CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter

CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter

CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter CoPPs,USA Newsletter

In 1996, there were about 1,500 health care bills initiated in Congress and State Houses nationwide. Most of the bills were designed to ban unethical business practices by managed care organizations. Examples of immoral practices include "drive-through deliveries" to force new mothers and babies out of the hospital within 24 hours, the "gag clause" which prevents doctors from advising their patients of proper medical care and prevents them from disclosing their financial interest in their patient’s managed care organization, and a "bonus for gatekeepers" to discourage them from giving necessary care.

Under the pressure of the election last November, Congress rushed to draft H.R.3103, S1028, S1698 in an attempt to address the portability and accessibility of an individual’s health insurance policy subscribed to under employment. As a result of partisan politics and the influence of the special interest groups, Congress finally settled its disputes with the Health Insurance Portability and Accountability Act of 1996, on August 2, 1996, when the Senate passed the final version. The Act was signed into law on August 21, 1996 by President Clinton.

The Act is imperfect and controversial, and its impact on cost containment, quality care and freedom of choice remains to be seen. Nevertheless, the provision of Medical Savings Accounts (MSAs), one of a few sensible features in the original House bill, H.R.3103, which survived with disfigurement after severe attacks from its foes.

Managed care organizations, the most powerful MSAs foes, realized that MSAs would deny them power to dictate to health care. After failing to kill the MSAs provision, they now offer the Managed Care MSA plan, a combination of both high deductible and controlled access to health care, to rake in more profits. Americans Beware: As freedom cannot exist in captivity, so MSAs cannot exist in Managed Care!

Thanks to the MSAs supporters in Congress, the Act now allows those Americans who have lapsed health insurance coverage for longer than six months, to establish MSAs with pretax dollars and subscribe to a catastrophic insurance policy with a deductible equal to the amount of their MSAs. There is no limit on the number of accounts for the uninsured.

The Act also allows self-employed and small employers with 2 to 50 employees to establish MSAs with pretax dollars and subscribe to a catastrophic insurance policy. There is a cap of 750,000 accounts, on a first-come, first-serve basis during the period between January 1, 1997 and December 31, 2000 available for them. Unless the Congress enacts another provision, there will be no new accounts available either after the cutoff date or when the number of accounts has reached the cap.

There are individual and family Medical Savings Accounts. The amount of the annual deposit for an individual account is not less than $1,500 and not more than $2,250. 65% of the deposit is pretax dollars. However, 100% of the deposit in the case of self-employed uses pretax dollars. The individual is required to subscribe to a high-deductible catastrophic insurance with an annual deductible of no more than $2,500 and an annual out-of-pocket expense of no more than $500.

The amount of the annual deposit for a family account is not less than $3,000 and not more than $4,500. 75% of the deposit is pretax dollars. The family is required to subscribe to a high-deductible catastrophic insurance with an annual deductible of no more than $4,500 and an annual out-of-pocket expense of no more than $1,000. The interest yielded on all accounts is tax-deferred. The unused fund of an account at year’s end can be carried over to the next year. Using the account for expenses other than medical care is subject to tax liability and penalty.

Incentive, the most important factor other than conscience, motivates and influences human behavior. In some cases, people hold themselves to a high moral standard only because of an incentive ---- going to heaven at the end of his life. And, vice versa, people misbehave because of a disincentive.

The "free lunch" mentality created by faulty tax laws and regulations has driven Americans into abusing health care resources and wasting health care dollars. Employees think that their health insurance policy is a free benefit given to them by their employer. Insurance policyholders feel that it is his insurance company paying their claims. The recipient of Medicaid, Medicare, or other governmental program feels that he, too, is entitled to free health care at his disposal. They all think that they are spending someone else’s money! Therefore, no one cares about the cost of the care they receive. No one even questions if the charge is justified for the care they seek. There is no incentive for individuals to conserve resources and bargain for low cost for the care.

For the past three decades, health care professionals and facilities have contracted with insurance carriers to provide their services to patients. They have charged their services to and have been directly reimbursed by insurance carriers. The more patients they serve the more money they receive. They can serve more patients if they would follow the insurance carriers’ demand. There is no incentives for the health care professionals and facilities to provide proper or cost-effective care to the patients.

