Category Archives: Politics

Resisting Obamacare and Confronting the Dangerous “Other” Complicity – There IS a Way Out

With the deadline for states to convey their intentions on Obamacare exchanges to HHS only days away at this writing, much attention is centered on what they will do.  It is possible that half the states will decline to participate leaving the Feds alone in a task some think may not go well.  The point that the States have the option of participation cannot be lost.  The crafters of Obamacare were in some ways cognizant of the limits of Federal power and, thereby, sometimes reliant on willful submission and complicity to achieve their goals.  In the past few weeks I’ve discovered that exchanges were not the only situation where Obamacare recognizes its potential limitations vis-a-vis the states, opening the door to the potential for significant new legal non compliance options.

On November 29 I received an email from Donna Rovito, fellow Pennsylvanian, National leader in  healthcare freedom issues, and founder of the Lehigh Valley Coalition on Healthcare Reform.  It included a link to a Citizens’ Council for Health Freedom (CCHF) page featuring commentary from its president Twila Brase.  Her topic was a section of Obamacare that drew notice of at least one attorney at the Goldwater Institute.  It’s found in Subtitle G – Miscellaneous Provisions, specifically Section 1555 which reads:

“No individual, company, business, nonprofit entity, or health insurance issuer offering group or individual health insurance coverage shall be required to participate in any Federal health insurance program created under this Act (or any amendments made by this Act), or in any Federal health insurance program expanded by this Act (or any such amendment), and there shall be no penalty or fine imposed upon any such issuer for choosing not to participate in such programs.”

The question raised was whether Section 1555 leaves individuals the right to opt out of Obamacare or is restricted to issuers of insurance, accepted as understood.  I hope to show why this distinction is of minor concern.

Only a few more pieces of this puzzle need to be considered to understand its importance, mostly falling under the heading of what I’ve been calling the “other” complicity.

The other complicity is the unchallenged acceptance of Obamacare coverage mandates and regulations into policies as they even now exist before the exchanges are set to begin.  This would include everything that defines how health insurance must look, from the phony deceptive “no cost sharing” first dollar mandates (including “free” contraception) to the age 26 requirement and bans on exclusion of preexisting conditions, from minimum loss ratio requirements to actuarial value restrictions and more.  All this defining by the feds is in a direction 180 degrees from anything that makes sense and will add hugely to health insurance premiums within the exchanges.  Michael Cannon at the blog Cato @ Liberty just presented some stunning information on the magnitude of these premium increases.  We are looking at 30-40% and in some cases more.

While the Federal Government may be able to define the parameters of insurance within Obamacare there still exists a world outside, separate and apart, or at least there can and should.  That world is the authority and responsibility of the states to regulate insurance sold within its borders granted to it by the McCarran-Ferguson Act of 1945.  Under McCarran-Ferguson insurance was exempted from Federal anti-trust law and its regulation was left to the states, and remains in effect to this day.  There is nothing about Obamacare that strips states of this right and insurance companies cannot claim that they are bound to participate in the dictates of Obamacare, as Subtitle G-Section 1555 makes clear they are not.  Insurance companies were given the choice to partcipate, but states, through their insurance departments, and the authority of McCarran-Ferguson, reserve the right to require the continuance of non Obamacare compliant health insurance outside the exchanges, no matter what form the exchanges take.  So long as states do NOT go for the purchase of health insurance across state lines, they have the defense, even in the face of the modern skewed interpretation of the Commerce Clause, to keep it this way.  States must see Obamacare not as an imposition upon them but as a federal program layered over them for those who want it.  They hold the keys to the maintainance of the availability of sensible health insurance policies, outside the federal program, firmly in their hands.

States, by using the authority they have, can even require a movement to true high deductible insurance where everything covered conforms to the deductible, among its choices outside Obamacare, thus setting the stage for many to pay the tax for non participation in the exchange, purchase sensible real insurance outside it, stash money into a HSA, and still have money left over in the end.

