Brokers debate core products

But the numbers don't lie, no matter how they're twisted. Health care rates always outpace inflation while carriers whittle away at coverage.

In fact, some of the latest numbers point out that even though more people boast insurance coverage, the number enjoying private coverage has dropped. More and more find themselves on the public health care dole, which only accelerates the cycle.

Two brokers face off this month in our core debate: Jonathan Edelheit laments climbing costs while offering an alternative solution that just might surprise you. Jim Christenson, on the other hand, simply argues that the system is fundamentally flawed.

HDHPs hold little more than promise
By Jim Christenson


High deductible health plans -- consumer-driven health care -- are being touted as a solution to curbing health insurance costs in the United States. President George Bush asserts his 2003 legislation offered the first step in putting consumers in charge of their own health care.

This legislation also created health savings accounts. The idea is that people will shop for the lowest priced services and spur competition among providers. This will, in turn, drive costs down.

If only the details were as simple as the big picture. You must have an HDHP to open an HSA. HDHPs are sometimes referred to as catastrophic health insurance. An HDHP is a less expensive health insurance plan that generally doesn't pay for the first several thousand dollars of health care expenses (i.e., your deductible) but generally will cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover, provided, of course, you have saved the difference.

For 2006, the deductible amounts are $1,050 for individuals and $2,100 for families, respectively; the annual out-of-pocket (including deductibles and co-pays) for 2006 cannot exceed $5,250 (self-only coverage) or $10,500 (family coverage). HDHPs can have first-dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co-pays and co-insurance) for non-network services.

Your annual HSA contribution cannot exceed the HDHP deductible. For example, if you choose a plan with a deductible of $1,100, you may not deposit more than $1,100 in your HSA for that year. If you want to save more, you must choose an HDHP with a higher deductible. Your personal contributions offer you an "above-the-line" deduction, which allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit.

You, your employer or both of you can make HSA contributions. All contributions are aggregated to determine whether you have contributed the allowable maximum. If your employer contributes some of the money, you can make up the difference.

HDHPs have been a boon to the small businessperson. For my definition, a small businessperson is one who is in business by himself. He might have one part-time employee. HDHPs make the plans more affordable than conventional low- or no-deductible plans. Saving in HSAs can make a person in business for himself independent providing he does not become ill and spend the account balance. Allowable withdrawals from HSAs include qualified long term care, COBRA and Medicare.

The two largest contributors to health insurance inflation are the uninsured and the federal government reduction of reimbursement for Medicare/Medicaid recipients. The uninsured still use our doctors and hospitals. Simply put, when the providers cannot collect, they are forced to charge higher prices to those who can pay to offset their losses (costs). The U.S. government pays the lowest percentage of usual and customary costs of all negotiated payers. Since most health care providers cannot violate their Hippocratic oath and refuse to treat the elderly and the poor, those costs are again passed along to those who can pay, and that is those who pay for health insurance.

A third contributor to health insurance inflation is advanced medication and technology. As consumers, we want the best available medication and the best available testing. When my son broke his ankle, a simple X-ray would not have revealed the truest picture of the bone damage; an MRI did. I'm 51. When I began to suffer from vertigo, I had a stress test, an MRI and EKG, along with a few blood tests. When it came time for my blood pressure medication, I tried a few, but I take the one with fewest side effects.

Now we are told that CDHPs will reduce health insurance rate trends. My question is how exactly that will happen. In doing some fact checking, I could find no law or regulation that required any provider or practitioner to post or otherwise publish prices. When I shop, I need prices; there is no other way to compare. When I want to buy a shirt, generally speaking, the quality is reflected in the price. A nice 120's Egyptian cotton shirt is usually more expensive than a bargain store's cotton and polyester blend. When I go to shop for a car I can compare the exact models and brands to ensure I get the best deal.

In health care, we know the most expensive procedures require the most immediate attention. If one is having a heart attack, one is not in any position to choose a provider, let alone make price comparisons. If my mother needs cataract surgery, she needs a methodology that will allow her to compare price and service. Suffice it to say that none of us can "shop" for health care the way we shop for a durable item. This is in direct conflict with idea that HDHP could be consumer driven.

Next, look at the typical American household income of $53,331, based on the 2005 national average, according to Wikipedia. Subtract FICA and state and federal taxes of 20 percent, or $10,666. Throw in another $4,800 for their share of family health insurance and you have a net income of roughly $38,000. A $2,100 deductible is 5.5 percent of net income. We won't even factor in co-insurance.

Now, none of us can predict the future, but it is my belief that these amounts could go unpaid, burdening an already taxed system. It might even increase health insurance inflation along with the already burgeoning numbers of personal bankruptcies, but that is another crisis altogether.

If that same family is unlucky enough to have a baby with health problems, not only will they not have to pay the deductible annually, it is very likely they might never fund an HSA. The cleanliness of theory is never any match for reality. The reality is, for example, that we would have much greater participation in 401(k)s if people saved.

Some reports insist HDHPs will help rein in rate increases. I started my life on a Blue Cross 500 plan, an indemnity plan in which I paid the first $500 and then it paid major medical costs at usual, customary and reasonable reimbursement rates. It is a historical fact that meteoric rate increases on these products gave birth to the HMO/PPO environment we live in today. Adjusted for inflation, that $500 deductible from 1975 would be a little more than $2,000 today. It is forward into the past with a HDHP's $1,050 deductible.

With the growing number of elderly, the HSA is a strong concept. It would be more of an advantage if we could save for COBRA, Medicare and long term care insurance. It should not be tied to a HDHP.

