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Repeat after me: Health insurance is not health care

I keep forgetting that health insurance is not health care. It’s easy to mistake insurance for health care. We call our insurance a health plan, after all. If we think that insurance is health care, then we start to think that insurance companies must want us to use health care when we need it so that we can stay healthy, or cure what ails us and return to good health.

It turns out insurance companies and other Payers want us to use as little health care as possible. Or more accurately, they want to pay for as little health care as possible. And that makes sense, I suppose. Does your employer want to pay more for employee health insurance? Do your coworkers want to pay higher premiums because someone among you required expensive cancer treatment? Why does it work this way? Well, because we’ve monetized health care in the U.S., and have been using this employer-sponsored health insurance system since about World War II, and changing it is going to take time.

There’s a lot of talk about Health Savings Accounts. They’re growing in popularity with Employer Sponsored Health Insurance (ESI) and they are mentioned frequently by politicians. Health Savings Accounts (HSAs) are individually-owned, pre-tax funded bank accounts that are used in combination with High Deductible Health Plans (HDHPs). You get to keep the HSA forever, even if you change jobs. You have to have an HDHP in order to spend the money in the account. The money you put in the HSA is pre-tax, so it lowers your taxable income. Sounds good so far. The HDHP has a lower premium, so you and your employer are paying less to own a health insurance policy. And you have a minimum deductible of $1300 for an individual (employee only) plan or $2600 for a family plan. Those criteria are determined by the IRS. Wait, what? What does the IRS have to do with health care?

The IRS deals with all the tax related parts of health care spending. Health insurance is a tax-free benefit bestowed upon employees in the U.S. We get health insurance instead of higher wages, or employer sponsored health insurance is considered part of compensation. When job seeking or trying to decide on a job, you consider the benefits including health insurance, right? And the money spent on health insurance (which doesn’t feel like income because it’s paid directly to the health insurance company) is really part of your compensation but is not taxed by the IRS, so works to reduce your taxable income. And the IRS is responsible for the advanced premium tax credits (APTC) for consumers who buy their insurance on the Marketplace (Obamacare)! (Every day I learn that health care and health insurance are really complicated.) I could keep going, but tax talk is making me dizzy…

ah yes, so Payers (health insurers and employers) want us to use as little health care as necessary, in order to keep spending down. Enter HDHPs. By requiring a higher deductible, that shifts health care costs to you, the employee/worker/consumer! You pay a lower premium, which sounds good. But then you’re on the hook for the first $1300 of health care, which you pay with your HSA. Where does the money in your HSA come from? From you! You divert pre-tax wages to your HSA. Your employer might contribute as well, kind of like the employer match for your 401K. The idea behind HDHPs and HSAs is that consumers will use less health care, because when you have to pay for it, people are less likely to. Hopefully that means consumers/employees/workers/people seek out unnecessary care less often, which I suppose would be waiting out a common cold with rest and fluids and chicken soup instead of running to their physician to request unnecessary antibiotics. But what if it means avoiding needed care because of the cost?

 

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