Healthcare Reform - Is it on the way?

Many people will argue yes, health care reform is on its way. Major government policy change may happen at some point, but what is everyone waiting for? Why does it take an act of government to make changes in expanding the array of health care providers, decreasing the costs of health care, decreasing the costs of health insurance, and improving the access to health insurance and health care? One reason may be that we all know we need health insurance. We all know we’d like health insurance. So those who can afford to keep paying the increases of 10% or more each year, will; those who cannot afford to pay, won’t. We’ll all just keep paying, or not! Are there ways around paying for the full cost of health insurance? What government programs are out there now that help curb the costs of health care and health insurance? Answers to these pressing questions are discussed in detail later.

Some states are making it mandatory
Mandatory health insurance coverage is enforced in some states. In one state it is said that everyone will have health insurance. If you can’t afford health insurance, the state will help you pay for it. Immediately this seems like a great idea; partially subsidized health insurance. But intuitive thought tells us that this will only drive up the costs of health insurance. Basic economic theory says when demand increases, so do prices. So will mandatory health insurance coverage be an intermittent fix? Well many will argue that it wont be a fix but a great burden on those trying to find ways to curb the costs of health insurance.

Government Programs
Many programs exist which aim to curb the costs of health insurance by creating tax efficient vehicles for purchasing health insurance such as HSAs, MSAs, FSA,s, and HRAs. Refer to the IRS publication 969 for a detailed description, and benefits of having one of the above mentioned programs. Government agencies appear to be creating cost saving strategies as a form of health care reform, and others seem to be adding to the problems. The obvious answer is to do as much as you can to participate in a program that saves you money. Who wouldn’t want to save money?

So what can you do now?
It’s simple; save money where ever you can. By using a government created program like an HSA or and HRA and by knowing the difference between a high deductible and low deductible plan you can think about and create savings. With a low deductible plan, generally you will pay a higher premium and a lower deductible. With a High deductible plan, generally you will pay a lower premium and a higher deductible. So what is the correlation? Low deductible plans force the consumer to pay for services before they are used; you may end up not using what you pay for. High deductible plans enable you to put those dollars saved on the monthly premium payment towards the services that you actually use. So why not just pay for what you use? Many people will say never pay in advance for what you may not use and then point to the high deductible plan. But the decision in yours.

What else can you do to save money?
Ask your broker up front questions like “how can I save money”? Insurance brokers are there to be information dispensers, but they will not dispense what they are not asked. Many government programs are designed to gain employer involvement. So get your employer involved. One way you can stand out in a company is by saving your employer thousands of dollars because you suggested a program like a health reimbursement arrangement (discussed further in IRS publication 969).

Another thought... The health care industry has named health care plans after the deductible amounts right? (i.e. high deductible plan and low deductible plan). My reason for this is that most people are drawn to the plan that sounds the cheapest up front without fully considering all the costs-- people are drawn to the low deductible plan because it sounds cheap. But the catch is it's not cheap and in fact this is how health care insurance companies make more money than they should.

So lets rename the plans. Lets now call a low deductible plan a high premium payment plan and a high deductible plan a low premium payment plan. I think you can do this because there really is an inverse relationship with the deductible and the premium payment. (i.e. the higher the deductible the lower the premium).



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