Unfortunately, new healthcare legislation will enact changes that will water down these helpful health plans.  Starting on January 1, 2011, people with health savings accounts can no longer use their HSA funds to pay for over-the-counter medicines.  Purchasing medications like pain relievers, cold remedies and cough syrup can really add up, especially for large families, but the new law dictates that such expenses must be paid out of pocket.

Another change looming in 2011 is that the penalty for withdrawing money from an HSA for non-medical expenses doubles from 10 percent to 20 percent.  So if one mistakenly spends HSA money on an unapproved item, like over-the-counter medication, for example, he’ll be penalized at double the current rate.

Regardless of these changes, health savings accounts are still a very attractive option to many individuals, especially now that the government has mandated that all people purchase health insurance.  Because of this, there will be many new entrants to the health insurance market, including millions of “young and invincible” consumers who previously chose to go without insurance to save money.  It’s likely that such people will want to keep their costs down and will opt for a high deductible health plan with a low monthly premium.  Choosing a high deductible plan will make more people eligible for HSAs, and therefore increase the amount of people enrolling in health savings accounts.

That could be a good thing for both the individuals and the tax-paying public.  When consumers are the key decision makers over how their money is spent, incentives will be aligned throughout the health care system to create better value.

Wiley Long, President of HSA for America, has put together a timeline of reforms and some strategies to help people maximize their benefits while minimizing their costs.  While the majority of changes won’t occur for three to four years, some changes are already underway.

2010

On September 23, policies will no longer have lifetime limits, children with preexisting conditions cannot be denied coverage, and kids can stay on their parents’ insurance until their 26^th birthday.  Another change is that domestic and same-sex partners will become eligible for HSA reimbursements.  In effect, anyone with money in an HSA can use funds from that account tax-free to pay for their partner’s medical or dental expenses.

2011

On January 1^st, people with health savings accounts can no longer use their HSA funds to pay for over-the-counter medicines, and the penalty for withdrawing money from an HSA for non-medical expenses doubles from 10 percent to 20 percent.

2014

2014 is when the majority of changes are enacted, including a government mandate that all Americans purchase a minimum level of health coverage or face a monetary penalty.  Other major changes are that people with pre-existing conditions cannot be denied coverage, and government subsidies will be available to individuals earning up to $29,327 and families of four earning up to $88,200.

These and other health care reforms are raising questions from confused Americans on how to minimize their costs in the face of comprehensive legislation and expected tax hikes.  Wiley Long suggests the following strategies for maximizing benefits while keeping costs low:

1. Maximize your deductible – The higher your deductible, the lower your monthly premium.  Since insurance rates are likely to increase at an accelerating pace, and the government may decrease maximum deductibles in 2014, Americans should consider switching to a higher deductible health plan now.  Regardless of how reforms affect deductibles in the future, people with high deductible plans will be able to keep them as long as the insurance companies continue to offer them.

2. Lock in current rates – Several insurance carriers offer two or three year rate guarantees.  Locking in your current rates could save you a lot of money over the next few years.

3. Beware of Rising Taxes – Health care reform will be expensive, so several new taxes will be implemented to help pay for it.  Individuals earning more than $200,000 and couples earning more than $250,000 will face an additional 0.9 percent Medicare payroll tax starting in 2013, as well as an additional 3.8 percent Medicare tax on investment income, like interest, dividends and capital gains.

4. Maximize Your HSA Contribution – Since taxes will increase, take any action you can to lower your tax bill, like making tax-free contributions to an HSA.  If you had an HSA-qualified plan in place by December 1, 2009, you should make a contribution to a health savings account by April 15, and continue to fund it every year.

Click here for more information or to sign up for a health savings account.

Expanded Coverage for Dependents

On September 23, 2010, kids will be allowed to remain on their parents’ health plan until their 26^th birthday, provided they’re not already covered by their own employer plan.  If a child age 25 or younger has been dropped from your plan, ask your insurer how to get him or her reinstated.  If this causes your premiums to rise significantly, compare the price increase with policies sold on the individual market to ensure you receive the best plan at the best price.

Reducing the Medicare “Doughnut Hole”

Currently, once seniors have spent $2,830 on prescription drugs, they then have to pay the next $3,610 in prescription bills out-of-pocket until coverage kicks in again at $6,440.  This costly gap in coverage is known as the “doughnut hole.”  Now, seniors who fall into the doughnut hole in any calendar quarter this year will receive a $250 rebate check.  Next year, seniors will receive discounts on prescription drugs, and more discounts will be applied until the doughnut hole is closed.  To prepare for this, people should save all Medicare documentation and prescription bills to prove they’re entitled to the rebates.