My take is that Obamacare is so reliant on willful complicity as to be a paper tiger that only gets teeth that are handed to it.  All of the above along with the adoption of Healthcare Freedom measures as 17 states so far have, will determine how far states will permit the federal power grab that is Obamacare to go.  A tradition of states exerting those powers they have needs to be rekindled, and there is no better time than now, on this issue, to do it.

Why Employers Should Embrace a Requirement to Offer the HDHP/HSA Choice

Get around business people and mention requirements coming from government and chances are good that there will be a usually correct knee-jerk reaction against almost anything being proposed.  I’ve run into this with a suggestion to require every employer, public and private, who offers health insurance as a benefit, to include the choice of high deductible plans with health savings accounts.  Far too many employees still do not have this choice available to them even as evidence exists that such an approach is clearly win-win for the employer and their employees.  Most of this can be attributed to resistance caused by misunderstanding that has become very entrenched over time.  In this regard, even though employers are free to offer high deductible plans without any government requirement to do so, the requirement itself can be a benefit to many in providing cover for them in the face of employee, or especially union, resistance.

The proposal to require all employers to offer high deductible health insurance has the solid backing of a 30000+ person case study in the state of Indiana.  Starting in 2005, by way of the leadership of Governor Mitch Daniels, Indiana offered all its state employees the high deductible choice with health savings accounts, while maintaining the currently offered PPO plans.  Bucking initial resistance, the state human resources department backed the new choices with education.  From only 4% participation in the first year, by 2010 over 70% had moved to the high deductible choice, and today it is over 90%.  At the 70% level, when Gov Daniels wrote his March 1, 2010 op-ed in the Wall Street Journal he estimated that taxpayers in Indiana would save at least $20 million because of their high enrollment in high deductible plans.  Importantly this is after  the state shares the savings by partially funding health savings accounts, in the case of family plans, $2750 annually.  These savings are primarily due to employees spending their own money ahead of that of others, slashing overuse, unwise use, and incentivizing finding the most value.  Governor Daniels never doubted the free market or the critical importance of direct payment in the restoration of necessary market forces that have been disrupted by unnecessary third-party payment, and the overwhelming results should have precipitated a flood of followers both in the public and private sectors.  As noted in the op-ed though, “Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.”  Adoption has been slow although has been accelerating in recent years.  Still after 9 years of eligibility HDHP with HSA represent only about 10% of the total health insurance market.  Total consumer driven plans, which include HRA accounts are close to 20%, but only HSAs represent the property of the employee, an important consideration in partially solving the portability problem.  Again, a requirement to offer HDHP as a choice provides cover against initial misunderstanding of how or why high deductible is most often in the best interest of both employer and employee.  All existing plan choices can remain, additionally easing concerns of those who may have doubts or face unusual circumstances.

What will motivate the business community to back any requirement to do anything is substantial evidence that the regulation or requirement is indeed in their interest.  A quick back of the envelope calculation, making very realistic assumptions is rather eye-opening.  Let’s start with the realized savings on 30000 state employees in Indiana, make the assumption that similar savings would occur elsewhere, then extrapolate to a larger private sector population.  My state, Pennsylvania, has about 5 million private sector employees.  Since the regulation would only apply to employers who already choose to offer health insurance, this number needs to be reduced by that amount.  Latest figures show health insurance is offered by 61% of employers.  Since this is not employees and to err on the side of caution, I’ll use 50% as the factor not offered health insurance and reduce the potential pool by half to 2.5 million.  This then needs to be further reduced for the approximate 10% of the population who already have HDHP and HSAs, reducing the pool further to 2.25 million.  Since we are looking for similar savings at the 70% level as reported by Indiana with 30000 employees, dividing 2.25 million by 30000 gives us a projection factor of 75, which when multiplied by the assumed savings of $20m yields an expected annual injection into the private sector economy of $1.5 billion for Pennsylvania after attaining the 70% participation level, achieved by Indiana in five years.  Now, does that make a regulation sound better?  Keep in mind also conservative assumptions present the chance that even greater results can be produced.  This is one government requirement that business should request rather than resist.

