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POLITICS -
The Future of Health Insurance?
Are MSAs an idea whose time has come? Not, apparently, in Connecticut
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Business New Haven
8/9/1999
By: Laurence D. Cohen
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If Congress really wanted to reform the nation's health-care system, it could drive across the Potomac into Virginia and see the future of health insurance first-hand.
Drive right out of the District of Columbia, stop at the first little bungalow you come to in Arlington, and here's what you might find:
A family of five. Mom and dad in their 40s. Three kids. They have standard health-insurance coverage. But they have no co-pays for doctor visits or drugs, they can see any doctor they want, and they need no referrals for specialists. They never have to beg their company or an HMO for permission to get a new liver or to crunch a kidney stone.
How much do you think the premium for such coverage might be? That family in Virginia pays about $135 per month.
Don't believe it, do you? Well, I left out one little thing. There is a deductible. A great, big ol' deductible. A $4,600 deductible.
There's more to it than that, but let's stop right here and ponder the deal so far. What do you think? Would you be willing to pay out of pocket when Johnny has an earache, or when Nancy needs a tetanus shot, or when Dad (that devil) wants to give Viagra a try? In return for cheap coverage of medical catastrophes, would you be willing to pay for the routine stuff on your own?
Health economists have whined for decades that deductibles for health coverage are far too low, encouraging over-utilization and driving up costs to poor folks for whom the first dollar really is important. Many folks have higher deductibles on their car windshields than they have on their bodies.
But $4,600? Whew. Our family in Virginia has a little extra incentive, to make the deal more reasonable. That $4,600, whether it comes from them, or from their employers, or a combination of the two, gets put in a special savings account to be used for routine medical care. If there's any money left at the end of the year our family gets to keep it, as a retirement fund, to grow tax-free, just like an IRA.
They're called Medical Savings Accounts (MSAs), a health-insurance experiment created by Congress in 1996 aimed specifically at small businesses and the self-employed. Because Bill Clinton's health-care bureaucracy is hostile to non-government solutions, and because the large health insurers and insurance agents hate the MSA concept (remember, the premium for our Virginia family is only $135 a month), rules and regulations governing the program are hideously complex and restrictive. As of December 1998, only about 54,000 qualified MSA policies had been sold, but there is congressional pressure to ease up on the restrictions.
To the surprise of no one, Connecticut is one of just four states that don't permit the sale of MSAs. Better for the General Assembly to spend weeks clucking about the big, bad managed-care industry than to approve a market-oriented option already legal nearly everywhere.
The most public cheerleaders for MSAs has been J. Patrick Rooney, patriarch of the Golden Rule Insurance Co., a Midwestern niche player that has long peddled high-deductible health insurance to businesses and individuals who can't afford the traditional stuff. Rooney is dismissed by some of his industry competitors as a nutty self-promoter: He dabbles in "conservative" policy issues (e.g., school vouchers); he talks about the importance of God in his business life; and he is loud and rambunctious in his criticism of the status quo.
As keynote speaker a few weeks ago at the annual Washington confab of the National Taxpayers Union, he was vintage Rooney, making fun of Hartford, making fun of Connecticut, and making fun of Aetna - one of his favorite insurance targets.
"Hartford, Aetna, the managed-care industry - they hate MSAs," he told the assembled tax rebels. "With MSAs, you're in control. When you're in control, you don't have to ask Aetna's permission to go see a doctor."
Assuming the Republicans don't get routed in the next congressional elections, the pressure will build to expand and simplify the MSA demonstration projects.
At some point, of course, Connecticut will be the only state to prohibit MSAs. But that's okay. We have mandated insurance coverage for Lyme disease. Who needs lower insurance premiums, so long as our legislators are fighting off the ticks?
Laurence D. Cohen is a senior fellow of the Yankee Institute for Public Policy.
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