Cuts to Medicare Advantage Plus

Over the next three to seven years, government subsidies to Medicare Advantage Plus plans, which provide coverage and additional benefits to 11 million seniors, will be cut by $136 billion.  To prepare, seniors are encouraged to keep track of their Medicare renewal period.  Because prices and services could vary significantly from plan to plan as these changes take effect, seniors might need to make a new decision each year about whether to change plans.

Limits on Flexible Spending Accounts

On January 1, 2013, contributions to Flexible Spending Accounts (FSAs) will be capped at $2,000, and reimbursement for non-prescription drugs will no longer be allowed.  If you want to put away more money for medical costs, consider a Health Savings Account (HSA) instead of or in collaboration with your FSA.   HSAs allow you to save pre-tax money for future medical costs, and unlike a use-it-or-lose-it Flexible Spending Account, HSAs roll over from year to year.  To be eligible for an HSA, you simply need to pair it with a high deductible health insurance plan.

New Tax on Investment Income

Starting January 1, 2013, individuals who make more than $200,000 a year—or couples who earn more than $250,000 together—will be hit with a new 3.8 percent tax on investment income like dividends, interest and royalties.  To combat this, people can invest in tax deferred investments like municipal bonds or Roth IRAs.

In addition to the above measures, there are many other changes to be aware of as health care reform rolls out.  Visit moneywatch.com for more details on how to begin planning for the expected changes to your health care and finances.

In all my years working in the Texas health insurance industry I cannot recall a more unpopular, ill-conceived and financially irresponsible bill passing through Congress.  The magnitude of this legislation is unprecedented in terms of an American government’s exertion of power over its people and its display of “we-know-what’s-best-for-you” arrogance.  Even worse, the idea that this version of health care reform will improve coverage and access to coverage while reducing costs is simply not true, if not totally comical. How can the government add 35 million people onto the health rolls of the already overburdened emergency rooms and amid a serious doctor shortage without  long waiting lines and rationing?  If this is what change looks like, then Mr. Obama, you can keep it.

All figures of cost savings used by Obama and his administration come from the Congressional Budget Office (CBO), which conducts its analysis in a vacuum.  For example, the CBO must tally all assumptions from the health care bill, reasonable or not, including the ridiculous notion that $500 billion in savings will be gleaned by reducing “fraud and waste” from Medicare.  The government uses this large sum, and several others, to counteract its spending, thereby reducing the stated cost of health care reform.  It’s a way for the government to hide hundreds of billions of dollars of spending from the American public.  Upon removing such gimmicks, the former director of the CBO predicts deficits of $562 billion over the first ten years.  So rather than reduce the federal budget deficit, the overhaul of our nation’s health care system will push us further into a hole from which we may never resurface.  Many pundits feel that this will be the final nail in the coffin that bankrupts our country, and I happen to agree.

Equally as intimidating as this financial burden on us and future generations is the blatant infringement on our personal liberties.  By passing this bill, Congress is effectively mandating that all Americans must purchase health insurance, or be subject to a fine.  Forcing people to buy insurance is unprecedented, and arguably unconstitutional.  Our government has always taxed us on things we do buy, like cigarettes or automobiles, but taxing us on what we don’t buy?  That’s a frightening, slippery slope.

ObamaCare by the Numbers

John Goodman, president and CEO of the National Center for Policy Analysis, pokes some holes in ObamaCare, including the notion that, as Obama has repeatedly stated, people who like their insurance plan can keep it.  But the Lewin Group, a health care and human services policy research and management consulting firm, estimates that 19 million people will lose their employer plan.  And more than eight million seniors are predicted to lose their Medicare Advantage plan, according to the Medicare Chief Actuary.

Another Obama sound bite was that no one earning less than $200,000 would experience any tax increases.  The reality though, according to the Joint Committee on Taxation, is that approximately 73 million people earning less than $200,000 can expect to pay higher taxes to support the health care bill.

And what about reducing cost burdens on individuals and families?  Insurance companies estimate price increases ranging from 54 percent to 111 percent for individuals, and the CBO predicts a $2,100 increase in insurance premiums for the average family.

This isn’t health care reform.  It’s health care overhaul.  And it just might be the biggest abuse of government power I’ve ever seen.

Richard Monello
President/CEO, Custom Health Plans, Inc.

By connecting health care services with actual health care costs, health savings accounts are decreasing health care costs. Evidence supporting these claims continues to surface causing many to question why HSAs are not being considered as an option in the Obamacare health plan. Obama’s goal is to provide affordable health insurance to all people, which is something all Americans agree is needed. However, increasing taxes and putting our nation in more debt should not be the price paid in order to make health insurance more affordable and readily available to all citizens.