While it is easy to claim that savings could be even higher without Indiana’s pre-funding of Health Savings Accounts, this sharing of savings directly to a HSA rather than, or in addition to, including in wages is important in two regards.  First, the incentive to take the high deductible choice is strengthened.  Second, studies have shown poor HSA funding habits by a significant percent of employees when left on their own.  Matching arrangements like those with a 401k could represent an additional way to incentivize employees to do what is right for their future and the future of market driven cost controled healthcare reform in general.

Prescription for Successful State Healthcare/Insurance Reform–Simple and Focused

Let’s begin with the question, What would be the single most effective thing any state could do legislatively to produce the most positive outcome in healthcare/insurance reform?  Is there such a thing?  Belief in the Pareto Principle or the 80-20 rule of problem solving would suggest such effective prioritization of effort should likely exist and in what follows I’ll make the case that not only does a simple focused solution exist but fits state based healthcare/insurance reform especially well.

While running for President, Herman Cain, as a career problem solver, would often say that the number one thing about problem solving is to make sure you’re working on the right problem, then caution that this is not as easy as it sounds.  Einstein is attributed to have said, “Not everything that counts can be counted, and not everything that can be counted counts.”  All three citations  say essentially the same thing, that knowing where to focus effort can and should result in greater efficiency and less wasted time in solving almost any problem.

Fortunately on the healthcare/insurance issue, in consideration of all the separately identified component problems, there exist a few select studies and one highly successful, sufficiently large real world example that, taken together, reveal proper focus that fits the significant 20 in the Pareto Principle, the right problem Herman Cain speaks of, or what really counts according to Einstein, leading to clear and simple solutions.

Any consideration of the healthcare/insurance issue that does not start with, or misses entirely, the 1994 CATO study by Stan Liebowitz, titled simply and directly “Why Healthcare Costs Too Much”, risks missing the stark reality that unnecessary third-party payment is the central culprit both in terms of cost and the disruption of a normally functioning marketplace that requires the direct interaction of provider and consumer, according to what one is willing to accept and the other is willing and able to pay, in order to efficiently set prices and allocate resources.  It is the illusion of free or almost free caused by low or non-existent deductibles and low copays that incentivizes massive overuse that Liebowitz estimated to be, including administrative costs, $333 billion in 1994, easily making unnecessary third-party payment the number one source of excess cost in the system.  The lesson of the Liebowitz study is simple.  The solution lies in focusing on methods that increase direct payment and reduce third-party payment.  This is the central issue and required for reconnection to market forces long abandoned prior to Obamacare or Obama.  The Executive Summary states, “The use of medical savings accounts needs to be promoted.  High deductible health insurance should be encouraged.”

Following Liebowitz in 2001 Milton Friedman wrote “How to Cure Healthcare“, which featured a cartoon depicting unnecessary third-party payment via employer-provided health insurance as dumping money down a rat hole.  The conclusion was the same, again pointing to the basic need to increase direct payment relative to third-party payment, which today represents about 5 of every 6 dollars spent on healthcare services.

The two cited studies alone clearly identify the single source of greatest waste, the acceptance and growth of unnecessary third-party payment.  Neither argues against the proper use of insurance to protect assets against expenses that would be unaffordable otherwise.  In addition, achieving more direct payment coincidentally lessens the effects of other identifiable problems, namely largely negating the considerable costs of coverage mandates so long as they conform to a high deductible, curbing the use of defensive medicine by raising questions of necessity, bringing consumer demand for pricing transparency, lessening the opportunities for fraud, and restoring the doctor-patient relationship as nothing else can.  It also provides partial portability as the health savings account component always remains the property of the insured employee.  These positive effects on other component problems not addressed lends confidence that the focus on unnecessary third-party payment is the 20 of Pareto, the root of the overall problem.

