ISSUE IN BRIEF:
Freedom Health Plans
Staff
Contact:
The Medicare Modernization
Act of 2003 included a provision to allow individuals to create a new
tax-favored account - commonly referred to as a Health Savings Account
(HSA) - to pay for medical expenses. The account can only be created
when the individual or the individual's employer purchases a health plan
with a higher deductible - a minimum $1,000 for individuals and $2,000
for family coverage.
Traditional managed
care companies are restricted from selling these higher deductible policies
and therefore thousands of New Yorkers can not start a HSA.
Some employees
have access to high deductible health insurance plans. Large employers
who are subject to ERISA and not New York State Insurance Law, can purchase
them. Employers who purchase indemnity coverage or preferred provider
organization coverage can buy them. But the vast majority of employers
who purchase traditional managed care coverage are restricted from purchasing
them because Insurance Law considers the deductible to be too high.
Business Council Priorities
The ability for
individuals to create their own health savings account can quietly transform
the health care system. Until recently, consumers have had little direct
knowledge of the totality of the costs of health-care and have not been
prudent in how they use the health care system. Many people spend far
more time researching the costs and quality of a big screen television
than they do learning where to go for surgery and finding out how many
times a particular surgeon has performed the procedure.
When employees
are spending their own funds there will be a greater incentive to use
services more prudently. The HSA's also allow the employee to carry-over
their accounts from year to year, thus building up more substantial funds
to use at a time when they are more likely to need more services. The
HSA is also portable for the employee, allowing them to take the money
with them if they change employment.
New York needs
to authorize higher deductible health insurance plans to complement health
savings accounts. Senator Seward and Assemblyman Morelle have spearheaded
a major initiative to allow more employers to buy what we are calling Freedom
Health Plans. S.1405/A.2688
has nearly 50 legislative sponsors, a number that is surely to grow.
It should also
be noted that an additional benefit of HSA's is that a workers' employer
is also authorized to put money into an employees HSA. For instance,
if an employer wanted to purchase a $2000 deductible family policy they
could also put, say $750, into the employees HAS. The employee could
use this money to pay for medical expenses.
Health care costs
are continuing to rise multiples of the inflation rate and there is no
end in sight. Some estimates project the savings from Freedom Health
Plans as high as 30%. Any savings would be welcome relief for small businesses.
A recent Business
Council survey of New York State business leaders shows that employers
want Albany to enact sweeping reforms to improve New York's business
climate. The cost of health insurance was the top issue for the second
year in a row. Nearly 90% of the respondents identified health insurance
as either "a top priority" or "very important".