In the meantime, insurance carriers have dealt with employers for more enrollees and larger premiums. To make a larger profit, they always demand an increase in premiums from employers, reduction in coverage for employees, and scale-backs in reimbursement to both health care professionals and facilities. So long as the insurance carriers place profit above all other concerns, it is a disincentive for the insurance carriers to reimburse more than a reasonable amount to qualified health care professionals and facilities which hope to provide the best care to their enrollees.

When the cost becomes the only matter of concern, patients and health care professionals fall victim to another scam---managed care, staged by the third party including bureaucrats and politicians, employers, and insurers. Managed care can never correct the skewed health care system, because it is not designed to properly return the necessary incentives to each player in the system. Instead, to achieve cost control and profitability, managed care exploits its authoritative power (financial control) to ration the standardized health care (one size fits all!) to its enrollees, based on its financial concern, not patient’s need.

Over-insured is the strategy for insurance companies to charge individuals more in premium and make more in profit. Generally, only 65% of the collected health insurance premium is being used to pay for claims. Americans are paying an extra half of their actual health care cost to insurance companies for profits and management expenses. If the cost really is a critical matter of concern, individuals should be empowered to eliminate the middle man or at least reduce the portion of the health care cost, which does not affect the quality of care.

To contain the cost and maintain the quality in health care, patients must have both the financial incentive and the decision-making power. When the patient pays for his health care, he demands the best care for the money. With a few exceptions, one will neither waste his money nor deny himself proper care. When the health care professional or facilities are directly paid by the patient, they must provide the best care at a reasonable charge to gain the confidence of the patient.

The ownership of an MSA plan is the right incentive to motivate individuals into judiciously utilizing medical care. Individuals realize that they are spending at least the first $1,500 of their money for the care they seek. Generally, less than 20% of the American people have spent more than $3,500 annually for health care. Under the MSA plan, a majority of the American people would save, and in turn, reduce the cost of health care.

Although the fund in a Medical Savings Account can be used to pay for non-covered medical services and items such as cosmetic surgery and eyeglasses, it is desirable to use the fund strictly as the deductible toward a catastrophic insurance policy in exchange for a lower premium, which is a non-refundable health care expense. And insurance companies will have less in profit. Opposed to Managed Care, which dictates to an individual’s health care, an individual under the MSA plan with a catastrophic insurance has more say in his health care. To prepare for a large out-of-pocket expense in case of illness, Medical Savings Accounts are the vehicle to build a safety net, into which Americans can fall back.

Autonomous Care features the patient, who plays the buyer in the free market, as the driving force in the health care system. It combines the programs of Medical Savings Accounts (or Health Savings Accounts for the Coalition to emphasize their coverage for all health care services) and Self-Insurance Pools. Both Medical Savings Accounts (MSAs or HSAs) and Self-Insurance programs have been successful in their own right. Autonomous Care offers the advantage of both. Although Autonomous Care would work well at different stages of an incremental health care reform with different goals, its final goal is to return both autonomy and responsibility in health care to all Americans regardless of the status of their employment, finances, race, gender, or age. Autonomous Care would relieve the Medicare insolvency and Medicaid crisis, which are a result of monstrous bureaucracy, flawed laws and regulation, and third-party corruption.

Enough has been said about how Medical Savings Accounts work for middle- and upper-income Americans. Contrary to what its foes claim, MSAs also work well, with proper legislative efforts, for indigent and low-income Americans.

Under Autonomous Care, MSAs (HSAs) would work well with Medicaid programs. For its Medicaid programs, the state would place 20% of the Medicaid Fund, after taking 3-5% of the fund for administrative costs, into escrow as co-payment accounts (as HSAs or MSAs) and inform each Medicaid recipient of their individual share in the accounts. The rest of the fund would be used as a general fund or contributed to a publicly-controlled, non-profit regional self-insurance pool if available.

A recipient would visit his family physician, gynecologist or pediatrician twice or three times annually at no cost to his co-payment account. Using other health care services, including hospitalization and transportation, however, would require a 20% charge of the total reimbursement to his co-payment account until the account is exhausted for that year. The pool would be totally responsible for the charges for further services during the year. At the end of each year, a percentage of the balance of the individual’s co-payment fund would be rewarded to that recipient for staying healthy during the year.

Autonomous Care would save money for the state on the Medicaid program without having to deny proper care to the recipient. Moreover, it encourages recipients to choose healthy lifestyles and to practice preventative care.