Following Liebowitz and Friedman, in 2003 Congress passed the act that established Health Savings Accounts with the requirement that they be associated with High Deductible Health Plans (HDHP).  Starting with 2004 such plans became available, alone setting the stage for significant reform with their adoption, but there was a problem.  Widespread adoption did not happen.  Years of embracing the false comfort of third-party payment along with limited understanding of personal finance and economics and the disconnect from cost caused by employer provision had conditioned the majority of the public to not see the advantages of high deductible plans.  Employers were slow to offer as employees and unions were quick to resist.  By the start of 2012 after 9 years of availability less than 10% of Americans were covered with high deductible plans that included health savings accounts, although as the reality of Obamacare approached and costs continued to soar these plans have been increasing in recent years.

Fortunately there is one glowing exception to the slow adoption of the high deductible approach that should be the model for the entire nation, both in its simplicity and results.   When Mitch Daniels took office as Governor of Indiana following his 2004 election, such was his understanding of and faith in the free market that he had no concerns that the path he decided to take would work.  All 30,000+ state employees were offered high deductible health insurance plans alongside the existing PPO plans most employees are routinely provided.  Then the state made the commitment to back the new choices with education.  Human resource personnel met with employee groups to explain how the high deductible approach would be to the benefit of most who chose it.

The results speak for themselves.  In the March 1, 2010 Wall Street Journal, Governor Daniels laid it out.  By that time state employee participation in high deductible had reached over 70%, up from 4% only five years earlier and the state estimated taxpayers would save in excess of $20 million.  More importantly, this projected annual savings is after the state funds health savings accounts  $2750 each year for family plans and proportionally less for individual plans.  As compared to the PPO plans, spending in the high deductible plans was only  65 cents on the dollar.  Emergency room use was down 67%, showing that even the insured will use an emergency room for non-emergency when the out-of-pocket cost is low enough and it is a situation of convenience.  Importantly, satisfaction was high, with only 3% going back to the PPO plans after choosing high deductible.  Since 2010 the situation has improved even more, with the participation rate in the high deductible plans now in excess of 90%, all by free choice of the employee.

There is no reason to believe that the Indiana results cannot be replicated everywhere.  This could be accomplished by legislation in any state to simply require all employers, public and private, who choose to offer health insurance to their employees, to include the choice of high deductible plans with health savings accounts.  No current offerings would have to change.  In Indiana they remained as they were.  It was individuals coming to the realization that the high deductible choice is in their best interest that led to the changes and the savings and the satisfaction.

Business normally resists regulation but should consider embracing this requirement.  In a world where third-party payment has been so widely accepted and its evils to the marketplace so little understood by so many, an external requirement would give managements cover to put before their employees that which may likely be, and often is, resisted at the outset due to lack of understanding.  The key is choice rather than coercion, and results are clearly win-win, with the potential to slash costs for employers and empower employees with spending their own money ahead of that of others who then gain control in the transaction.

Indiana accomplished so much by doing so little.  All they did was a justifiable function of government to assist the proper working of the free market by insuring each consumer information and choice, both necessary to market efficiency.  If all this seems too simple, think Pareto, Herman Cain, and Einstein.  Think also Ronald Reagan who said in a 1964 stump speech, “There are no easy answers, but there are simple answers.”

Simple Switch to Defined Contribution Health Insurance Can Cure Many Ills

This is a story of what could have been and what still could be.  A simple switch to defined contribution health insurance would likely spark a cascade of events that can restore market forces, empower patients with ownership, make policies portable, restore the doctor-patient relationship, end the largest source of waste, negate many costly coverage mandates, and even curb defensive medicine.  Yes, all that and even more.  My only caution is to not dismiss it as trite.  As Ronald Reagan said, “There are simple solutions, just not easy ones.”

