Saturday, August 8, 2009

A Simple Solution For Health Care Reform

A Simple Solution For Health Care Reform

I have been paying attention to the rhetoric being used in the current debate on Health Care reform. Right now, no one REALLY has a great solution. The current requests by Congress are not satisfactory by the people and their respective constituents. The President is losing popularity on his position in this particular issue. Republicans and Democrats resort to blaming the Insurance Companies for their underwriting guidelines in regards to Health Insurance. What I find interesting, that there is a solution already in the marketplace! What is that solution? I will present this solution shortly, but let's explore why the current system is not working. The current system has several problems, but the main one is the rising costs. Let's see why costs are rising, and how "The Simple Solution", can begin to gradually fix this issue.

Let's look at main reason why costs are rising in the health care arena. First of all, no one REALLY knows what they are paying for their service. Many Americans don't pay cash for all of their health insurance needs. Those costs are typically transferred over to a 3rd party payer :e.g. Insurance company or Government Health Care. With Private Insurance, the premiums are usually paid by the employer and small percentage is shared with the employee. Government Health Insurance is paid by the tax payers. The insured may pay a small fraction of the office visit or service, but has no clue to the true price of the visit! For example, if I have a typical PPO network Group Insurance plan, I make my doctor appointment, show them my card; and pay the co-pay. That co-pay is a fraction of the doctor's visit! I see the doctor, and go home! The doctor bills my insurance company, and they pay the doctor for my visit; typically at a lower price than his true retail price. Here in lies the problem: Since I don't know the true cost of the visit, I will more than likely over-utilize the service, thus creating a higher demand for the health care providers' services. This problem is also compounded with the fact that my employer is picking up most of the bill for my health care premiums! So what happens? The costs of health care go up as well as the costs of premiums!

When this happens on a large scale, the insurance companies must either raise the premiums for the overall group, or drop them from the plan. Insurance companies are in the business to make a profit, not provide free health care. They have obligations to meet also.

What is the solution? The solution must have incentive for the insured. It must have an incentive for the employer, and it must still have some incentive for the health care provider. It must be a win-win-win. The solution must be able to control costs, and it must give some feedback to the insured to allow them to choose their service based on price, but not lose access to quality health care. It also must provide coverage when something catastrophic happens to the insured. You ready for the solution!

This solution is a combination of a Health Insurance plan and a personal savings account. It is called a Health Savings Account. Let's explore how it works. It has the workings of a typical Auto or Homeowner's insurance policy. Let's look at your Auto policy. You may have a $0 deductible or a $1000 deductible on your car. If you are in an accident, the $0 deductible policy, the insurance company pays for the entire damage to the car; while the $1000 deductible is different. You must pay the $1000 first, then the insurance company pays the rest of the bill. Which one is cheaper in premiums? If you guessed the $1000 deductible, go to the head of the class! That difference in premium between both types of deductibles, you could save in an account and cover the costs when you do have a claim!

Heath Savings Accounts work very similar. Here are some benefits:

  • Contributions to the Account are Tax Deductible
  • The money in your account is YOUR MONEY not the insurance companies'
  • With most HAS plans, once you meet the annual deductible, the insurance company pays for the insurance claims at 100%
  • Any office visit during that year, paid out of the HSA account is counted towards your deductible
  • Premiums for these plans are considerably less than tradition PPO plans.
  • With most HSA plans, in network providers must charge you the network cost versus the actual retail price. This provides tremendous savings for the client!
  • The visits are paid with a VISA debit card, the health care provider receives their money, right then! Reduces Admin cost to file to the insurance company! No waiting for reimbursement from the insurance company for the health care provider!
  • For the insured, ANY health care related costs can be used from this account: i.e. Drugs, Short Term disability premiums, Long Term Disability premiums, Dental Insurance premiums, etc.
  • Since the Premiums are cheaper than a typical PPO plan, the cost to the employer is reduced, AND the employee can take the account with them if they leave their current employer!
  • It will cover catastrophic events: Major Hospitalizations, etc. Keep in mind, if these events exceed the annual deductible, you are covered 100% by the insurance company!
  • Many companies lock in the premiums for 2 -3 years! No major rate increases!
  • It can be sold as an individual plan or a group plan

    This is a small list of all the benefits for this type of insurance. Is this for everyone? It could be! It provides a win-win-win for all parties, and gives the consumer the power of choice on how he/she can spend his money on health care. It also provides the employer a more cost effective way to provide multiple health care benefits, and still be competitive in the marketplace. It also provides the Health Care provider, a much simpler way to process and receive payments, and it promotes better customer service because the consumer will have choices since he is paying cash!

    The irony of all of this debate, these are types of plans have been in existence for several years, no one has really promoted this plan in the debate. Its time to look at these plans as a step in the right direction for the solution to this "Crisis" For more info on this type of plan, send me an email at

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