Ga. Consumers Get More Control over Health Insurance, Care

Published July 1, 2008

Georgia Gov. Sonny Perdue (R) has signed into law a pair of measures intended to make High Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs) more affordable and available in the state’s insurance market.

Critics have called the new laws “little more than a hefty tax break for insurers,” according to the Associated Press. But health finance experts have lauded Georgia’s new policy as the country’s first attempt at a market-based, consumer-directed solution to the nation’s health coverage crisis.

Among other market-based adjustments, the new laws exempt HSAs from state and local premium taxes, which is expected to save consumers and insurers nearly $150 million.

“This legislation encourages more consumer choice by making quality, affordable health care coverage more available,” said Perdue at the bill’s May 10 signing. “More insured citizens means lower costs for all taxpayers, and preventative care means a healthier population. It will also allow small business owners to provide low-cost health insurance to employees and their families.”

Tax Exemptions

House Bill 977, the first of the two bills, exempts insurers who provide HDHPs that include HSAs from having to pay state and local taxes on the premiums charged for those policies. It also allows people to deduct the amount paid in premiums from their state income taxes. The exemption and deduction are expected to save insurers and consumers nearly $150 million per year.

The legislation also provides a $250 annual tax credit for small business employers that spend at least that amount each year to enroll their employees in an HSA plan.

HB 977 will allow the state commissioner of insurance to fast-track approval of employer-sponsored HSA plans. It will also allow insurers to reward their HSA policyholders for healthy lifestyle changes, a key measure in the government’s ongoing attempt to focus as high a percentage of health care spending as possible on prevention, rather than treatment.

Honoring Consumer Choice

Senate Bill 383 was designed as a complement to HB 977, with two added provisions. First, SB 383 officially states that Health Reimbursement Accounts (HRAs)–employer-sponsored accounts that allow employees to use pre-tax dollars to pay for certain verified health expenses, including health insurance–which are not packaged with individual health insurance policies do not qualify as “insurance” for state recognition purposes.

Second, SB 383 declares HSA plans must comply with the consumer choice option under current law, meaning the insured will be able to choose any willing provider so long as that policyholder pays any increase in premiums and costs that are incurred after initial enrollment.

‘Patient-Centered Solutions’

“Georgians suffer from skyrocketing health care and insurance costs,” said State Sen. Judson Hill (R-Marietta), one of the chief architects of the Senate bill. This legislation “makes Georgia the first state to deliver a patient-centered, prevention-focused, free-market solution providing greater financial security to thousands of our working families through more affordable health insurance,” he said.

Market analysts largely concurred, saying Georgia’s plan could serve as a model for other states currently struggling to effectively solve their health insurance problems.

“This bill is a smart move for Georgia,” said Paul Guppy, research director at the Washington Policy Center. “By reducing taxes on HSAs, state lawmakers are cutting the cost of health insurance and allowing Georgians to own their own health benefit, without being dependent on an employer or government program.”

‘Edge’ in Attracting Businesses

“This policy initiative not only helps reduce the number of uninsured,” Guppy continued, but it will also “give Georgia an edge over other states in attracting new businesses.”

Oklahoma State Rep. Doug Cox (R-Grove), an M.D. and chairman of the state assembly’s public health committee, lauded the new Georgia legislation, saying, “As Oklahoma studies health care policy over the interim, we will examine the progressive changes Georgia has undertaken.

“Georgia has now proven to be a leader in addressing the health care issues facing our nation,” Cox added.

‘Model for Other States’

“Georgia has made a major addition to the variety of state approaches for increasing coverage and lowering costs,” said Greg Scandlen, director of Consumers for Health Care Choices. “It may become a model for other states once it is tested in the marketplace.”

However, Scandlen warned, the legislation should be seen as only the first step in a lengthy process of establishing a nationwide market-based health care system.

Jeff Emanuel ([email protected]) is The Heartland Institute’s research fellow for health care policy and managing editor of Health Care News.