Mentioned mostly in relation to pensions and 401k arrangements, defined contribution has useful applications to health insurance as well.  This should have been central to conservative arguments as an alternative in opposition to  Obamacare and should now be promoted for its total repeal and replacement.

Due to the tradition of employer-provided health insurance employees have become disconnected from the cost.  Few employees have any idea what their health insurance costs.  They don’t think about it except will complain if asked to contribute more from their paycheck, as if it wasn’t all their money that could be otherwise paid in higher wages in the first place.  They become satisfied with and then desire plans that cover almost every need with low deductibles and copays.  They accept a plan that is just like the plan of all other employees with no regard to their unique life or  financial situation.  In accepting third-party payment they accept third-party decisions on what will be covered, even for treatments within their ability to pay directly, where only they would be in charge.  They accept all this without ever asking if the money could be better spent otherwise or if they are getting a good deal.

They have stopped being health insurance consumers because they have ceded that responsibility to their employer and have thereby lost their connection to the transaction.  The employer continues to give them what most say they want even when squeezed by higher and higher premiums and even as what they say they want is not in the best interest of most who say they want it.  The insurance companies continue to play along with this even though they know the low deductible prepayment scheme approach benefits no one more than them and has been their license to print money for years.  This is the price of a population, including many very smart people, who know far too little of personal finance and market economics.

Implementing defined contribution forces both employers and employees to do many very healthy things resulting in many healthy outcomes.  First they must look at the health insurance expenditure as part of the total cost of employment.  This provides the reconnection to cost and consideration of alternatives.  Under defined contribution, the employee would be given a voucher to buy their own plan in an existing online exchange or from an agent of their choice.  So long as employees get to keep any unspent voucher amount for other purposes employees will use their money as wisely as possible.  In doing so many will discover the benefit and good sense of high deductible insurance where some may even save enough in the first year to fund a health savings account in an amount that fully covers the deductible!  This is not outside the realm of possibility when compared to the cost of the low or no deductible approach.

Since the health savings account offers triple tax advantage and retains any unspent funds most folks starting at a young age could build substantial balances over time and many would reach retirement with no use for medicare and the ability to enjoy the low-cost of much higher deductibles while still protecting their assets.  Whatever their plan choice, every employee would have a policy they own that fits their particular financial needs and eliminates the portability issue.  The unhealthy connection to employment would be effectively broken even as employers offer vouchers for the purchase of insurance plans.  This is a great way to transition away from the bad habit of employer purchase that has taken root over time.  Habits, after all, die hard.

For those under or part-time employed the opportunity to combine vouchers from several different employers either of one employee or members of a family could provide the opportunity to purchase insurance where one small employer alone may not be able to fully fund the cost of premiums.  Again where costs are confronted and value scrutinized, high deductible choices quickly rise to the top of the list.

Large numbers of employees incentivized to choose high deductible plans due to the reconnection to the cost of insurance would then likewise reconnect to the cost of services.  Spending their own money ahead of someone else’s restores the forces that decide how that money is spent wisely.  They want and need to know what a service costs and will shop for the right combination of cost and value as with anything else.  Their power is restored in the transaction.  The provider no longer needs to hire staff to constantly interact with third parties who dictate what and how much they will cover.  The single largest waste, overuse caused by the illusion of free or almost free largely ends.  The power of the free market is restored, prices are set, and assets are allocated in accordance with it, all due to the power of the direct connection of consumer and provider as the driving force.  Questionable cost inflating coverage mandates that conform to the deductible are effectively negated and the single greatest expense of the tort issue, defensive medicine, is kicked to the curb by questions of necessity, even if signing off on some recommendations as “declined”.   Add to this a prohibition to preset prices with network/PPO arrangements (at least with high deductible plans) and a requirement to post asking prices for all standard procedures and the stage is set for market derived prices that could be the basis for medicare allowances rather than the other way around.

