Ms. Laing has authored two healthcare books, The Small Business Guide to HSAs and The Consumer’s Guide to Health Savings Accounts. Her newest book, The Janus Principle, Focusing your company on selling to small business will be in airport bookstores in October.
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