Health insurance: Who pays and how

By Rudi Keller

Business Today

HRA. HSA. PPO. HMO. Navigating through the heath care universe can be an alphabet soup.

Capitated plans. Indemnity plans. Association plans. Consolidated plans. Self-insured plans. The myriad of options available to employers, both large and small, can require the services of an expert just to figure out the language.

Meanwhile, costs continue to escalate, employers are squeezed between providing health care and providing raises and the issue won't go away. Every candidate for president has a plan, usually some combination of tax credits, government subsidies to lower and middle income people and mandates for everyone to purchase health care.

According to the Kaiser Family Foundation, regular surveys of Americans asking them to compare their health care worries against other possible problems has found "that more Americans are worried about their health care costs than about losing their job, paying their rent or mortgage, losing money in the stock market, or being the victim of a terrorist attack."

In December 2007, the Kaiser survey found that 46 percent were very worried about their income not keeping up with rising prices.

"Just behind worry about incomes keeping up with rising prices, more than four in ten say they are very worried about having to pay more for their health care or insurance," the study summary said. "One-third of Americans also express worry about the quality of their health care services getting worse, and three in 10 about being able to afford their prescription drugs."

Almost three in 10 also worry about losing their coverage, according to the Kaiser survey.

Other data compiled by Kaiser shows that health care costs are rising at double the rate of inflation. But there's good news in that figure. Just a couple of years ago, the rate of increase was triple that of the bite rising prices were taking in other areas of the economy.

The least expensive group plans Business Today was able to find that provide a comprehensive set of benefits are now costing $350 per month for a single adult. Very similar plans can cost $500 a month or more. The reason is that each group's rate is based on their history of use, the demands for higher reimbursements from hospitals and other providers and the need for insurance companies to make a profit.

That calculates out to about $2 to $3 per hour for a 40-hour week.

Extending the coverage to families can add $600 to $800 a month to the plan's cost, and in almost all instances that cost is directly on the working family. Very few employers in this area pay to include families as part of the benefits package.

And for the employees working a standard 40 hour week, the cost of providing health care to their family takes about $4 an hour out of their paycheck.

That brings the total cost of health care to between $6 and $7 an hour, or just about the minimum wage.

LOCAL EFFECT

Conversations with employers recently show the advantages, and obstacles, to providing health care.

At Schaefer's Electrical Enclosures in Advance, Mark Diamond and his partners took over a company about eight years ago that had 40 employees, was using older technology, provided a paycheck to workers and little else in the way of benefits.

Since that time, the company has modernized working methods, expanded the payroll to more than 100 and added health care benefits.

That bucks the national trend, because employers are much more likely to drop health care as a benefit in recent years than take on the additional burden.

The company also added a 401(k)) retirement plan and an increase in wage rates, Diamond said.

Diamond's company builds large enclosures for electrical systems that are shipped around the world. He needs employees who will stay put, learn new skills and take on more responsibility as the company grows.

"We pay a competitive wage that we believe will be competitive in Cape," Diamond said. "It is a wage that will get reliable people."

Providing health care was good for the bottom line, he said.

But for other employers, with high turnover and a slim bottom line, a continuing rush of government mandates are just seen as burdens. Health insurance is a dream for Doc Cain at Port Cape Girardeau.

Cain's business has been hit by minimum wage increases that compress his pay scale for long-term employees. He's said repeatedly that he would like to provide health care, but that every time he has explored doing so, the costs have been prohibitive.

"I'd have to add $5 to the cost of a rib dinner," he said.

Cain has a mix of long-term employees and those who work for him while in college. He wants to keep his employees happy but can't see a way to provide health insurance.

EDITORIAL THOUGHTS

There are an estimated 47 million people in the United States without health insurance. In Missouri, the figure is estimated to be about 700,000 residents of the state doing without insurance.

Bridging that gap will be an enormous undertaking. The question boils down to who pays and how.

Every other major industrialized nation already builds the cost of providing health care coverage into their economy. Most do it through some sort of social insurance contract.

In this space before, I have advocated a similar contract among Americans. I have recently become convinced that any real solution will require plans built around Health Savings Accounts, the HSAs from my alphabet soup above.

An HSA allows workers and their employers to put aside up to $2,900 a year for individuals and $5,800 a year for families in an interest-bearing account that employees keep for life. The complement to the savings account is a catastrophic coverage plan for when the costs exceed a certain level.

Right now, the federal requirement for such plans is that they have a deductible of at least $1,100 for an individual and a maximum annual outlay of $5,600 for individuals and $11,200 for families.

Over time, employees would build large nest eggs that would cushion the impact of a cancer or heart disease problem. When healthy, they could pay for small expenses, like eyeglasses or dental work, from the savings account.

And when a crisis hits, the savings would go toward the huge bills that could send them into bankruptcy.

I have also become convinced that the plans should be mandatory -- like Social Security, a required contribution from employers and employees based on a percentage of payroll. Portability of the plans is key, so that from the first day on any job until retirement, the account builds and it follows the worker.

But I oppose depositing the money with the government. That was a good idea when Social Security was enacted in the 1930s. The means of tracking contributions was so cumbersome, only a large bureaucracy could handle it then.

Today, with computers, mutual funds and 401(k)) plans, the structure exists to keep track of the plans and allow employees the ability to make their own decisions about investments.

The key, however, is that everyone be covered. It would take the pressure off rising insurance costs, eliminate the alphabet soup and relieve the worries of many that they are just one major illness away from bankruptcy.

Rudi Keller is business editor at the Southeast Missourian.