Markets work.  We know that.  The proof is all around us every day.  It is why our economy functions so well and always much better than any attempt at central planning.  So where are the healthcare/insurance free market defenders?  Indeed, where are the free market understanders (George Bush word)?  And why is it taking a non-degreed non-credentialed retired postal employee with a passion for finance and economics to explain all this?

The Argument FOR an Individual Mandate – Where Heritage Gingrich and Romney Went Wrong

Before knee-jerking on out of here, this is an argument that needs to be made in the face of continued charges from the left that the individual mandate to purchase insurance or pay a fine (or a tax) was an idea that came from the right.  It did.  Much of the reasoning was and remains sound.  The conclusions, however, while understandable were wrong.  Very wrong.  Being able to explain this will avoid an increasing number of situations, where the left makes the “right’s idea” claim and the person on the right cedes the point and moves on with no idea of how to address it.  Knowing how to address the mandate origin issue not only shuts this leftist attack down, deflecting hits on Romney and Romneycare, but presents opportunities to swing back and teach market principles as well.

The justification for a mandate starts with accepting universal coverage as a fact of life that has existed since the 1986 Act that required treatment at emergency rooms without the ability (or willingness for some) to pay…..anything!  Following on that, it is hard to imagine conservatives taking the position that ultimately we wish to refuse life saving treatment and let people die as a matter of choice and public policy under any situation.   This is rather a position embraced by Obamacare as part of the atrocity of the Independent Payment Advisory Board (IPAB), that will impose rationing and refusal and delays.

Universal coverage will not go away because, in the end, the life of a fellow human is not a car or a house that over time can be replaced.  To be fair, the situation therefore demands universal participation, the rationale that every individual to the extent possible should do what they can to protect others from them, to not present themself as a burden on their fellow citizen.  It is this view that resulted in the understandable but misguided conclusion that everyone should be forced to buy health insurance because anyone without it becomes a free rider and danger to others.

The flaw comes in our approach.  Who pays is of critical importance.  The mistake of Heritage, Gingrich, Romney and others was following the path of overindulgence in third-party payment.  Nowhere else in our economy do we have a situation in which the vast majority of all transactions involve someone else’s money, even when there is no good reason for it.  Unexpected car repairs can sometimes be expensive but we find the resources within our budget to pay for them directly.  Doing so over the long run saves by not needing the services and expense of anyone else to be involved in the transaction, but more importantly constrains usage and costs by the use of market forces that can only happen by the direct interaction of consumer and provider.  A third-party payer disrupts normal market forces that efficiently set prices and allocate resources in repairing cars or sick humans.  It encourages overuse by creating the illusion of free or almost free to the user at their time of use.  A central goal in healthcare/insurance policy should be the reduction of third-party payment and increase of direct payment as much as possible.  The fact is that we all pay in the end, going through a third-party only adds to those costs, and studies have shown those additions to be considerable.

Had Heritage approached the concept of a mandate with direct payment objectives in mind they may have been on to something.   Consider a system of forced limited budgeting as an alternative to forced third-party prepayment schemes we foolishly accept as insurance.  This is a radically different approach that respects economic freedom and market forces.  Rather than a requirement to buy typical cover everything insurance think of a requirement to direct a percentage of income to a health savings account independent of insurance up to a certain limit that is then indexed to inflation.  The amount may be $30,000 to $50,000 but the vast majority of people would reach this over a surprisingly short amount of time.  Importantly, a huge portion of the money spent on healthcare would then stay with the user, never passing through the hands of any third-party who thereby gains the right to direct decisions in the transaction.  Direct payment puts the consumer in charge and restores the long ago disrupted doctor-patient relationship as nothing else can.

A limited budgeting mandate would importantly be applied to everyone and a percent of any public assistance would be directed to a health savings account as well.  Such accounts would have to be limited in their use without any exceptions.  This approach would all but eliminate the current situation where anyone would receive medical services and pay nothing.  Everyone would almost always have available at least a portion of the payment as well as the freedom and dignity of making their choice as to when and where to spend it.

