When you buy homeowner's insurance, you don't expect your insurance to pay for installing new windows or a new roof. You don't expect your auto insurance to pay for an oil change or new tires. You only expect the insurance to protect you when major problems arise like a fire or an auto accident. If you feel that a new roof is needed on your home, you find 2 or 3 reputable contractors, compare their prices and services, and then pay the chosen contractor for their work. You don't expect your insurance to pay for it. –Why is it then that when you buy health insurance, you expect it to pay for almost everything, while giving little attention to the costs of your medical services?

Do people even need health insurance? Yes. But what they need is catastrophic health insurance. This coverage is available to the majority of Americans by using High-Deductible Health Plans coupled with Health Savings Accounts (HDHP/HSA). These plans can be purchased at very affordable rates and can save both employers and employees large amounts of money. What most people don’t need is a standard $500 deductible plan in which the insurance companies tell the physician what to do and how to do his job, creates a structure that limits a patient’s access to the physician, and reduces the quality of care by forcing the physician to see a certain amount of patients per day. Most health insurance plans are too expensive, financially wasteful, extremely inefficient, irrational, and are not actually “insurance” at all. They are a form of pre-paid healthcare, which many of the beneficiaries never utilize or receive.

The key to reducing rapidly rising healthcare costs is to redefine "health insurance" as it is already defined in these other insurance industries. This is easily accomplished through High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA). High Deductible Health Plans are health insurance plans that typically have a deductible of $2,000 - $3,000. After the deductible is paid, the insurance covers 80%-100% of additional costs. There is a maximum yearly out-of-pocket cost that is incurred. Health Savings Accounts are an interest earning account obtained through a bank that can only be used for healthcare expenses. Deposits are made pre-tax just like an IRA. Most major banks offer them now and funds can be accessed by writing checks or swiping a debit card. This account must be tied to an HDHP. Most employees will have money left over in their HSA at the end of the year to roll over to the next. That money will earn interest and can be used when bigger problems arise.

How can HDHP/HSAs save you and your employees’ money? The premiums are greatly reduced from typical health plans (i.e. $100 vs. $700 monthly). This allows for an immediate and substantial savings to both employers and employees. Employees simply swipe an HSA debit card to pay at the time of service for needed physician visits and testing. There would be no claims, preapprovals or rejections, and far less administrative costs. Since decisions are made by physicians and patients, important tests such as coronary calcium scoring and fractionated cholesterols get paid. Tests such as these can help physicians make better case-management decisions that are in the patient’s best interest, but many insurers have deemed them unnecessary and won't pay for them.

With HDHP/HSAs, transparent pricing becomes critical. Medical services now enter the free market which lowers costs, spurs competition, and improves the quality of care and services. You know how much a new tires will cost before you buy them and when employees start writing checks for their medical care, they will expect to know the costs before paying for them as well. Pricing at reputable facilities is surprisingly variable (Table 1). Concierge physicians regularly negotiate much cheaper prices for x-rays, labs, stress tests, and colonoscopies for their patients (Table 2). These other providers are very willing to deeply discount their fees when cash is paid at the time of service (with a simple swipe of an HSA debit card). They avoid the hassle of the collection process, delays in payment, and uncertainty whether the bill will even be paid. Transparent pricing is possible for patients of concierge physicians because the physicians are able to take the time necessary to research and negotiate prices, which most other physicians can't do and don’t have the time to do.

Legislators would endear themselves to many of their voters by requiring x-ray facilities, labs, physicians, and other health service providers to post their cash prices. Just like at the auto mechanic, patients should be able to know the cost before receiving a service, not after. Perhaps prices could even be available on a local website as is currently available in Long Beach, CA on www.healthylongbeach.org. It would create competition for services, lower prices and give more people the comfort level to purchase an HDHP/HSA. EWS avidly supports legislation for transparent posted pricing of healthcare services.

Table 1: Negotiated cash prices at reputable facilities - Bucks County, PA. January 2008.

Most people know very little about HDHP/HSAs because insurance brokers and benefits advisors don't discuss them unless asked. Brokers and agents receive commissions as a percentage of premiums, leaving little incentive to educate themselves or their clients about the low-cost and low-commission HDHP/HSA option. EWS supports legislation which permits brokers and agents to charge a higher commission for these inexpensive premiums allowing them to be paid the same as they currently are for the high priced managed care insurances. This would give insurance brokers and agents the incentive to promote the HDHP/HSA. EWS also believes that Congress should pass laws that allow annual pre-paid physician fees to be included as qualified medical expenses on HSAs. This would allow patients to invest pretax dollars in easily accessible primary care which would dramatically reduce the utilization of expensive Emergency Room care. This is proving to be fact, not theory. MDVIP, the largest organization of concierge physician practices in the country, has proven a 60%-85% reduction in ER visits among their patients.

From a fiscal standpoint, a healthy person utilizes less medical resources. Patients receive the time needed for optimal preventive medicine with a concierge physician. Also, improved access allows conditions like bronchitis and high blood pressure to be treated early, before they lead to pneumonia and heart attacks.

Employers can easily reduce healthcare expenditures and lessen lost employee work time. The typical employer who offers health insurance pays $600-$700 monthly per employee. Employers could instead pay $100-$200 for an HDHP and $200 per month to fill their employees’ HSAs. That would leave an extra $200-$300 per month that the employer could use to cut their costs, claim as a ROI, invest back into the business, or give it back to the employees. With a concierge physician your employees will spend less time away from work. Their waiting room times at physician appointments will be less, appointments can be made after work hours, and some discussions can be handled by phone instead of needing an office visit. Also, concierge physicians are able to practice preventive medicine more effectively, resulting in healthier employees that lose less time on the job and incur lower medical bills. Finally, when insurance rates rise, the employers’ out of pocket costs will be less because the lower base insurance cost will rise more slowly.

Table 2 - Comparative costs of services - Bucks County, PA

This may seem like an unusual insurance model, but it is the way most insurance works. The purpose of homeowner's insurance is to cover the cost of big problems when they arise, like fire or earthquake. When upkeep of your home is needed like installing new windows or purchasing a new roof, you expect to hire a reputable contractor and pay them directly. Homeowner's insurance does not get involved. You make the decision and get the quality of work desired. Competition among the contractors drives quality service and prices. Free market pricing and competition along with the redefinition of health insurance to match with other comparable insurances are what is needed to keep healthcare from bankrupting employers.

Our free market economy is not the enemy, for within it is contained all of the solutions to our current problems. We must allow the healthcare system to completely interact with the free market.