Higher deductibles, savings accounts gaining favor
Puget Sound Business Journal (Seattle) - by Peter Neurath Staff Writer
New high-deductible health insurance policies are coming to market - as employers struggle with ever-higher premiums for employee health coverage, and as laid-off workers weigh whether to shoulder those costs.
Cash-strapped employers and unemployed workers alike may take a harder look at whether to switch to less expensive coverage, in the form of high-deductible, catastrophic health insurance
They may decide to follow the advice of Renton physician Vern Cherewatenko: "Insure for the big stuff, pay cash for the small stuff, just like you do with your car."
In like vein, critics of health insurance that covers routine health services argue that high-deductible policies reflect the true nature of insurance - protection against large financial loss.
"The primary purpose of insurance is to guard businesses and individuals against devastating or catastrophic financial loss," said Issaquah resident Dr. Steve Barchet, former deputy director of Naval Medicine and a proponent of Medical Savings Accounts. "Higher deductible health insurance makes absolute sense."
Those who agree will find that the local menu of high-deductible policies features more choices.
In January, Regence BlueShield will begin marketing a small-group plan with a $1,000 deductible.
"Employers are looking for options," said Regence vice president Martin Andrews, now that the economy has fallen into recession.
Up to now, the highest deductible was $500, and there wasn't much call for that, he said. Employers have stuck with richer-benefits health coverage to retain and attract employees.
The monthly premium for Regence's small-group (1 to 50 employees) $1,000 deductible plan will be $157 per employee.
For individuals, Regence has offered policies with deductibles of $500, $1,000 and $1,500 since returning to the individual market last October. Andrews said about half of the insurer's new policy-holders have chosen the $1,500 option. For a 50-year-old nonsmoking adult, the monthly premium is $89.
Another insurer going deeper into the high-deductible market is KPS Health Plans, in Bremerton.
As soon as it gains permission from the state insurance commissioner, KPS will market to trade and professional associations high-deductible plans that go with IRS-approved Medical Savings Accounts, or MSAs.
Federal law requires people with MSAs to have health insurance with deductibles ranging from $1,600 to $2,400 for individuals, and $3,200 to $4,800 for families. Employers may contribute pretax dollars to employee MSAs, which employees may use for routine medical expenses.
Acordia insurance broker Kallijah Praska said KMS is catering to an unmet need in the market for health insurance complying with MSA regulations.
Regence and Aetna U.S. Healthcare, meanwhile, have begun selling high-deductible insurance that can accompany so-called Personal Health Accounts, in accord with Section 105 of the IRS code.
Premera Blue Cross has been offering small-group coverage with deductibles up to $1,500 for some time. But so far, a Premera spokesman said, there's been no demand for $1,500 deductibles and buyers for $1,000 deductibles are rare.
However, he added, "we expect that high-deductible plans will be more common in the future."
Indeed they may, as employers face hellish premium increases.
For the last few years, increases were less than 10 percent; but now they're trending at around 15 percent, and some employers are seeing even higher renewal rates, said Towers Perrin principal Michael Nikunen.
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