Of course the need for insurance remains, but limiting that to true insurance for the unexpected and beyond the ability to pay otherwise benefits all, again, by restoring market forces.  It is not the failure of the market that has created the healthcare/insurance mess, but rather a market that can no longer properly function due to the disruption caused by excessive third-party payment and government regulation.  Proof of this can be seen by looking at those procedures not normally covered by insurance.  Lasik eye surgery, cosmetic surgery, and dental implants are all examples and what we see is what the market always does.  Quality improves as prices come down.  Free markets work and bring the only forces that will ever bend the cost curve.

Beyond limited forced budgeting, any consideration of a mandate to limit public liability by buying insurance needs to itself be limited to very large deductibles but with very high or even no limits.  Because very few individuals get involved with the highest of medical expenses this approach could be made affordable to almost all with the participation of all, especially where a budgeting mandate is applied first.  The mandate idea in healthcare/insurance has merit but creative out of the box thinking is required in its implementation, taking care to first and foremost promote a maximum of direct payment that preserves market forces.

Taking Health Savings Accounts to the Next Level

Currently available health savings accounts were packaged into the 2003 bill that provided for Part D, the prescription drug addition to Medicare. They were first available in January 2004 and have remained available with many of the same limitations since.  The potential of their inclusion was so great as to cause some such as Rick Santorum to support a bill they otherwise probably would have not.  Had more in a position to do so like Governor Daniels in Indiana found a way to promote and make popular health savings accounts across a wide section of the population, this alone may have shown light on the folly of Obamacare and stood in the way of it becoming the law of the land.

Health savings accounts (HSA) combined with high deductible insurance plans (HDHP) are much more than just a good idea.  They form the only approach that will restore a functioning free market currently poisoned by the presence of unnecessary third-party payment that incentivizes massive overuse, incurs substantial administrative costs, and disrupts the doctor-patient relationship as nothing else.  What is lost on so many is that ceding the responsibility for payment to another willingly hands over to the other party the right to determine how that money is spent.  It is, after all, now their money and the party who has intrusted them with payment responsibility has lost much of their standing in the transaction.  Even though there remains the health insurance contract, the insurance company will look for any legitimate excuse to not spend more of their money than they must in looking out for their interest.  This is one reason why direct payment to the extent possible is so empowering (and third-party payment so enslaving), why efforts to limit it are so short-sighted, and efforts to maximize it are the proper approach.  HSAs along with HDHPs are key in restoring market forces and the personal power that comes with it in any healthcare transaction.

Since their inception health savings accounts have been tied to a required high deductible health plan.  Annual contribution limits at first were based on the amount of the deductible but have since been set free of that and indexed to inflation.  For 2012 the limits are $3100 for an individual and $6250 for a family plan.  Also a catch up provision has been added for those over 55.  There are other rules all explained in IRS bulletin 2008-25.  Health savings accounts offer rare triple tax advantage when used as intended.  Money goes in pre-tax, accrues earnings untaxed, and exits untaxed when used for intended medical purposes.

So how should health savings accounts be improved?  Where is the next level?  Four things could substantially improve HSAs.  First, there is no good reason to require the connection to any insurance.  While high deductible health plans should retain a HSA connection, HSAs should also be available to anyone who wants to establish one.  Every dollar in a HSA protects others from ever having to pick up the tab on their behalf in addition to providing the account holder the power that comes with spending their own money and the dignity of making their own choices.

Second, contribution limits should be raised to match those of 401k retirement accounts.  Keep in mind that assets in HSAs not only benefit the owners of those assets but protect others in an area where ultimately we do not want to refuse life saving treatment to anyone.

Third, anyone on welfare or unemployment should automatically have a portion of such transfers directed to a HSA.  This form of forced budgeting benefits everyone and again is justified due to the reality of universal coverage that has existed since the decision to not turn anyone away from emergency rooms based on ability to pay.  Having almost no one pay zero would greatly lessen the strains on the system.

