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The State of Our Health
Comparing health-care costs and mandates, where does Connecticut fit in with its neighbors?
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Business New Haven
3/1/2004
By: Melissa Nicefaro
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The health care world is in a constant state of flux - some might even call it a vicious cycle. Health insurance premium costs are skyrocketing, but there is scarce help in sight for the weary.
In early December, President Bush signed the Health Savings Account legislation into law. The new Health Savings Account (HSA) is looked at as a "new and improved" version of the Medical Savings Account, with these significant changes: they carry lower deductibles, 100 percent of which can be contributed to the savings account and, unlike traditional medical savings accounts, almost everyone is eligible for the HSA.
The HSA is a tax-sheltered savings account modeled after the IRA, but intended for medical expenses. The account is accessible through by a check or debit card, and excess from the account carries over from year to year, generating interest.
According to the group msainfo.net (an independent group of insurance agents and financial planners), when combined with a low-cost, high-deductible health insurance policy, the health savings account is intended to replace the traditional high-cost health insurance policy (with its low co-pays and restrictions on medical choices).
The group says a health savings plan will restore a high degree of freedom of choice by allowing users to choose their own physicians (typically from an extensive PPO directory) without the sometimes suffocating restrictions imposed by HMO-type plans.
HSAs are available to employees of all size business and cover single individuals and families. For 2004, the minimum deductible for a high-deductible health insurance plan is $1,000 for singles and $2,000 for families. The maximum annual out-of-pocket expense is $5,000 for singles and $10,000 for families. Individuals can save up to $2,600 per year in an HSA. Families can save up to $5,150 per year. Individuals age 55 or older may also make additional catch-up contributions.
Connecticut has adopted laws to accommodate MSAs, but is still considering HSAs. Connecticut has adopted legislation to remove a limit on deductibles for policies issued in conjunction with MSAs. As a result, MSAs established in conjunction with high-deductible health insurance policies issued in Connecticut may now qualify for favored tax status under the federal Internal Revenue Code. The state's Department of Insurance provides a list of companies that provide high-deductible health insurance policies online at its Web site, www.ct.gov/cid.
According to Janet Brierton, associate legislative attorney for the insurance department, like MSAs, contributions to HSAs may be claimed as a deduction when filing federal income taxes. Since the Connecticut income tax is based on the federal Adjusted Gross Income, HSA contributions are allowed as a deduction for state income tax purposes as well.
In addition, HSA assets are portable so that they stay with individuals if they change employers or leave the workforce. Unlike MSAs, however, an employee and his employer can both make contributions into an HSA.
Many Connecticut workers have no access to health insurance. In most cases, these workers are employed by small businesses that cannot afford the expensive premium costs.
Nationwide, the number of people without health insurance rose by 2.4 million between 2001 and 2002, according to the U.S. Bureau of the Census. According to these estimates, 15.2 percent of the population had no health insurance in 2002, up from 14.6 percent the year before.
Donald Young, M.D., president of the Health Insurance Association of America, says the health insurance coverage estimates represent both good and bad news.
"The good news is that, despite an economic downturn, nearly two-thirds of all working-age Americans had employer-sponsored health insurance last year," Young says.
"The bad news is that, because of the economic downturn, the proportion of the population with no health insurance at all rose last year back up to levels not experienced since the late 1990s."
Young says that as the economy rebounds, the number of people with private health insurance will grow. "However, double-digit increases in health-care costs will put continuing pressure on both private, employer-backed health insurance and on public programs like Medicaid and SCHIP [the State Children's Health Insurance Program]. Affordability remains the No. 1 reason people lack health coverage today," Young explains.
"The Health Insurance Association of America urges state and federal policymakers to avoid the imposition of costly new mandates or regulations, and to provide tax incentives to help small employers and moderate income workers better afford health insurance coverage."
According to the state's Office of Health Care Access (OHCA), 99.9 percent of the largest businesses in the state (those with more than 1,000 employees) offer workers health insurance in some form. Less than 60 percent of businesses with fewer than ten employees offer health insurance.
