Power to the patient: can high-deductible plans and health savings accounts lower premium costs and replace the traditional goal of comprehensive insurance?

• Author: Cauchi, Richard

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From the Xerox corporate boardroom and Main Street small business owners to President Bush's State of the Union address, the talk of health savings accounts has attracted headlines, high profile support and nagging concerns.

The idea behind this new way of buying health insurance is to give the patient control over how her health-care money is spent--is that MRI really necessary for a sore elbow? Because if she doesn't spend it, she gets to keep it. The money stashed pretax in the health savings accounts can build up over the years, tax-free. On top of that, there's a significant out-of-pocket savings on premiums. Depending on the deductible (ranging from $1,050 to $10,000 annually), policies can be 10 percent to 60 percent cheaper than traditional insurance.

Florida Representative Frank Farkas says the best way to control health-care costs and increase access is to put control of healthcare choices back into the hands of patients, which is what HSAs do. Consumers are more frugal spending their own money than when they spend an insurer's, and they have an incentive to adopt a healthy lifestyle because it could save them money.

EMPLOYERS SIGN ON

Employers also like the plans. Wendy's, the fast-food chain, saw its health care spending drop when 9,000 of its 40,000 employees signed up for the tax-free savings accounts.

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The Whole Foods grocery chain uses health savings accounts to cover all its 30,000 workers, even part-time grocery baggers, at half the national corporate average for health care costs. Kansas, like a number of states and localities, gives state employees the option of choosing a health savings plan.

Where do the savings come from?

Let's say a Kansas state employee who earns $40,000 a year chooses a family health savings account along with a $3,000 deductible, 20 percent coinsurance policy. The state chips in $408 monthly, as it does for everyone. He pays $240 per month, while his colleagues with traditional insurance pay up to $520 per month. Right off the bat, the HSA employee is saving $3,360 annually and most of it can go into his personal health savings account. If his family is relatively healthy, he might have $1,000 or even $2,000 saved by the end of 2006. Every year the family does not spend all the money in the health savings account, it accumulates tax free. However, if a head injury lands his daughter in the hospital for four days or his wife has a complicated preterm...