Costly US Health Plans may Bring Down Premiums in the Long Run

Last year, the average premium per person in the US was $4,940 — more than double the price employers paid in 1996, the federal Agency for Health Research and Quality has said. In a new study, the agency found that American employers are spending more than ever for their workers' health insurance. Health costs have been predicted to go climbing up further. Total health spending will increase more than 80 per cent through the end of this decade, say the Centers for Medicare and Medicaid Services. This could mean that in a few years time, more Americans in an ever-growing population would be unable to afford health insurance.

So, which is the way forward? The strategy should be to reduce health care costs and extend insurance coverage to more people — by expanding access to high-deductible health plans linked to Health Savings Accounts.

High-deductible health plans carry low monthly premiums, which make them very affordable. With an HSA, individuals can set aside up to $3,050 per year in pre-tax dollars — or $6,150 for families — to pay for routine medical expenses.

Once a consumer reaches his policy's annual deductible, insurance generally covers any additional medical expenses. Funds left in the account at the end of the year remain the individual's property for future use. And plans cover preventive services without a deductible.

These plans provide protection against the costs of a major medical problem. They also make people more cost-conscious health care consumers. Participants have an incentive to avoid paying for unnecessary services because they keep the money they don't spend.

According to a study conducted by the American Academy of Actuaries, high-deductible plans generate significant cost savings compared to traditional plans — as high as 20 percent the first year, and 3 to 5 per cent on average in the ensuing years. Overall costs associated with high-deductible plans have gone down even as insurance premiums for traditional plans have risen.

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Importantly, consumers with high-deductible plans aren't just misers, skirting necessary medical care to save a few dollars. In fact, the actuaries' study found that patients with high-deductible policies are more likely to take advantage of preventive services.

Lawmakers have taken notice of the benefits of high-deductible plans and HSAs. Sen. Orrin Hatch, R- Utah, is advancing a bill that would enhance these offerings by giving consumers more control over how they can spend their HSA dollars and by expanding the insurance choices available to them. Rep. Erik Paulsen, R-Minn., has introduced a similar measure in the House.

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The evidence is clear: High-deductible insurance plans combined with Health Savings Accounts are an extremely effective way to curb rising health costs and to ensure that more Americans have access to quality care. Even better, they don't require billions in new federal expenditures.

They should be at the center of America's efforts to expand health insurance coverage.

Source-Medindia