After experiencing a sharp increase in the premium for employee health insurance during the past decade, an increasing number of businesses with more than 50 employees have switched from commercial insurance programs to self-insurance programs. In spite of a few reports of shortfall on the self-insurance programs, most businesses, with proper setup on the stop-loss mechanism, have been able to contain the health coverage expense through the programs and minimize its impact on their business competitiveness. Many unions also successfully offer their membership health coverage through the self-insurance programs. However, small businesses with less than 50 employees have not been able to enjoy the same success, because of the size of the insurance pools.

Realizing that an average of 25% of the health insurance premium is insurance profits, self-insurance programs are the best tool to reduce health care costs without jeopardizing the quality of care. The statement is particularly true in cases of small employers who want to provide health coverage to their employees. Although the Multiple Employer Welfare Arrangements (MEWAs) in the Employee Retirement Income Security Act of 1974 (ERISA) allow small employers to establish self-insurance pools, the laws are confusing, with obstacles. In the power struggle between the federal and state governments, many states have pre-empted the provisions under the ERISA including the creation of self-insurance pool.

At this time, where the laws permit, a business should set up a self-insured plan administered by itself or by insurance administrators under contract, with input from employees in designing the plan. Small companies should organize self-insurance pools through their business/trade associations. A company sets aside a portion of its employee’s health care dollars in a MSA (or HSA) and provides its employee with an insurance policy with a deductible in an amount equal to the employee’s share in the MSA (or HSA.)

The goal of Autonomous Care is to expand its programs at workplaces into a combination of MSAs (HSAs) and publicly-controlled (controlled by the participating individuals), non-profit (no corporation or investors) regional insurance pools to underwrite portable and individualized health insurance policies to every citizen within the region, regardless of their social, financial, and employment status. While an increasing number of Blue Cross/ Blue Shield insurance companies, after exploiting the tax-exempt status for building their wealth during the past decades, are switching their non-profit status to for-profit, the publicly-controlled non-profit regional self-insurance pools will fill the vacuum left by the conversion of all Blue Cross/ Blue Shield insurance companies. The pools would accept beneficiaries of Medicare and Medicaid programs. The pools would function exactly as mutual insurance pools do and dictate neither to patients nor to health care professionals or hospitals.

The pools, as the consumer’s advocate, would educate patients about how to look for quality care at low cost, and publish fee or charge schedules of health professionals and facilities for their subscribers in the region. However, they would leave shopping to the patients who would have a keen interest in seeking high quality and low cost in needed care. Under public scrutiny, professional fees and hospital charges would be reasonably reduced by competition.

Through the election, the American people have renewed their mandate that the Congress must place public interest above partisan politics and special interests. If this Congress continues to ignore their mandate, there could be another upheaval in November 1998.

In 1994, the rising public outcry stopped the Clintons’ health care reform plan, "Managed Competition", which would have created a monstrous bureaucracy and dictatorial regulations to limit necessary care to patients and penalize both patients and health care professionals for health care which unfairly favored the third party. Americans do not want government or insurance companies to dictate their health care. As part of the mandate, a majority of voters wanted the 104th Congress to change the laws and return the public to the driver’s seat in the health care system. But the last Congress disappointed Americans. It continued accepting the influence of special interest groups and giving more control of health care to government and third-parties, as reflected in the Health Insurance Portability and Accountability Act of 1996.

In a short term, the Act may "guarantee" continuing availability of health coverage to employees who leave or lose their job. However, the mandate on employers may give insurance companies a legitimate excuse to inflate the premium and to create another national health coverage crisis. Similar situations have occurred in several states. The Act is flawed.

Before "guaranteeing" the American people affordable and accessible quality health care, the 105th Congress must do away with bureaucratic and unfair laws and regulations, return all health care decision-making to patients, and allow the free market system to work between patients and health care professionals. Most importantly, the Congress must pass a few simple bills as its highest priority, without political strings attached, to reassure the American people that health care is a simple personal matter and warrants no interference or micromanagement from a third party, including government and insurance companies.

1. Change tax laws to allow every American or family, regardless of the status of their employment, finances, race, gender and age, a fixed amount of pretax dollars to cover their health care expenses by subscribing to a Managed Care plan or an Autonomous Care plan with a combination of MSAs and the publicly-controlled, non-profit regional self-insurance pools. Along with the change, the laws should continue to allow employers to earmark a set amount of compensation to employees as tax-free health care expenses, which either must be credited toward the individual’s allowed tax-deductible health care expense, or become taxable income to the individual.

