Consumer Power Report #155

Published November 26, 2008

With the stock market crashing, home values falling, unemployment rising, and the prospect of massive federal intrusion in the health care you get, it may be hard to find things to be grateful for this Thanksgiving.

Call me Pollyanna, but I’m not worried. Yes, we will dither. The country will experiment with centralized planning and control. The Washington Elite will be telling you what to do, and how to do it. They will tell you that you are nothing more than a cog in the machine and your number one duty as a citizen is to obey their instructions. It will be ugly for a time.

But we’ve been there before and other countries have tried it on massive scales. It never works. Never. And it won’t work this time, either. Liberty is the inevitable answer, as the Founders knew. Each one of us is still endowed by our Creator with certain unalienable rights.

We will fight, as the Founders did, to restore those liberties and regain our personal sovereignty from the usurpers. We will win. But tomorrow I will be thankful not just for family and friends and turkeys, but to be born in a country that is founded on such ideals.



Free Riders?

Heartland policy advisor Bill Snyder had a nice op-ed published in The Wall Street Journal this week. He makes the point that the uninsured are not some homogenous mass of misfits and unfortunates. Rather, they are often people who are responsible and pay their bills on time.

He cites a California study that found half of the uninsured with incomes twice poverty received and paid for health care services in the past year. Eighty percent paid in full and another 10 percent were paying in installments. Nationally, the uninsured paid $30 billion for health care services directly out-of-pocket. He suggests that, “perhaps we should look for ways to encourage the millions of people who are currently eligible for existing government programs to enroll before we expand programs to include people that may not need assistance.”

SOURCE: Wall Street Journal

Blaming the Victim

Here’s a harbinger of things to come. The insurance commissioner in Oklahoma, Kim Holland, would like to “induce” residents to buy health insurance through the “forfeiture of football season tickets to University of Oklahoma or Oklahoma State University games, forfeiture of lottery or gaming winnings, loss of state income tax deductions or licenses to drive, hunt or fish” for the uninsured. Republican state Rep. Kris Steele wants to eliminate any “excuse” for not having health insurance and punish those who don’t purchase it.

How’s this for an excuse, Mr. Steele? You and your buddies in the state legislature have made health insurance so expensive and unattractive that not many people want to buy it. Maybe you should start by allowing people to buy the coverage they would like to have.

SOURCE: Daily Oklahoman via AHIP

Bush Administration Dawdles

The Wall Street Journal ran an editorial praising Louisiana Gov. Bobby Jindal for renovating the way the state takes care of the poor and the uninsured–“thus taking up a topic for which most Republicans require a shot of epinephrine just to pay attention.”

He wants to take a “defined contribution” approach to providing them with coverage and let them choose between a variety of health plans. But the state needs a federal waiver approved to implement the idea and the remaining Bush administration folks in the Department of Health and Human Services are dawdling. The article says, “The Bush Administration’s go-ahead is also a matter of urgency. If the talks aren’t wrapped up soon, Mr. Jindal will be forced to start over with Barack Obama’s team, which will be hostile to reforms that bank on the private sector.”

The administration is also twiddling its thumbs on a similar waiver requested by the state of Rhode Island. The president needs to get his people to move on these and other issues ASAP, before the door closes on January 20.

SOURCE: Wall Street Journal

HSAs “put the responsibility back on the person”

The city of Logansport, Indiana is switching to an HSA program provided by Anthem, according to an article by Kevin Smith in the Pharos Tribune. Mayor Mike Fincher explains the city will save 22 percent in premiums from its old program and it will use that savings to fund half of the deductibles of $3,000 for singles and $6,000 for families. Employees may fund the balance on a tax-free basis.

Firefighter Mike Rush is quoted in the article as preferring the old plan, noting the out-of-pocket expenses for people who use a lot of services will go up. But he is also preparing to change his own behavior. He says, “You’re going to be taking more responsibility for your insurance. It will keep people from wasting money because they won’t be visiting the doctor as much.” He adds, “I used to order prescription medication every three months by mail. But now that is going to cost too much so I’m going to be going to Wal-Mart, Walgreens and CVS to check on the costs of prescriptions and will be getting the cheapest one I can get. It’s putting the responsibility back on the person.”

SOURCE: Pharos Tribune


We have had our share of disagreements with the annual consumerism survey conducted by the Employee Benefit Research Institute. So it is nice to report that it seems to be getting on track. The latest report was released on November 18 and appears to be fairly consistent with other research on the same topic.