Fourth, and possibly the most significant, gifting should be permitted from one HSA to another in cases where a medical condition would deplete the account of the recipient.  Such voluntary transfers would bolster the character of us as a people and a nation and should be encouraged.  Communities could put out the call to come to the aid of one of their own much as with bake sales or other fund-raisers.  Groups could commit to coming to the aid of each other thereby lessening the need for insurance and allowing for higher deductibles.

There is no government fix for the healthcare/insurance mess aside from policies that restore market forces surrendered over time by a short-sighted  move to have someone else pay the bill.  Health saving accounts are the best example we have of how government can help, and the time to take them to the next level is now.

The Argument Against Selling Health Insurance Across State Lines

A popular idea tossed around in the search for effective healthcare/insurance reform is the notion of selling insurance across state lines.   Along with malpractice reform, this often tops the list of solutions, especially from Republicans, even as the main culprit, unnecessary third-party payment, is not even mentioned.  At a recent debate for an open seat in the US House in the district where I live all five GOP candidates spoke in favor of this concept.  Yet is it a good idea or possibly the source of more trouble, and are there other means to attack the existing problem?

On the surface it would seem like a fantastic idea and with good reason.  The argument goes that more competition would bring down prices.  After all, the opportunity to purchase a health plan from a company not doing business in a particular state would now be available.  More importantly, because insurance is separately regulated state by state, it would now be possible to circumvent excessive mandates and regulations that much more dramatically affect price than the number of company choices available.  Both the number of coverage mandates and the nature of them varies greatly from one state to another.  In a few states simply requirements for community rating and guaranteed issue have made the individual market so expensive as to all but destroy it.  In this sense, so long as there are at least three or four company choices anyway, the ability to purchase insurance regulated and approved in another state would change the nature of the competition from one of price to that of determining the least amount of expensive regulation and mandates the buyer felt was needed for their protection.  So far, so good.  What is not to like?

The problem and basis for the argument against what would seem like such a good idea on its surface is the Commerce Clause of the US Constitution, or rather more correctly, the modern perverted interpretation of it.  What began as a provision to facilitate exchange among the states has over time become an excuse for the Federal Government to impose all manner of meddling and micro-management to anything bought or sold across state lines.  The fact that insurance is not bought and sold across state lines should serve as a defense against such federal meddling and against the imposition of Obamacare itself.  In this regard, providing for such interstate commerce would open the door to the legitimate intrusion of the federal government and surrender of the defense that exists without it.

The origin of state control of insurance was the McCarran-Furgeson Act of 1945 which exempted insurance from federal anti-trust laws and left regulation to the states.  Right up to today this has kept federal regulators mostly out of the picture, with the exception being health insurance.  Even there federal intrusions have been few and limited until the passage of Obamacare.  The fact that they went unchallenged by the states was absolutely a mistake by the states, but the extent and nature of the intrusions was of limited scope and never sparked challenges that should have occurred.  Now with the passage of Obamacare the federal government has become the bull in the china shop, seeing no limit to its authority, even though a reasonable defense against it still remains so long as we do not move to purchase across state lines.

Two possible alternative solutions come to mind.  The first makes the most sense and leaves little doubt as to its effectiveness.  Those states that have ruined their health insurance market by excessive and abusive mandates and regulation need to fix their problem internally.  Rolling back that which has caused the problem will eliminate it and do for its citizens exactly what providing the opportunity for circumvention would do.  The second solution is more problematic and questionable.  That would be to possibly keep the federal government out by the formation of compacts among states that want to provide for the purchase of each other’s health insurance plans.  Since compacts must be approved by congress and the internal solution would work as well, this approach would not be suggested.

The bottom line here is that what seems like a great idea to solve a known problem may simply cause even more trouble, give away a reasonable defense, and end up being in the category of “be careful what you wish for”.