Indiana Government Workers, Taxpayers Saving Big Through HSAs

Published May 31, 2016

With more than 70 percent of Indiana’s 30,000 public employees choosing to have a health savings accounts, there is growing interest in how the state’s Governor, Republican Mitch Daniels, launched the ambitious cost-saving health measure that has helped save state employees more than $8 million of their own money in securing themselves health care since 2006.

“HSA customers seem highly satisfied; only 3 percent have opted to switch back to the PPO,” Daniels wrote in a March 1 column in the Wall Street Journal. “The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment.”

Significant State Savings

Diana Furchtgott-Roth, a health care policy expert at the Hudson Institute, a think tank in Washington, DC, believes other governors are now closely examining Daniels’ track record in creating health savings accounts, as they have helped Indiana save a significant amount of money.

“States—if they want to cut the cost of their public employees’ health care—have to look at this,” Furchtgott-Roth said. “Governors are all watching each other and looking to emulate each other’s successes.

According to an evaluation of the HSA plan by Mercer Consulting, it has helped reduce the state’s total health care costs for employees by 11 percent.

“That’s the great thing about fifty states: we can see what works and what doesn’t. In this case, in terms of health care, California does not work, and Indiana does. What Gov. Daniels has done with health savings accounts in Indiana is really terrific.”

HSAs Provide Flexibility

Michael Rinebold, director of government relations at the Indiana State Medical Association, cites an understanding of how interest groups affect legislative policy as one of the reasons Daniels was able to push through his health savings account plan in 2005.

“Gov. Daniels has proven himself to be an effective governor, and has done Indiana well. Through his leadership he has put Indiana above other states and left us in a better position. His HSA policies—giving incentives for state employees to move to health savings accounts—have been positive,” Rinebold said.

Jody Dietel, chief compliance officer of Wage Works, a health care plan firm with more than five million flexible spending accounts under its administration, is likewise impressed with Daniels’ success in instituting HSAs.

“Indiana’s health savings accounts and their Medicare spending program are very successful,” Dietel said.

Designed to Appeal to Employees

Anita Samuels, policy director for Gov. Daniels, notes the administration designed their health savings accounts to be extremely appealing to state employees, to encourage them to participate in the plan.

“This type of plan was chosen for the many benefits to our employees, including portability if they leave state government, tax savings by making contributions to the HSA with pre-tax dollars, interest-earning potential on HSA funds, more control over employees’ health care by allowing individuals to decide which services or treatment they want and how to change their current habits and lifestyle, access to personalized services and online tools for health improvement, and the opportunity for long-term savings,” Samuels said.

35 Percent Cost Reduction

Compared to the old health care plan available to Indiana’s state employees, the new HSA plan has led to a $35 reduction in cost for every $100 incurred under the old plan, according to studies.

This is no surprise to Rinebold, who says the Indiana State Medical Association supported Daniels’ implementation of health savings accounts, because they knew it would create more cost-effective health care with more consumer control.

“Our association has been supportive of Gov. Daniels’ health savings accounts. It is an alternative and allows the consumer to drive their health care,” said Rinebold. “It has helped make employees’ health insurance more cost-effective, turned Indiana’s health care market into a more consumer-driven one because it has given consumers more choice, and has helped educate consumers on the cost of health care.”

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.

Internet Resources:

“Hoosiers and Health Savings Accounts,” by Mitch Daniels, The Wall Street Journal: