Setpoint Systems, like most small companies, has experienced huge increases in health care insurance. We have had our share of health challenges in our small group. As Setpoint System’s CFO, I have been in the middle of this. Several years ago we went to a new Health Savings Account (HSA) type plan that really solved a lot of our problems.
I testified before the senate finance committee on the value of HSA’s to the health care consumer and the systems as a whole. Believe me there are many opinions on these types of plans both for and against. I am for the plans.
A HSA is a tax protected savings account connected with a high deductable low premium plan. Most HSA’s provide for a fully covered annual physical and then a high deductable for any other medical needs. The HSA account carries over year to year and can be used tax free to pay for any medical, dental and most alternative medicine treatments. Upon retirement HSA funds can be withdrawn without penalty for retirement (however funds used for expenses other than medical are taxed as income).
At Setpoint we adopted HSA’s in 2004 and have had them ever since. While this type of insurance takes some getting used to, it has been a real benefit to Setpoint. We have had two very serious medical issues with employees and/or spouses that were dramatically driving up our medical costs. When we went to the HSA I was worried about how this plan would affect the two employees with challenges. (One of the arguments against the HSA is that it costs less for the healthy but more for those with serious illnesses). In our case both of our employees with serious cases found that they saved thousands of dollars when we went to the HSA. This is the reason why. First, Setpoint was able to save on premiums and was able to contribute those savings to the employees’ individual HSA accounts. Second, the employee no longer had to contribute as much to insurance since the premium was down. Third, (and this is the one that is not often mentioned but has a huge impact) in our plan once the deductable is met then you have 100% coverage – that means no co-pays on meds or visits. When you take these three issues together the HSA saved those with health challenges thousands on an annual basis.
So with a better deal for our employees with challenges and lower costs to those that are healthy, the HSA seemed like the right thing to do. Since we have been on the HSA plan our premium increases have stabilized and meanwhile our healthy employees are building up saving for the future. It’s been a win-win for us. Now every plan is different and obviously our sample is small.
This type of plan helped solve our health care problems. Let me illustrate with a personal experience with the HSA’s. I have a large family and use the system quite a bit. When we need some medical care, we let our providers know that we have a HSA plan and pay cash. This usually leads to discounts in coverage. Also, we always ask for and understand costs to procedures. One of the big issues with economics of health care is transparency of costs. Since we have relied on insurance for so long and only had to pay fixed co-pays, consumers of health care have no idea how much their care really costs. In many cases neither do providers. How do we control costs without anyone on the front line really knowing what they are?
In my first year with the HSA my son needed a simple surgery. When I explained to the hospital that I had a HSA plan and asked for a cost estimate the administrator said why it matters if you have insurance. After explaining the new HSA plan the administrator could not come up with a price and it took several calls to get the right number from the hospital. Then I had to get costs from the doctors to put together a total costs. It was a challenge but we were able to get to the bottom line and even got a discount when we paid cash for the procedure.
That was in 2004. Today costs are easier to get on many procedures. There are still issues with transparency but things appear to be getting better. As transparency improves, costs will come down as providers innovate and find ways to deliver services at lower costs. Some argue that the mini-clinics where a physician’s assistant can do a strep test and other simple procedures at low cost of $30-$50 that are near pharmacies are a direct connection to more users on HSA’s.
We believe that more free market based plans like the HSA’s are our best chance to control medical costs. These types of plans do not solve the problem for the nation’s uninsured. I believe that an expansion of the HSA plans for those who have employer provided insurance and can afford it is only part of the solution. Providing for the uninsured should be a second part of a health care solution. What I hope is that any plan we pursue as a nation uses market principles to control costs. We believe that the HSA approach is a step in the right direction.
Great completely unanticipated point about additional savings for employees with more medical work needed. They stop paying the copays after the deductible is met. I never heard of that before. Clearly the market solution works even in healthcare.