[Congressional Record Volume 151, Number 75 (Wednesday, June 8, 2005)]
[Extensions of Remarks]
[Pages E1155-E1156]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 INSURANCE OPTION HAS WORKERS PAY MORE

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                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                        Wednesday, June 8, 2005

  Mr. KUCINICH. Mr. Speaker, I wish to bring the following article on 
associated health plans to the attention of my colleagues. We must 
continue to work to bring health care coverage to the more than 45 
million Americans who are uninsured. This article clearly shows that 
associated health plans are not the solution. I will continue to push 
for the adoption of a truly comprehensive and universal, single-payer 
health care program.

               [From the Los Angeles Times, May 23, 2005]

                 Insurance Option Has Workers Pay More

                      (By Ricardo Alonso-Zaldivar)

       For years, they were the kinds of health insurance plans 
     one found at small businesses or among the self-employed, 
     plans that had huge deductibles and required workers to pay a 
     lot of medical bills themselves--such as allergy shots, chest 
     X-rays and the cost of a new baby.
       They weren't the policies most people preferred, but they 
     were the best some people could afford, better than no 
     insurance at all.
       Now, as medical costs keep climbing, those high-deductible 
     plans are spreading to the giant corporations that have long 
     been the backbone of traditional job-related, low deductible 
     health insurance. And if the trend continues, it could 
     reshape the medical insurance landscape and sharply 
     redistribute costs, risks and responsibilities for many of 
     the 160 million Americans with private coverage.
       A number of large employers, including defense contractor 
     Northrop Grumman Corp.,

[[Page E1156]]