This number is significant, according to OHCA, since nearly one-quarter of Connecticut workers are employed in firms with fewer than 24 employees.
Even though the majority of small firms offer health insurance, some employees are not enrolled for one of two main reasons: either the employee works only part-time and is not eligible for the benefit; or the employee declines the covered due to the high cost of the insurance premiums.
According to OHCA, the average monthly employee's contribution for an employer-sponsored health insurance is $30 for a single or $111 for a family.
This problem is not unique to Connecticut, as a large portion of uninsured in New York, Massachusetts and Rhode Island are employed by small businesses. New York also blames the high cost of premiums.
New York passed a law in January 2001 called the Health Care Reform Act, which makes an affordable health insurance benefit accessible to up to one million New Yorkers.
Under the "Healthy New York" plan, the state reimburses health maintenance organizations (HMOs) for claims from individual policyholders between $30,000 and $100,000. HMOs are responsible for claims above and below those amounts.
Healthy New York includes essential coverage for inpatient and outpatient hospital services, physician diagnostic and treatment services, maternity, family, preventative and primary care, X-rays, lab services and a prescription drug benefit.
To be eligible for Healthy New York, a small business must have at least 30 percent of employees earning no more than $30,000 and at least one of those employees must enroll in the plan. To qualify, sole proprietors and individuals must have household incomes below 25 percent of the poverty level, must not be eligible for Medicare or private insurance and must not have had coverage in the preceding 12 months.
Healthy New York's premiums are 30 to 50 percent less than premiums in the individual market. The program is funded by a $219 million allocation. (For more information, visit www.ins.state.ny.us/acrobat/hnystudy.pdf).
Laws regarding health-care coverage vary greatly from state to state, especially on such issues as age-based pricing for premiums and coverage of pre-existing conditions.
Massachusetts health insurance companies are by law forbidden to deny health insurance due to health status, age or risk. Massachusetts health insurance companies are prohibited from charging more based on an insured individual's gender or health, although family size, age and demographics can affect cost.
Much like Massachusetts, New York law says one cannot be denied health insurance due to health status, age or any other factor. Also, the cost of New York health insurance premiums cannot be dependent upon the insured's health, occupation, age or gender.
Connecticut health insurance companies, on the other hand, are permitted to factor in health status in deciding whether they want to offer coverage - and what that health insurance policy will cost.
In Connecticut, the cost of health insurance is not controlled. Companies generally charge individuals the same amount as others with similar health profiles, but they can choose to charge more. Once an individual has entered into a contract with a Connecticut health insurance company, she or he cannot be denied a request to renew the policy.
Similar to Connecticut, the cost of Rhode Island health insurance can vary due to health status, age, family size, and the type of coverage sought.
The laws in Connecticut and its three neighboring states regarding pre-existing conditions also vary. Rhode Island health insurance policies can include a provision with a pre-existing condition exclusion period of no more than three years, according to Health Insurance In-Depth, LLC. During this period, a health insurance company is not responsible for reimbursing an enrollee for any expense related to the pre-existing condition.
New York health insurance policies can only include a pre-existing condition exclusion period up to a maximum of 12 months. In New York, medical conditions are considered to be pre-existing if a patient received medical treatment for or was diagnosed with it six months prior to the beginning of the plan. If you are switching New York health insurance and have had no breaks in coverage, the previous coverage can be used to credit the pre-existing condition period of your new plan.
Massachusetts health insurance policies simply can not exclude coverage for a pre-existing condition, but Connecticut health insurance companies can exclude coverage for medical conditions if they are considered "pre-existing" conditions. Connecticut laws consider conditions to be pre-existing if an employee has received medical treatment for a condition or was diagnosed with the condition 12 months prior to the beginning of the plan. Legally, Connecticut insurance companies are allowed to include exclusion periods for any condition that falls under this description.
However, if you switch insurance companies, you can avoid having a second exclusion period imposed by making sure your Connecticut health insurance coverage is continuous. If you have no break in between policies, your old coverage credits your new plan's exclusion period thereby decreasing or eliminating it, Health Insurance In-Depth, LLC says.
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