The consumer-driven concept is fundamentally flawed in that it does not address the major contributors to health insurance inflation. Health plans are unprepared to be consumer driven. There is no existing infrastructure.

Unfortunately, like every problem, we need multiple approaches that won't provide instant solutions or subject matter for impassioned speech. Health insurers should be allowed to rate for smoking and obesity. Both the carrot and the stick need to be employed to cure these unhealthy addictions. Employers need to foster well-care and disease management. We need to be able to pool risk so that smaller employers are not paying more than larger ones.

Finally, are we as Americans, proud citizens of the richest and most powerful country in the world, willing to let our fellow citizens suffer and die at the doorsteps of the greatest health care providers on the planet? The fact of the matter is that there are those who won't go if they can't afford it. HDHPs will make adequate health care unavailable to the majority of our fellow Americans.

Trends in health care -- myth, theory or reality?
By Jonathan Edelheit


Agents are always looking for that magic bullet, the new trend in health care that will save their client money and allow agents to obtain new clients. Agents are always looking for that new idea that will give them an edge on their competition and give them something to sink their teeth into when asking a client to choose them over another insurance agent.

For the group health insurance marketplace, it is very difficult. There are basically five major health insurance carriers in any metropolitan area. Every insurance agent is bringing in the same carrier and every agent is competing with the same proposal. It is hard for an agent to differentiate himself or to stand out from the crowd. Some agents have jumped onto the bandwagon of theoretical concepts, such as disease management. Some argue disease management can reduce the cost of health care, but it remains just a theory with no hard proof to back it up.

Another concept is health risk assessments, where employees will understand the health risks specific to them and make changes in their life. But once again there is no direct correlation between reduced health care costs and this type of program. It is just a theory.

Agents today seem to be in search of that one "theory" they feel will help convince a prospective client they are doing something different than any other agent in keeping health care costs down. The problem is that once you implement one of these theories, there is no way to quantitatively prove the concept worked. In fact, if the client has a bad claims year, this concept could backfire.

Showing a direct correlation between a new concept or emerging trend and reduced costs is almost impossible. The most recent trend today is health savings accounts, but they haven't caught on like everyone originally thought. The cost savings isn't there yet, to entice employers to change from the standard group health insurance plan to that of a high deductible within an HSA.

In fact, no one mentions that many employers do not want to implement an HSA for fear of alienating or losing their employees due to the reduction in group health insurance benefits. Many experts argue that health savings accounts don't even reduce health care costs, because when people need care, they are not going to avoid treatment simply because they have a higher deductible.

Surgical outsourcing has emerged as a new creative trend that shows a direct correlation with reducing costs. It is not a just theory. Surgical outsourcing is the concept of employees traveling overseas for surgical procedures such as back surgery, knee surgery, bypass and even transplants. The advantage to this outside-the-box concept is the significantly discounted prices available overseas for major surgeries. Surgeries overseas can be as much as 80 percent less than in the United States.

In fact, the hospitals overseas are nicer and better maintained than U.S. hospitals. Some employees who have gone overseas equate these hospitals to a Ritz Carlton and equate U.S. hospitals to a Motel 6. The disparity is amazing. The overseas hospital is more like a modern five-star hotel with all of the amenities. Patients receive personal care and a private room. Unlike in the United States, there is a much higher ratio of registered nurses to patients overseas. Many patients feel they even have their own personal nurse. In the United States, it is sometimes hard to find one RN on each hospital floor.

Amazingly, many of the doctors overseas went to school and practiced here in the states.

In the end, many of the patients believe they received better care overseas than they had in the United States. Even more enticing for employees is turning their surgical procedure into a vacation. This is why this growing concept is now being referred to as medical tourism. Employees travel to a new country to receive their surgical procedure and have a mini vacation with their loved one.

When I first heard the concept of using overseas hospitals and foreign providers for surgeries, I was a little hesitant. I was still filled with a misplaced concept that the American health care system remained far superior to any other health care system in the world. With a little research and due diligence, I found that no longer to be true. The U.S. health care system is breaking down. U.S. health care costs continue to rise, more and more companies cannot afford major medical insurance. Our hospitals are not what they once used to be, and the level of care they are providing is not commensurate with the exorbitant prices they are charging.

The best fit for this concept is within a partially self-funded major medical plan. It is difficult to offer it on a fully insured platform, as the fully insured carriers are not interested in this model. The five major medical carriers controlling the market today have an excellent profit model and have no reason to upset this balance.

In a partially self-funded major medical plan, the employer is in control of its health care and the company's future. Employers can create the plan design they wish and implement overseas hospitals as part of the preferred provider network. Self-funded employers can entice employees to go over by incentives such as waiving deductible and coinsurance, and paying for airfare for the employee and a loved one to go to the hospital.

If an employer can get employees to buy into this concept if can effectively change the corporate culture in respect to where surgical procedures are performed. The end result is a win-win for everyone. The employer saves up to 80 percent on the surgical procedure, and the employee saves on his out-of-pocket expenses he would have had to pay here in the United States.

Health care costs keep rising in the United States and there is no end in sight. More and more employers cannot afford health insurance for their employees, and those employers that do are increasing employee contribution requirements, while slashing benefits. Integrating overseas surgical outsourcing into a major medical plan can not only stem the rate increases each year but actually result in annual rate reductions. If a majority of the major claims costs are reduced by 80 percent, and the majority of the mid-level surgery costs reduced by 80 percent, the end result is a lowering in the cost of health insurance.

This is not a theory, but hard dollar savings that go right to the bottom line that is being implemented today. Just imagine meeting with an employer in today's health care crisis and telling an employer you have a concept that if implemented will result in cutting health insurance costs every year, guaranteed.