From time to time I will post a picture of a portrait and share what I have learned. I must often research what my subjects tell me because I don’t understand their predicaments. I painted this portrait in March 2010. Two years later, I have learned a lot about health savings accounts. I share my thoughts in this blog via this portrait.
I”LL START WITH THE END FIRST: In my research, I think that HSAs are products that should be sold by financial advisors to people who wish to leverage their health for financial gain. These people are willing to take risks. They “play” with money. And they also have money to fund the health savings accounts (HSA) for tax advantages.
My conclusion: HSAs are a way to shift more of the cost of insurance onto the consumers.
The above portrait is of a woman who bought a health savings account on the “individual market.” The individual market is when a person knocks on the door of an insurance company, so to speak, and asks them to sell an insurance policy to one person. This is unlike employers who get policies for their whole “group” of employees.
Health savings accounts are high deductible insurance plans. Consumers pay more of their upfront, out-of-pocket medical expenses, up to several thousands of dollars, before insurance coverage starts.
When individuals buy HSAs directly from the insurance companies, those consumers must pay the premiums for the HSAs AND fully fund their health savings accounts, separate savings accounts for medical costs. (In group plans, some employers may opt to make a contribution to an employee’s HSA.)
The idea is that a consumer is socking away money in a HSA for when he gets sick and needs to spend the money on medical care. The supposed attraction is that the insurance premiums are less expensive, and the savings accounts can be funded with pre-tax dollars. But the money can only be used for medical expenses.
HSAs are considered “catastrophic” plans because it is believed that consumers will not meet the high deductible until an expensive medical catastrophe happens.
The high deductible plans cover preventive care. The point of a check-up is to catch problems early. If a problem is discovered during a check-up, the patient is faced with the dilemma of moving forward with treatment knowing he will be paying out-of-pocket until the high deductible is met.
Some consumers will put off seeing a doctor if ill because they do not want to pay the out-of-pocket-expense. Instead, they think of their high deductible insurance plan as a fallback option if a medical catastrophe happens. And they’ll just figure something out if they have to come up with the $5,000 out-of-pocket if a catastrophe happens. They might remortgage a home, for example.
Many consumers know they really don’t have the money to fund the HSAs before they purchase these high deductible insurance plans. When people don’t fund the savings accounts, the HSAs are not a benefit but an burdensome idea, a psychological weight that reminds consumers that they don’t have money for the deductibles. (SEE PORTRAIT STORY BELOW)
Critics of HSAs say these policies are for a very narrow slice — a very very healthy slice — of the population that does not use health insurance. People with chronic diseases like multiple sclerosis, for example, could end up paying the very high deductible in a month or two just on prescriptions. Their high, recurring medical expenses prevent them from ever being able to save for future medical bills. Their expenses are ongoing.
Opponents of the Affordable Care Act, ObamaCare, tout HSAs as a way for individuals to take more responsibility for their healthcare choices. The thinking goes that if you are saving your own money in a HSA, you will shop around and be smarter about how you spend your healthcare dollars. Smarter buying of healthcare services is supposed to bring down the cost of insurance.
The logic strikes me a bit disingenuous. There are 50 million uninsured in the US. Are the prevalence of HSAs really going to bring down the cost of insurance to the point of insuring 50 million more people? Granted, HSAs are just one component of a plan put forth by anti-Affordable Care Act forces who believe that, along with tort reform and allowing insurance companies to sell across state lines, HSAs will help the free market bring down costs for health insurance. Its a bit of a stretch when one considers that 60% of bankruptcies in the US are due to medical bills.
HSAs are supposed to make us “smarter” consumers. One of the subjects of this project had a stroke at 27. I don’t know how much shopping around she was in a position to do. This woman did not have an HSA but her experience is noteworthy when evaluating HSAs. This insured young woman said that navigating the black hole of getting health insurance claims paid was a lot harder than recovering from the stroke. She got to the point where she was discussing how the billing departments were coding her procedures on the claims forms. Should patients recovering from strokes or anything else have to do that? Seems that pricing practices might want to be scrutinized rather than putting the onus on patients to shop around when they clearly can’t in medical emergencies.
The portrait at the top of this blog post is from my Art As Social Inquiry series of portraits that looks at the way we access healthcare. Using art I look at this social issue through the lives of real people. Here is her portrait story.
Draper, Self-Employed, Age 63, Insured on Individual Market: The day subject turned 60 years old, her health insurance premiums increased by 45%. She could not pay $802/mo. to keep her insurance policy with a $500 deductible.
The insurance company offered subject a Health Savings Account (HSA) for a premium of $584/month. This policy has a $5,000 deductible. This means that she must pay the first $5,000 of medical expenses out of her own pocket then insurance coverage starts.
In addition, subject has the option to fund her own HSA. She is not completely clear on how health savings accounts work but she opted for this policy because the premium is affordable. She considers it catastrophic coverage.
Her strategy: Try not to get sick, and avoid check-ups and treatments until she’s eligible for Medicare (Interview March 2010) (oil on canvas 40 x 30 in.)
Artist’s Note (2011): As of 2011 subject’s premium for the Health Savings Account policy with $5,000 out-of-pocket rose to $683/month.
Subject also now understands that in addition to her premium, which she pays to the insurance company, she is permitted to put additional money in a tax-free health savings account – money that has not been taxed and can be spent on health expenses. After she spends $5,000 out-of-pocket, her health insurance coverage starts.
She also discovered that since she is buying insurance on the individual market, her tax deduction is 20% of the premium (not 100% as is the case for group policies). She feels uninsured since saving money to fund the health savings account is a challenge in addition to paying the $683/month premium. She is eligible for Medicare on<br /> Dec. 1, 2011.
Artist’s Note (5/2012): Subject enrolled in Medicare last December. She expressed great relief in having affordable medical coverage.