Why Are Labor Unions Afraid of HSAs?

John McCain HeadshotI know this is an election year.  The political nonsense is everywhere.

Here is yet another article full of unsubstantiated threats:

McCain endorses health care rip-off

The AFL-CIO’s criticism of the position McCain took on State Children’s Health Insurance Program (SCHIP) is interesting.  SCHIP is supposed to provide additional government funded (Medicaid) health insurance for the poor, right?

Then how come the definition of “poor” could be up to $62,000 of annual household income?  This would have required already short state budgets to fund Medicaid well into middle-income earning families.  It would have also ended up moving a tremendous number of privately insured children into Medicaid.  “Why pay for it if the state offers it for free?”  Most states couldn’t afford to match the federal funding requirement in the SCHIP bill anyway.  I can’t blame McCain for voting against it.  That was bad legislation.

This is the part of the Peoples Weekly World article that I need someone to explain to me…

How can AFL-CIO Political Action Director Karen Ackerman claim, “that employers would use these individual medical savings accounts as an excuse to dump health care plans workers fought for decades to win..”?

You can’t have an HSA without being covered by a health insurance plan!

I know of many people that thought they had good health insurance because their deductible was low.  The insurance deductible is only part of the “out-of-pocket” equation. There are actually three moving parts, the deductible, co-insurance (the 80/20 part) and, of course, co-pays.  Most health insurance policies don’t count co-pays towards the “out-of-pocket maximum”.  If there is a cancer or serious heart issue or organ transplant you can plan on paying thousands of dollars in co-pays in excess of your “out-of-pocket maximum” deductible and co-insurance.  These co-pay plans shouldn’t be able to use the words “out-of-pocket maximum”.

My last blog, “Do Co-Pays Really Make Sense???” speaks on this issue further.  HSA qualified health insurance plans when implemented properly offer both healthy people and high utilizers excellent value.

Have any of you Union employees been unfortunate to have suffered through a life threatening incident such as cancer or an organ transplant?  How much total medical expenses did you have to pay including all co-pays.  Would you rather have had an insurance plan like the City of Iola, KS (way to go Judy!)?  They have a $1500 deductible 100% comprehensive major medical health insurance plan that saves the city enough premiums to fund each employee with $700 per year into their HSA.  Do the math: $1500 – $700 = TERRIFIC HEALTH INSURANCE PLAN!

And for the employees that don’t spend their $700 HSA, they keep it!

Go to Blue Cross, Coventry, Aetna, Cigna, Humana, United Health Care, or any other health insurance company and tell them you want to purchase a health insurance plan that has a total out-of-pocket risk in any calendar year of $800 including all inpatient, outpatient, testing, prescription drugs, EVERYTHING!

You can’t buy a better health insurance plan than a properly designed and funded HSA plan.

So why do HSAs seem to upset Labor Unions?  I fail to believe it has anything to do with the HSA itself.  It has to be politically motivated, because financially, HSAs make sense.

General Motors and Ford spend more money on health insurance per car than they spend on steel.  This huge expense has allowed Toyota to surpass GM as the largest auto manufacturer in the world.  GM had owned that spot for 75 years.  Unfortunately trying to hang on to old inefficient health insurance plans will keep GM out of the top spot.  Labor Unions need better quality health care that costs less.

Hey GM, CALL ME!!

Car Signage - Finally Health Insurance that makes $en$e

The HSA GUY… Scott Borden

2010 UPDATE:  Hoosiers and Health Savings Accounts article in WSJ talks about the results of HSAs in Indiana:

“The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.”

6 Comments

  1. Is the state of American education so woeful that we are now unable to perform simple math functions or a modicum of critical thinking?
    In the article “McCain endorses health care ripoff” we are lead to believe by the labor unions and other knee jerk reactionaries that HSA qualified plans are something only a greedy insurance company would love. Oh really?
    Let’s examine the concept and the math.
    An HSA qualified plan is a health insurance plan with a lower (20%-50%) premium than standard co-pay plans. In my own case, I went from $742 per month in premium to $384 per month in premium and my new plan included dental coverage. which the previous plan did not That’s improved benefits and a $400 per month SAVINGS that I get to keep, tax free, to fund my out of pocket expenses. (Oh, by the way, whatever I don’t use I get to keep. Every year. No kidding.)
    So, if I’m sending $400 per month or $4800 per year less to the insurance company, how do they become more profitable? I’m keeping half of what used to be their money and their profit. If I could remove $400 per month from your paycheck, we would be able to hear your screams of outrage all over the city.
    Yet we are led to believe that profiteering insurance companies are leading the charge on HSA’s so they can rake in the money and hold down the little man. Baloney. If insurance companies were only interested in profit, wouldn’t it make sense for them to work to limit or eliminate the spread of HSA qualified plans? The idea that insurance companies are only interested in HSA’s because of greed just doesn’t hold water.
    If you ask me, the only reason HSA qualified plans are not wildly popular is because insurance companies and insurance agents don’t want the cut in profit or commission. Is it possible that those who stand against the HSA concept are actually shills for big insurance and big insurance brokers?
    Think about it.

