How the Real HSA Stands Up
BCBSNC Announces New Group HSA Offering with Mellon Financial
BlueCross BlueShield of North Carolina - December 2, 2004
Blue Cross and Blue Shield of North Carolina (BCBSNC) announced today that it is launching a new group Health Savings Account (HSA) product with Mellon Financial Corporation’s Human Resources & Investor Solutions (HR&IS) business for North Carolina employers. The new offering, called HSA BlueSM, consists of a high-deductible health plan (HDHP) from BCBSNC and a health savings account (HSA) administered by Mellon.
Here’s how it works:
1. Consumers purchase a high deductible health plan that carries a lower premium than many other health plans.
2. Consumers and their employers can contribute to an HSA to cover their qualified medical expenses up to the amount of their deductible each year.
3. When members use health care services, their physician or hospital files a claim with BCBSNC.
4. BCBSNC processes the claim, taking into account the company’s negotiated fees and how much the member has paid toward his or her deductible. BCBSNC sends this information to the member and the physician/hospital, along with any payment due on the claim.
5. The physician/hospital bills the member for the amount he or she owes.
6. The member pays the bill with funds from his or her HSA, using a check from their HSA account or HSA debit card.
http://www.bcbsnc.com/news/press-releases/PR2004-1202.cfm
Comment: Proponents of HSAs (health savings accounts) with HDHI (high deductible health insurance) have touted the benefits of having complete control of your own personal funds for routine medical expenses, while having the security of 100% coverage after a reasonable deductible is met.
But there was a major flaw in this concept. The insurance industry does not want to cover 100% of anything, particularly the bills of those with major medical expenses. They are doing everything they can to reduce their exposure to risk. High deductible, full indemnity coverage is not in their plans.
The insurance industry’s primary product is administrative services. They did not want to lose control over the administration of the innumerable, small, routine expenses of the large majority of the population who remain relatively healthy. HSAs presented a great opportunity: lots of little accounts with small charges, and with no risk to the insurers because it’s not even their money. And, of course, the money managers who have learned to profit from IRAs have found the HSAs to be a great addition to their product line.
Physicians thought that they would have their full routine fees paid by the HSAs and the deductible, and then 100% coverage by the HDHI. In fact, the insurance industry has countered with managed care PPOs (preferred provider organizations) with restricted provider lists and contracted fees. More importantly, they have applied the same restrictions to the HSA component of the coverage. Patients who elect not to go to contracted providers will face very severe financial penalties. And those penalties will not apply to the deductible for the HDHI. The net result is that either physicians will continue to be trapped in PPO contracts, or the patient will have to accept much more risk resulting in very high out-of-pocket expenses. And many studies have confirmed that access to care would then be unaffordable for many.
As long as we leave private insurers in charge, we can expect more of the same: higher administrative waste, more financial risk for those with needs, worse health care outcomes, and unhappy providers who will continue to stew in their misery simply because they don’t want the government involved.
For those who protest that they can’t do this, the applicable IRS provision on HSAs is covered in Question 4 of the following document: http://www.irs.gov/pub/irs-drop/n-04-2.pdf