Working families of four in New York who earn less than $49,875 annually, and individuals earning less than $25,125, became eligible in January to enroll in high-deductible health plans (HDHPs) and health savings accounts (HSAs) as part of the state-subsidized health insurance program, Healthy NY.
In an October 30 news release, the state’s Insurance Department estimated the plan would create premium savings of 20 to 25 percent compared to existing Healthy NY plans, and roughly 60 percent compared to HMOs providing only the state-mandated benefits.
Saving on Insurance
The new plans come with deductibles of $1,150 for individuals and $2,300 for families. Subscribers owe only a co-pay, even before meeting their deductible, for preventive care such as physicals, certain cancer screenings, well-child visits, and prenatal care.
Healthy NY subscribers can choose to exclude prescription drug coverage from their HDHPs, just as they can with other Healthy NY packages. Opting out can yield premium savings of about 38 percent for an individual or family.
The two-month open enrollment period for existing subscribers continues through February 28.
“Health savings accounts provide consumers with protection against catastrophic health care costs, coupled with a way to accumulate savings for lifelong health care expenses,” said Tarren Bragdon, a health care policy analyst at the Empire Center for New York State Policy, a project of the Manhattan Institute. “New York taxpayers will also save because these HSA-compatible Healthy NY plans will likely require lower reinsurance subsidies from the state.”
Targeting the Uninsured
Gov. George Pataki (R) and the state legislature created Healthy NY in 2000 to reduce the cost of health insurance for sole proprietors, businesses with 50 or fewer employees, and the working uninsured. To qualify, applicants must be currently working or have been employed within the past 12 months, and they must have lacked insurance for the past 12 months or lost coverage due to certain events such as divorce or a change in residence.
Enrollment in Healthy NY has grown from 4,626 on January 1, 2002 to 130,850 on November 1, 2006, the most recent figures available. The working uninsured represent approximately 58 percent of enrollees, small businesses 23 percent, and sole proprietors 19 percent.
Lawmakers allocated $109.6 million for the program for 2006 and $85.2 million for the first half of 2007.
“We expect it will take some time for consumer familiarity and confidence in these distinctive products to develop,” said state Insurance Department spokesman Andrew Mais. “As such, we expect gradual enrollment growth in the Healthy NY high-deductible products, rather than any immediate spikes.”
Saving Money for Consumers
Even before the HSA option became available, Healthy NY subscribers’ premiums cost roughly half those of standard insurance products with only the minimum of state-mandated benefits. Healthy NY provides reinsurance to “backstop” claims, which Mais credited for the average premium savings of roughly 37 percent.
Exemption from benefit mandates accounted for as much as another 10 percent saving compared to traditional small group benefit packages.
“However,” Mais added, “when compared with large group health insurance plans or other more comprehensive products which include many optional benefits, the savings due to the streamlining of the benefit package would be greater.”
Reversing Uninsurance Trends
In upstate Onondaga County, premium savings of 25 percent can mean $400 annually for individuals who choose not to take prescription coverage through Healthy NY, or more than $1,700 annually for a family with drug coverage.
These savings can be redirected to fund the HSA, equaling 75 percent of the deductible in the family example. Add to this the tax deduction and savings from other out-of-pocket expenses, such as co-pays, and the family could soon make up the other 25 percent.
The New York Insurance Department credits Healthy NY with reversing uninsurance trends statewide. According to U.S. Census data in 2002, 15.8 percent of New Yorkers lacked insurance, compared to 15.2 percent of all Americans. By 2005, New York’s uninsurance rate had fallen to 13.5 percent, while the national percentage rose to 15.9 percent.
“Healthy NY would be unnecessary if New York had competitive health insurer markets in the first place for the small group market and individuals purchasing insurance not through their employer,” said Bragdon.
Nevertheless, Bragdon continued, “in a state with little positive news on the health reform front, HSAs in Healthy NY and the individual market represent a small step toward making insurance more affordable in the third-most populous state.”
Joseph Coletti ([email protected]) is a fiscal and health policy analyst at the John Locke Foundation, a free-market research group in North Carolina.
For more information …
Healthy NY, http://www.healthyny.com
Empire Center for New York State Policy, http://www.empirecenter.org/