One important improvement is sample size. Each year the sample gets larger and therefore more representative. The first year (2005) it sampled 1,358 people in “traditional” plans, 487 in “high-deductible health plans” (HDHP), and 186 in “consumer-driven health plans” (CDHP). This year the sample included 1,714 in traditional, 1,634 in HDHPs, and 1,184 in CDHPs.

The “traditional” category seems to include everything including HMOs, POSs, PPOs, and indemnity plans with a low deductible. HDHPs are plans with a deductible of at least $1,000 for individuals and $2,000 for families without an account (HRA or HSA), and CDHPs are plans with that level of deductible with an account.

The survey is conducted online and relies on self-reporting by consumers. I continue to believe this method is less reliable than some of the other work out there. It is subject to some self-selection and relies on an individual’s memory and knowledge of fairly technical terminology. But I am more comfortable this year than in the past that EBRI has tried to account for these issues. And that is all we can ask–a good-faith effort to get to the truth.

I’m not going to regurgitate all the findings here. But a quick overview is that EBRI finds there are now 9.8 million adults between the ages of 20 and 65 with a CDHP or an HSA-qualified HDHP. That represents 7.9 percent of the private benefits market. People with CDHPs are older, better-educated, wealthier, and in better health than those without. They are also more likely to have a choice of plan. Satisfaction has grown to the point that it is roughly equal to people with traditional coverage, and the two groups are roughly equal in compliance with treatment programs. Still, CDHP enrollees are substantially less satisfied with their out-of-pocket exposure and less likely to recommend the plan to coworkers than people in traditional plans.

The report finds that people in CDHPs and HDHPs are more likely to consider costs and to ask their doctor to recommend lower-cost drugs than people in traditional plans. In fact, the reasons people give for enrolling in a CDHP are mostly financial–lower premiums, the chance to save money, being in control of health care dollars, and the tax benefits. The reasons people give for choosing a traditional plan are mostly ease of use–prior experience with the plan, easy to understand, easy access to care, not much paperwork, low out-of-pocket costs, and a good network of providers.

The report is also improved because it cites other research on enrollment, making it easier for readers to understand how this survey fits into the landscape of information. It also provides samples of the questions used to identify how respondents are classified.

People in CDHPs are only slightly more likely to skip or delay treatment than people in traditional plans, but people in a HDHP are the most likely to forego treatment. People in traditional plans are more likely to get health information from their health plan, while people in CDHPs are more likely to seek other sources of information. Both HDHP and CDHP enrollees are more likely to consider costs when considering treatment options.

SOURCE: Employee Benefits Research Institute


Meanwhile, Mercer also has released its latest survey of 2,900 employers with at least 10 employees and found some amazing trends.

Most notable is that “traditional” PPO deductibles have soared in the past year. They have doubled from $500 over the past seven years to $1,000–almost enough to qualify for an HSA. Mercer’s Blaine Bos is quoted in the release as saying, “The introduction of the HSA may have changed employers’ thinking on just how high a deductible can go without causing employees to revolt.”

The report also mentions that, as we reported in the last issue, the usual increase in health care utilization during recessions may not happen this time. Mr. Bos says, “These are different times, and history might not repeat itself. Higher employee cost-sharing–like a $1,000 deductible–could prevent that spike in utilization that we’ve seen in other recessions.”

Meanwhile, CDHPs continue to grow substantially, with 20 percent of employers with more than 500 employees offering them in 2008, up from just 14 percent a year ago. Mercer says the reasons are obvious. HSA plans cost just $6,042 per employee while PPOs (even with the higher deductibles) cost $7,815 and HMOs costing $7,768. Trend for CDHPs was just 4.0 percent from 2007 to 2008, compared to 6.3 percent for PPOs and 9.1 percent for PPOs.

Mercer also queried employers about their opinions on health reform ideas. It found, not surprisingly, that employers are perfectly happy to support a mandate on individuals, but not on employers. In order of support:

  • 53 percent of employers support an individual mandate
  • 46 percent support a federal reinsurance program
  • 34 percent support replacing employer plans with individual plans
  • 34 percent support waiving ERISA to allow states to include employer plans in health reforms
  • 31 percent support an employer pay-or-play requirement
  • 30 percent support capping or eliminating the exclusion in favor of a flat tax credit for all
  • 29 percent support adopting a Canadian system
  • 24 percent support federal regulation of health insurance

SOURCE: Mercer