MSA's Can Be a Windfall for All
Table of Contents
- Introduction
- 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?
- Conclusion
- Notes
- Appendix
Will MSAs Pull the Best Risks from "the Insurance Pool," Raising Costs for Those Who Remain?
This criticism is closely related to the "healthy and wealthy" argument discussed above in that it makes all the wrong assumptions about who is likely to select which plan. The argument is also based on the false assumption that there is a single insurance pool in the United States.50
The assumption is that if only the healthiest people were attracted to MSAs, they would no longer subsidize the higher costs of the rest of the population. In fact, there are tens of thousands of pools in the country and none subsidizes the other. Every self-funded employer group is its own pool, independent from all others. Every insurance company and every HMO is independent from every other insurance company. Even within a single insurance company, there are separate and independent pools for different states and different blocks of business. The Insurance Commissioner in Iowa will not allow a company to raise its rates in that state to cover losses in California. Similarly, a company's small-group block of business is subject to entirely different rules and rating procedures than is its block of individual, non-group business.
So, if everyone at Joe's Print Shop chose an MSA, and they were all very healthy, there would be no effect whatsoever on the premium costs of Sally's Bakery. Joe's Print Shop pays for the claims experience of its own employees, plus an administrative markup. If they saved money by purchasing an MSA, that would bring down Joe's health care costs, but it would have no effect on Sally's costs.
