MSA's Can Be a Windfall for All
Table of Contents
- Types of Health Spending Accounts
- A Drumbeat of Criticism
- Are Cost Savings from Raising Deductibles Exaggerated?
- Do MSAs Change Patient Behavior?
- Will MSAs Attract "the Healthy And the Wealthy" at the Expense of Everybody Else?
- Do MSAs Encourage People To Avoid Needed Preventive Care?
- Will MSAs Pull the Best Risks from "the Insurance Pool," Raising Costs for Those Who Remain?
- Can MSAs Help Control Costs over the Deductible, Where the Need Is Greatest?
Are Cost Savings from Raising Deductibles Exaggerated?
Critics are skeptical that raising a deductible will save very much in health insurance premiums, certainly not enough to fund an MSA very well. Yet the same organizations acknowledge the value of increasing deductibles for other kinds of insurance. The month before Consumers Union's Gail Shearer wrote to the Wall Street Journal complaining that MSAs would poison the entire health insurance market, her parent organization published an article in Consumer Reports encouraging readers to raise their deductibles for home and auto insurance because "the first rule to apply to any insurance... is to buy coverage that protects against a broad range of risks, getting only enough protection to insure what you could not afford to cover with your own assets."21
This principle is even more true for health insurance than it is for home and auto insurance, because home and auto claims are large and infrequent, while claims against a health insurance policy are usually for small amounts of money and are complicated to process. In fact, raising a health insurance deductible can save substantial amounts of premium.
"Premiums for 'traditional' coverage have escalated."
There are several reasons why the premium savings are so large. The most obvious is that the insurer will pay less in potential claims. But since relatively few people have a claim in any given year, this is only a portion of the savings.
MSAs also greatly reduce a problem endemic to the entire health insurance industry: soaring administrative costs. One study estimated the administrative savings from switching to a national system of MSAs could amount to $33 billion annually.22 It is far less expensive for a provider to present a bill and be paid at the time of service than it is to file a claim and wait, often for weeks or months, to be reimbursed by an insurer.23 Immediate payment saves both administrative overhead and the time value of the funds.
"MSA's greatly reduce soaring administration costs."
One of the most common complaints health care providers make about insurance companies is the extreme complexity of the billing requirements, with many carriers demanding unique systems.24 To avoid these burdens, one organization of physicians based in Washington state is charging cash-paying customers half or less of what it charges insured customers. The difference in fees is due solely to the reduced overhead from not having to bill the insurers.25
Whether filed in paper format or electronically, claims are costly and complex to process and adjudicate. They involve confirming that:
- The patient is (or is not) a covered insured.
- The provider is (or is not) a network provider.
- The service billed is (or is not) covered under the insured's contract.
- The service is (or is not) appropriate for the diagnosis.
- The insured has fulfilled his or her deductible and coinsurance responsibility.
Next, the claim is forwarded for "repricing," depending on the provider's network status and agreed-upon discount. Finally, the check is cut and forwarded to the provider, an EOB (Explanation of Benefits) is sent to the insured and data are entered and a summary report sent to the employer. Additionally, there will be:
- Periodic audits to confirm the services billed were actually received.
- Utilization review efforts to ensure appropriate care.
- Customer and provider service departments to answer questions about claims status, and sometimes to explain why a claim has been denied.
- Appeals procedures to reconsider the payment of denied claims.
Reviewing the foregoing, it isn't hard to understand why the cost of processing a small claim can exceed the cost of the claim itself.
Depending on the particular plan, a Medical Savings Account program enables patients to pay small claims from an MSA in one of three ways: (1) they can pay directly at the point of service with a debit card or paper check written on the MSA account, (2) they can approve a bill and have their health plan pay it from the MSA, or (3) they can pay cash and send the receipt to their MSA administrator for reimbursement. At least in theory, there is little reason for the insurance company to get involved in the claim until the patient's total expenses approach the deductible.26