     the Wendy's hamburger chain, high-tech conglomerate Fujitsu 
     and office supply retailer Staples Inc., are adding what they 
     call consumer-directed health plans to their menus of 
     insurance options.
       In a recent survey, 26 percent of large employers said they 
     would offer such plans in 2006, up from 14 percent this year. 
     Another survey found that about half of large companies were 
     considering adding them.
       A few companies are pursuing a ``full replacement'' 
     strategy that leaves workers with no other choice. But even 
     where such plans are optional, they are proving popular with 
     workers who might once have scorned a plan that could leave 
     them with several thousand dollars in medical bills each 
     year. At Fujitsu, about half of 5,000 eligible U.S. employees 
     have signed up for the option.
       What suddenly makes such plans attractive to workers is 
     that many are caught in a painful bind: In recent years, pay 
     increases have been small at best. At the same time, 
     employers have been requiring workers to pay a larger and 
     larger share of their health insurance premiums. It's not 
     uncommon for higher payroll deductions for health care to 
     more than offset any pay raises.
       With the high-deductible plan, workers pay lower monthly 
     premiums and their employers commonly help them build up a 
     special savings account to cushion the impact of a larger 
     annual deductible. The accounts are controlled by the 
     employees, which has led insurers and employers to label the 
     plans ``consumer-directed.''
       Even if high-deductible plans offer immediate relief for 
     many workers, and big cost savings to employers, the allure 
     may not last. And the plans may do little or nothing to solve 
     the basic problem of soaring health costs.
       ``You're beginning to see a lot of growth in these plans, 
     not because they're going to solve America's health care 
     challenge, but because it's a way for employers to cut their 
     out-of-control benefit costs,'' said Robert Laszewski, a 
     consultant to health insurance companies. ``Any time an 
     employer can raise deductibles from $200 to $1,000, it is 
     going to reduce their costs. But will it reduce U.S. health 
     costs generally? The jury is still really out on that. ``
       The reason, he said, is that 10 percent of the people--the 
     sickest Americans--account for 70 percent of total health 
     care costs. ``Once the sick people have gone through their 
     deductible, they're back to regular health plan--the 
     incentives for them don't really change,'' Laszewski said.
       ``This is a cost shift device, and not a means to 
     fundamentally control health care costs.''
       Moreover, the willingness of workers to sign up for less 
     generous plans may change over time, as workers and their 
     families get older and more likely to encounter serious 
     medical costs.
       ``To make these plans truly work, they have to work for the 
     sickest population--it can't be a plan that only works for 
     the healthy,'' said Joe Walshe, a principal with the 
     consulting firm PricewaterhouseCoopers. ``It's very 
     difficult, but that's where the challenge is.''
       In the meantime, the short-term appeal of high-deductible 
     plans is easy to see. Employees get a bit more take-home pay. 
     Employers get some relief from higher health care costs.
       For big companies, the new plans represent an upfront 
     savings of about 10 percent and the expectation of more 
     gradual cost increases over time. Last year, large employers 
     spent an average of $5,584 per worker for coverage through a 
     high-deductible plan, compared with $6,181 for a worker in 
     the typical preferred provider network, according to a Mercer 
     Human Resource Consulting survey.
       Employers say the new plans are not designed primarily to 
     shift costs to workers. The ultimate goal, they say, is to 
     cut health care costs by changing consumers' behavior--
     teaching them to be more cost-conscious about things such as 
     generic drugs.
       ``In three to five years, every company is going to offer 
     them,'' predicted Alexander Domaszewicz, a Mercer senior 
     consultant based in Newport Beach. ``People are going to be 
     coming over from companies that have them, and they are going 
     to want them.''
       When the city of Las Vegas began offering a consumer-
     directed plan to 2,200 eligible employees last year, 60 
     percent signed up.
       ``When I was growing up in the 1950s, no one had insurance 
     for day-to-day going to the doctor,'' said Victoria Robinson, 
     the city's insurance manager. ``You covered those expenses 
     yourself and had major medical if you had to have your 
     appendix out or something like that.
       ``It's almost like going back to the future,'' she said.
       Yes and no, analysts say.
       When employers began offering health insurance, it was a 
     way to attract workers by offering them something of value 
     without directly raising their pay. Today, in purely economic 
     terms, shifting insurance costs to workers amounts to 
     reducing compensation.
       Although workers may think they will only face the high 
     deductible if serious illness strikes, those receiving 
     routine medical care can also face fairly hefty medical 
     bills.
       Many of the new plans ``confront people with a lot more 
     cost sharing than they are currently experiencing,'' said 
     Sherry Glied, a health policy professor at Columbia 
     University. ``If you are the kind of person who can't keep 
     $2,000 in an account, it could be a really bad idea for 
     you.''
       The experience of Mark Pung, a general contractor in Grand 
     Rapids, Mich., shows why such plans can be enticing.
       The father of four children, Pung says he would never dream 
     of going without health insurance. Yet he and his wife, Dana, 
     paid for the births of their two youngest children out their 
     own pockets--$3,600 for each healthy baby girl. That's 
     because their medical insurance carries a $5,000 deductible 
     for the family.
       Since their premiums are $180 a month, or $2,160 a year, 
     they could find themselves with as much as $7,160 in out-of-
     pocket health care costs in a single year.
       On the other hand, the Pungs face much lower monthly 
     premiums than they would have to pay for a traditional plan: 
     between $800 and $1,400 a month for family coverage--at least 
     $9,600 a year in premiums alone.
       Initially, Pung said, ``I felt more exposure. But it wasn't 
     enough to stop me from doing it, because I could run the 
     numbers and see how much sense it made.''
       The numbers would not be so dramatic for workers in company 
     plans. Employers help pay premiums and the deductibles are 
     lower. In 2004, the median deductible for a family in a 
     company-provided plan was $3,000. The employer contributed 
     $1,200 toward that through a special account, according to 
     Mercer, leaving the employee responsible for $1,800.
       Proponents of consumer-directed health care say another 
     advantage of the plans is that higher deductibles encourage 
     consumers to shop smarter.
       The two major firms that administer the plans for large 
     employers--Lumenos Inc. in Alexandria, Va., and Definity 
     Health Corp. in Minneapolis--also supply employees with ideas 
     for saving money, online health care information and related 
     services.
       ``The key thing is the whole concept of getting the 
     consumer engaged,'' said Doug Kronenberg, chief strategy 
     officer for Lumenos. ``We've got to see behavior change for 
     us as a country to be able to address the escalating health 
     care costs we've got.''
       When patients have no ``skin in the game,'' he said, they 
     don't think about how to save.
       In Washington, Republican policy-makers have encouraged the 
     trend toward high deductible insurance plans.
       Congress expanded tax-sheltered medical accounts and 
     renamed them health savings accounts, or HSAs, in the 2003 
     Medicare prescription drug bill. A year earlier, the Treasury 
     Department had quietly issued a ruling that enabled employers 
     to offer a plan known as a health reimbursement arrangement.
       The savings accounts are available to people who buy health 
     coverage with deductibles of at least $1,000 for individuals 
     and $2,000 for families. Employees and employers can make 
     pretax contributions to cover the deductible. The accounts 
     belong to employees, who can take them along when they switch 
     jobs. With reimbursement accounts, employees don't own the 
     health care accounts. They can roll over unused balances at 
     the end of the year, but they cannot take their accounts with 
     them if they switch jobs.
       In a typical reimbursement account, an employer would 
     create an account for an employee and family, and commit to 
     cover the first $2,000 of their health care costs. The 
     employee would then be responsible for the next $1,000.
       After that, traditional health coverage would kick in, with 
     the policy paying 90 percent of the costs and the employee 10 
     percent. Both the reimbursement and savings accounts have 
     caps on how much an individual can be required to pay in a 
     year.
       Still, financial incentives can change--especially as 
     individuals realize they need greater levels of health care.
       ``The real concern is that people will want to switch out 
     of these plans when they get sick,'' said Glied, the Columbia 
     professor. ``Then it will be very expensive for employers.''

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