  2. Another way to critically examine the viability of HSA’s is by looking at consumer enrollment in them. Trillions of dollars are being put into HSA’s, which means many consumers have accepted this product for what it is – a money saver!!
    ow
    There’s an inverse relationship between out of pocket exposure to the consumer and premium paid. The less out of pocket exposure the higher the premium, and vice versa.

    Statistically, 90% or more of the average person’s health care expenditures takes place in the last 5 years of life. So, for the average person, most of their life is spent paying premium for a benefit that is used little.

    Given this statistic, it makes absolutely NO SENSE to have a low deductible, copay type health insurance plan and pay the high premium required for it.

    Millions of small business consumers are realizing this statistic and enrolling in HSA qualified plans as a result.

    Also, a HSA qualified plan is refreshingly simple to understand – the consumer only has one number to remember, their deductible. Once that is satisfied, coverage is paid 100% by the insurance company. Wow – no longer does the consumer have to sift through their explanation of benefits trying to figure out their copays and coinsurance.

    So, what’s wrong with this picture? Maybe, that is what the labor unions are struggling with, they think the HSA is too good to be true. Sooner or later, they will have to critically examine this instead of having the likes of Karen Ackerman shooting her mouth off in ignorance.

  3. Scott,
    I’m more of an F-150 guy myself, but aside from that you’ve got a terrific blog. Thanks for all you do in the HSA space and for visiting us from time to time 🙂 . At some point in the near future, you and I should perhaps have a conversation.
    cheers,

    rg

  4. Excellent post! I appreciate your clearity and hope more business owners and entreprenuers find this blog!

  5. Labor unions are not afraid of HSAs. They know that they are impractical for working Americans. So you save $4800/year. You get into an accident in that great truck of yours (I prefer Jeeps) and land in the ICU with your head bashed and your pelvis smashed. After months of hospital and rehab you can get back to work, but your insurance got cancelled after the 1st month (no job, no way to pay even the reduced premium). You burned through your HSA in the first few minutes of your hospital stay and now have over $100,000 to pay off.

    In the real world accidents do happen. Young people get cancer and other weird-ass debilitating diseases. HSAs are only good for write-offs for the wealthy. They want you to believe that it is a great deal for you, but in actual fact it is a rotten deal for the average family.

    What is the best deal for all of us is universal health care: privately delivered (you choose your own doc and hospital), publicly funded. Health Care for All. The law for it is already in Congress (HR 676). We just need to get it to the Floor and voted on. We all pay in, we all are covered for the care we need, when we need it.

  6. Ludlow,

    Thanks for reading and commenting your point of view. That’s the beauty of blogging.

    I understand fully how accidents happen. In the scenario you listed above you state how you feel things would occur. Although your scenario could happen, there is an entirely different outcome having an HSA qualified plan would offer.

    I would take the $4800 in premium savings that was deposited in my Health Savings Account (HSA) and use that money to pay for COBRA premiums (yes, that is an eligible expense) during the months I’m rehabbing my head bashing and pelvis smashing episode. Luckily my CHEVY has airbags or it could have been worse! The hospital was paid $95,000 from my insurance company and I still owe my $5,000 family deductible. I am now back at work at another job and have paid half of the hospital bills with my HSA and kept continual coverage with COBRA thanks to my HSA. I just hope the new plan is an HSA qualified plan!

    You speak of “universal health care: privately delivered, publicly funded, health care for all”. The only thing worse than the greed of private insurance companies is the beurocracies of government. I say we take some of our health care dollars away from both of these endless money pits and place it where it belongs, in privately owned Health Savings Accounts!


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