Also, Obamacare does not address the fundamental problem of rising health care costs. The reason health insurance is not affordable for a majority of Americans is due to the excessive health care costs and the overuse of services. When people do not understand the costs of services (because the health insurance company covers most of the costs), they tend to overuse services unintentionally. With the knowledge of the actual cost per service, the individual can be more responsible with how they use these services. For example, let’s say you go to a restaurant and you do not know the prices of the dishes available. Let’s also say you will only pay a flat fee no matter what you order. You are more likely to order the most expensive meal on the menu, whether you are hungry or not. This analogy can be applied to how flat rate fees per service can lead people to using more than what they actually need when visiting health care providers.

The Cato Institute’s Michael Tanner writes that for every health care dollar spent in the United States, just 13 cents is paid by the consumer. If a co-pay is all that is required for health care services (whether the full costs are covered by your health insurance or the government), the rest of the service fees must be paid by someone. If the health insurance companies and the government continue to incur the majority of the costs, then health insurance premiums will continue to rise to compensate for increasing health care costs and usage. If the government incurs the majority of the costs, then taxes will continue to rise to account for these increases. Therefore, allowing every American access to standardized health insurance will definitely not decrease health care costs. Instead, it will actually decrease health care quality, increase health care costs, and increase taxes!

Instead, the root of the problem should be treated first. Increasing customer responsibility by connecting health care cost with service will allow people to begin to use the services that are only needed, not expected. Once health care services are better understood and maintained, the costs of health insurance will decrease. Once health insurance premiums decrease, more Americans will be able to afford quality health insurance. It is not a quick fix, but it is a better option than our country continuing to plummet into financial ruin.

Evidence of this concept working has been reported in states such as Indiana. In a recent article by Indiana governor Mitch Daniels for the Wall Street Journal, 70% of the state’s 30,000 employees use the HSA option available to them. The state deposits $2,750 a year into an account controlled by the employee, who uses it to pay health care costs. The state of Indiana also pays the premium for the high deductible HSA-eligible health insurance plan. Money left over each year belongs to the employee. A study conducted on these employees’ use of health care services show that they do not skip needed services, such as routine physicals and mammograms. Daniels claims this program will save the state about $20 million this year.

Before we endorse a health care reform bill that could cost us billions of dollars without addressing the real health care problem, we should look at what IS working to decrease health care costs and aid Americans in getting the health care services they need.

The Dallas Morning News

In Texas, the Department of Insurance does not routinely review health insurance premium increases unless a complaint is brought before them. Therefore, it’s argued that Obama’s proposal could protect many insured citizens from unnecessary and inflated health insurance premium costs.  However, each state differs in which health insurance carriers, plans, and benefits are available.  Paired with the fact that health insurance carriers are confined to only sell within state lines, how can the federal government adequately determine if a premium increase is unreasonable for the citizens of a particular state, much less regulate those that are deemed unreasonable?

Rather than spending more money on further regulation, how about some measures that would actually lower health insurance costs?  Measures like deregulating health insurance across state lines, so that market competition can naturally lower costs; or imposing tort reform to cut down on junk lawsuits, like we’ve done here in Texas; or increasing accessibility to health care, through more options like Texas health savings accounts and other consumer driven health plans that empower consumers to take control of their health care costs.

American health care reform cannot happen overnight, but until the right questions are asked, the wrong answers will continue to be proposed.

First, they allow the doctor to save time and personnel on insurance paperwork and redirect resources to patient care, simultaneously passing savings on to the consumer. Second, they encourage a closer doctor-patient relationship, free of interference from third parties such as insurance companies or government programs. Most importantly, cash-only practices curtail expenditures by linking health care decisions and cost directly to consumers; after all, when the insurance company is paying for your checkup, who bothers to ask how much it costs?

Cash-only doctors complement and enhance consumer-driven health care plans (CDHPs) like health savings accounts (HSAs) and high deductible health insurance plans (HDHPs).  High deductible health plans offer lower premiums and provide coverage for major medical emergencies and catastrophic events.  Other medical costs, like routine checkups, are paid out of pocket.  Health savings accounts allow consumers to save money on a tax-free basis, similar to an IRA, and then apply their money to these out of pocket expenses with pre-tax dollars.  These options supplement the cash-only market and empower consumers to take control of their health care costs.

So why aren’t these practices more widespread?  Simply put, big government hinders these options through the federal tax code, which favors comprehensive, employer-provided coverage.  In reforming health care, Congress should not favor one type of health care over another.  Instead, patients should have the right to choose which health care delivery system works best for them.  As The Heritage Foundation’s Ed Haislmaier states:

Maximizing value can be achieved in health care only if the system is restructured to make the consumer the key decision maker. When individual consumers decide how the money is spent, either directly for medical care or indirectly through their health insurance choices, the incen­tives will be aligned throughout the system to gen­erate better value—in other words, to produce more for less.