2. Repeal, amend and make laws, including ERISA, to make Medical Savings Accounts available to all Americans without unfair restrictions and to allow the creation of self-insurance pools at both the workplace and the regional level.

3. Redefine non-profit status and restrict the availability of the status to organizations established for charitable purposes or public advocacy. The non-profit organization must be non-incorporated with immunity to criminal and civil liabilities, but should be subject to public scrutiny for deviating from its stated purposes. The laws must prohibit a non-profit organization from converting its status to for-profit or placing its assets for sale.

4. Repeal the requirement of "certificate of need" for health care facilities, which has lost its intended purpose of reducing the cost of underutilized facilities and has become a government-sanctioned monopoly fueling the already runaway costs.

5. Repeal the criminalization of health care in the provisions included in the Health Insurance Portability and Accountability Act of 1996. Congress must recognize that receiving health care is a fundamental freedom for all Americans.

The Medical Society of Virginia, acting upon a resolution, submitted in its last October Annual Meeting by a member of both the MSV and CoPPs, U.S.A., calling for the adoption of Autonomous Care, has incorporated the Medical Savings Account Plan into its membership benefit programs, which will be offered to its members through Trigon Blue Cross/ Blue Shield in early 1997. The Virginia physicians should contact the MSV Insurance Information Center (1-800-231-2698) for more information and enrollment.

CoPPs, U.S.A. urges other professional societies and business associations at both national and state levels to follow the MSV to organize the MSA plan for their membership. The Coalition also strongly encourages organizations in the states, which have included a "Self-Insurance Pool" in the MEWAs regulations, to organize a self-insurance pool to underwrite a catastrophic policy for their members who establish MSAs.

By Harvey Randecker**

Although still in the primitive stage, a limited but increasing number of insurance carriers are announcing the offering of an MSA product. The following is an example of the structure and cost of a typical group catastrophic plan:

$1,500 deductible per person/ $3,000 per family per year. Then the plan pays either 90% or 80% (in-network or out of network) until your total "out-of pocket limit" equals $2,500 per person or $4,000 per family (including the deductible(s). Thereafter, the plan pays 100% until the end of the calendar year with a lifetime limit of $2 million per person. Expenses under the deductibles can be covered with proceeds from your tax-preferenced MSA (this particular plan would allow for a total of $2,250 (or a maximum of $187.50 per month) in MSA deposits.) The typical premium for this plan is - Male age 25 = $ 66.39*; Male age 35 = $ 84.48*; Male age 45 = $108.94*; Premiums for same aged females would be slightly higher for ages 25 and 35 and slightly lower for ages 45 and older. Children would be covered at a flat rate per family. Higher deductibles are also available which will increase maximum MSA tax-preferenced deposits to $3,375 (or $281.25 per month)

* Based on employment in the Portsmouth, Virginia area. Premiums would vary based on area of the country, age, sex and whether adult applicants smoke or not. Also available are $2,250/$4,500 individual/family deductibles as well as 100% coverage after the plan deductible without requiring "network" participation.

Most MSA-compatible products had to be newly created to comply with the law. However, a few qualifying plans pre-existed the law and are available in certain states. These plans are usually "individual major medical" plans and many do not require network usage. However, they still offer the maximum family deductible while limiting the individual exposure more than the new plans.

In addition to the obvious benefit of turning a previous expense into savings owned by the insured, the MSA offers another tax-related benefit. As part of this new law, self-employed sole proprietors and sub-chapter S corporations will be allowed to progressively deduct more of their medical insurance premium from their income taxes each year. However, in the tax year 1997, the self-employed will only be able to deduct 40%. By switching to an MSA/catastrophic combination, the tax-deductible portion will increase to between 70% and 80% in 1997.

While the new law leaves many important aspects of medical insurance and our health care system unresolved, the adoption of MSAs for a limited number of Americans is a step in the right direction. By converting to an MSA yourself and recommending them to your friends, patients, clients and associates, you will help remove the bonds of managed care while beginning to place the authority over one's health care where it belongs - with the patient. If you are interested in exploring the specifics of the MSA, please call CoPPs/USA at (757) 483-5540. THE OPPORTUNITY TO ENROLL IN AN MSA MAY END AS EARLY AS SEPTEMBER 1ST SO YOU MUST ACT NOW! We will refer your request to the proper resources. As a leader in the fight to restore patient control, that's the least we, as an organization, can do.