Adopting health savings accounts for state employees could save the state of Michigan more than $30 billion over the next 12 years, according to a study by Michael LaFaive, fiscal policy director for the Midland-based Mackinac Center for Public Policy.
Michigan is facing a fiscal year 2009 deficit of just under $1 billion, according to Gov. Jennifer Granholm (D).
Health savings accounts (HSAs) are tax-advantaged accounts into which employers and/or employees deposit money to pay for ordinary medical expenses. Savings are realized because premiums for the high-deductible insurance policies that accompany HSAs are much less than premiums for regular health insurance, and because consumer control over spending gives them a powerful incentive to be more cost-conscious.
Government Unions Resistant
The reason Michigan has been slow to embrace this effective, cost-saving option is “opposition to change and to high-deductible benefit plans by state government employee unions,” LaFaive says.
“HSAs haven’t been adopted by the Michigan state legislature because it is a wholly owned subsidiary of the governing class,” LaFaive said. “Making this bold change would [involve] a great deal of pain to legislators. The pain primarily would come from one of Michigan’s biggest constituencies: The 50,000 government employees who would scream through their union about what they would perceive as a cut in their health care benefits, despite the fact an HSA would constitute no such thing.”
Myriad HSA Advantages
American Enterprise Institute Research Fellow Joseph Antos agrees expanding the use of HSAs would benefit Michigan.
“HSAs have lower premiums than low-deductible insurance plans, and that’s obviously a savings for the family,” Antos said. “Also, from a societal standpoint, the fact that you are spending your money for ordinary affordable medical expenses, instead of having the money paid by a third-party insurer, means you are becoming more aware of the cost. Therefore you will demand value for your health care dollars.”
LaFaive believes the benefits of expanding health savings accounts in Michigan will soon become apparent to even the “most causal observer.”
“No institution or person can long maintain double-digit increases in the annual cost of anything like health care,” LaFaive said.
“Health savings accounts have two obvious major benefits,” LaFaive continued. “The first is the massive cumulative savings in the cost of paying premiums for the health insurance of state employees. The second, under almost every scenario, state employees will come out ahead with health savings accounts rather than a traditional PPO, and the reason is obvious: Traditional PPOs are on the hook for a percentage of your premium up to a very large number. But with a health savings account, once you meet the deductible, that’s it. So taxpayers win, the employee wins.”
Wide-Ranging HSA Benefits
LaFaive notes there are two other ways expanding HSAs would benefit Michigan taxpayers and civil servants.
“First, the state employees will have more latitude in choosing their physicians and other health care treatments,” LaFaive said. “Second, the state of Michigan gets an opportunity to save far more than they would for future health care and perhaps other expenses. As well, because it is consumer-directed, the state employees are in greater control of their health care destinies.”
Antos agreed. “Certainly going to a health savings account insurance model has the potential for savings primarily because it will bring real awareness of how much medical services cost and what the value is of those services.”
Thomas Cheplick ([email protected]) writes from Massachusetts.
For more information …
“Health Savings Accounts Can Save Michigan Money,” Mackinac Center for Public Policy: http://www.mackinac.org/article.aspx?ID=10731