The WSJ article begins by stating that “the best ideas out there are not those that were passed by the House and Senate last year, which consist of more spending, more regulations and more bureaucracy. If the president is serious about building a system that delivers more quality choices at lower cost for every American, here’s where he should start:”

Make insurance affordable – The current taxation of health insurance is arbitrary and unfair, giving lavish subsidies to some, like those who get Cadillac coverage from their employers, and almost no relief to people who have to buy their own. More equitable tax treatment would lower costs for individuals and families. Many health economists conclude that tax relief for health insurance should be a fixed-dollar amount, independent of the amount of insurance purchased. A step in the right direction would be to give Americans the choice of a generous tax credit or the ability to deduct the value of their health insurance up to a certain amount.

Make health insurance portable – The first step toward genuine portability—and the best way of solving the problems of pre-existing conditions—is to change federal policy. Employers should be encouraged to provide employees with insurance that travels with them from job to job and in and out of the labor market. Also, individuals should have the ability to purchase health insurance across state lines. When insurers compete for consumers, prices will fall and quality will improve.

Allow doctors and patients to control costs – Doctors and patients are currently trapped by government-imposed payment rates. Under Medicare, doctors are not paid if they communicate with their patients by phone or e-mail.  Medicare pays by task—there is a list of about 7,500—but doctors do not get paid to advise patients on how to lower their drug costs or how to comparison shop on the Web. In short, they get paid when people are sick, not to keep them healthy.

So long as total cost to the government does not rise and quality of care does not suffer, doctors should have the freedom to repackage and reprice their services. And payment should take into account the quality of the care that is delivered. Once physicians are liberated under Medicare, private insurers will follow.

Inform consumers – Patients need to have clear, reliable data about cost and quality before they make decisions about their care. But finding such information is virtually impossible. Sources like Medicare claims data (stripped of patient information) can help consumers answer important questions about their care. Government data—paid for by the taxpayers—can answer these questions and should be made public.

Eliminate junk lawsuits – Last year the president pledged to consider civil justice reform. We do not need to study or test medical malpractice any longer: The current system is broken. States across the country—Texas in particular—have already implemented key reforms including liability protection for using health information technology or following clinical standards of care; caps on non-economic damages; loser pays laws; and new alternative dispute resolution where patients get compensated for unexpected, adverse medical outcomes without lawyers, courtrooms, judges and juries.

For the full list of GOP proposals to President Obama, click here.  And if you’ve got some ideas of your own, we’d love to hear them; just leave a comment below.

The Associated Press reports that “Obama’s move came amid widespread complaints that efforts so far by him and his Democratic allies in Congress have been too partisan and secretive.”  Backlash stems from closed door deals that gave kickbacks to secure favorable votes, especially glaring since Obama initially suggested that health care debates should be televised on C-SPAN.

As the AP reports, “The meeting’s prospects for success are far from clear. GOP leaders demanded Sunday that Democrats start from scratch, and White House aides said Obama had no plans to do so.”

Many liberal groups want Congress to employ their lawmaking muscle to enact health care reform by reconciliation, a measure that can bypass Republican support.  But while President Obama has remained adamant about passing a health care bill similar to what passed in the House and Senate, lately he’s shown more willingness to consider Republican input.  In an interview with CBS’s Katie Couric, Obama said that he wants to look at the best ideas from both parties and arrive at some agreements.

But such agreements won’t come easily.  The White House maintains that “Obama does not intend to restart the health care legislative process,” whereas Senate Minority Leader Mitch McConnell speaks for many Republicans when he says that “if we are to reach a bipartisan consensus, the White House can start by shelving the current health spending bill.”

The mandates in question, separate bills passed by the U.S. House and Senate, would impose fines on people who elect to go without health insurance.  Their aim is to expand the pool of insured citizens by making coverage mandatory, which could help to offset the high costs of insuring those with preexisting conditions and more serious health care needs.  But those wanting to ban such mandates believe that the federal government has no authority to force citizens to purchase anything, including health insurance.

The Associated Press reports that according to the American Legislative Exchange Council, “legislators in 34 states have filed or proposed amendments to their state constitutions rejecting health insurance mandates.”  In many states, “the proposals began as a backlash to Democratic health care bills in Congress.  Instead of backing away after a Massachusetts election gave Senate Republicans the filibuster power to halt the health care legislation, many state lawmakers are ramping up their efforts with new enthusiasm.”

So while federal health care legislation has slowed, conservative state legislators have stayed busy, trying to thwart the Democrats’ efforts to force coverage upon Americans. “We need to move ahead no matter what kind of maneuvering continues in Washington, D.C.,” said Missouri Senator Jane Cunningham.