Prior to the September 11 terrorist attacks on New York City and the Pentagon, employers were bracing for a new round of health insurance premium increases. Washington-based Watson Wyatt Worldwide predicted a national average increase of about 14 percent.
Since the attacks, medical events and the downturning economy have exacerbated employers’ health care cost problems, a spokesperson for Watson Wyatt said. Many employers will now face health insurance benefits cost increases in excess of 15 percent in 2002. New York-area employers and employees appear to be hit hardest, with health care costs in the metropolitan region increasing by an additional 3 to 5 percent over previous estimates.
The additional health care cost increases can be attributed to an increase in the use of health care services, mainly mental health services, as well as to a rise in spending on prescription medication to treat anxiety and depression.
Layoffs also affect the cost of health insurance. Claims increase when unemployed workers continue their health care coverage through COBRA. Laid-off employees moving to COBRA typically incur costs at least 50 percent greater than active employees, both during the COBRA extension period and beyond, until they find alternative employer coverage or individual health insurance.
MSA Alternative
Medical Savings Accounts (MSAs) may offer an effective alternative for those losing coverage, and also for the uninsured who seek affordable coverage. Compared to the costs associated with continuing coverage under COBRA rules or switching to traditional individual health insurance, MSAs can be affordable, offering significant savings without sacrificing benefits.
An MSA health plan provides a tax-favored savings account (similar to an IRA) in combination with a high-deductible health insurance policy. The savings account portion accumulates over time from interest earnings and premium payments. The fund is controlled by the insured and can be used to pay routine health care expenses. The second element of the MSA plan, the catastrophic insurance policy, covers the more substantial health care costs incurred by the policy owner or beneficiaries.
While proposals pending in Congress would extend MSA availability, the accounts are currently available only to self-employed individuals or to small-business groups with fewer than 50 employees.
For more information . . .
see “MSAs Can Be a Windfall for All,” by Greg Scandlen, in the December 2001 issue of Health Care News.
On the Cato Institute Web site at http://www.cato.org, see “Medical Savings Accounts: Progress and Problems under HIPAA, by Victoria Craig Bunce.
Or use The Heartland Institute’s free online research service, PolicyBot, to find 49 documents on Medical Savings Accounts. Point your Web browser to http://www.heartland.org, click on the PolicyBot icon, and search for the Topic/Subtopic Health Care/Medical Savings Accounts.
