What Are Health Savings Accounts?

Nick Vailas has done very well for himself in the medical marketplace. He owns a network of physical therapy clinics and one of the region's leading ambulatory surgical centers.

Vailas, along with many others, believes that health care today exists in a fantasy world, cut off from the normal constraints imposed by supply, demand and price. Vailas says if other parts of the economy worked like health care, we wouldn't tolerate it.

5:09 go to an auto dealer, ask for the most expensive car and get as many of them as you want, whether you need them or not. That's insane.

Vailas believes in the power of consumer choice and his latest venture, Patriot Healthcare with its high deductible plans, is designed to expose the health care system to the cleansing virtues of the market. Depending on the plan, high deductibles make patients responsible for the initial 1,000 to 10,000 dollars of their medical bills. Vailas speaks with the belief that giving patients a financial stake is the key to taming run away health spending.

Vailas-3 A If all of a sudden you found that 20 minutes away there was a provider that was a 1,000 less, same technology, same outcome, I would bet you dimes to donuts that you would drive that 20 minutes if it was coming out of your pocket.

That’s not a universal view.

5:00 It’s a misdiagnosis. It’s like fighting a headache by cutting your toenails”

Gordon Allen is a health care activist, and director of the New Hampshire Developmental Disabilities Council. If Vailas can't believe that we allow health care to be divorced from market forces, Allen can't believe that anyone expects that throwing 100 million individual buyers into the mix will help a hugely fragmented and wasteful health care system.

13:51 I’m a strong supporter of the market economy and the free market, but the private market does not work in health care ….”

But as the war of perspectives goes on, consumer driven plans are gaining steam for the simple reason employers need to save money. All the major insurance companies, Anthem, Harvard Pilgrim and Cigna offer consumer directed plans. Patriot Healthcare has been in business for about a year. It is dwarfed by the leading firms but enrollment has grown steadily and now the company has about 3,000 members.

A handful of them work at the last surviving lumber mill in the Souhegan Valley in Milford.

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Wilkins Lumber has been in continuous operation for 198 years. But ask co-owner Sally Wilkins how business is doing and this short woman in a weathered red T-shirt will give it to you straight.

2:30 Rotten. There’s a reason we’re the last one. It’s a difficult industry. Hard to get labor. Hard to compete with Canada. Hard to maintain in an increasingly suburban part of the state.

The last thing this company needed was a higher health insurance bill for the seven people who work here.

Wilkins says the situation was getting desperate last fall. After years of 30 to 40 percent increases, premiums under their old plan were about to hit 10 thousand dollars a month.

We were starting to look at things like, do we have to go to a four day week, which would cut our electric bill. Because when you start to look for places where you can find substantial savings, those number are not easy to come by in a small operation.

The mill switched over to a high deductible plan last January and saved a lot of money. Premiums for the company dropped nearly 30 percent. On the other hand, deductibles for the employees essentially doubled. Most of the workers have a family plan and have to pay 2400 dollars before insurance kicks in. With one big exception – basic items like an annual physical or mammogram are fully covered.

Sally Wilkins says one of the biggest improvements is if she needs to see a specialist, it's a lot easier.

Under the old system, they would simply say, no, we're not going to pay for that, or in some cases, you couldn't even access that provider. Now, if you choose to do it and you're willing to bite the bullet and pay the bill, you can access whomever you like. Because you and your primary care doc are making that decision.

There’s another difference. Wilkins Lumber created health savings accounts, or HSA’s, for each worker and agreed to put in enough money to cover most of the deductible. That money belongs to the workers and if they leave, it goes with them. They can add their own money. It earns interest tax free; it can be saved for retirement. Even after funding those HSA’s, the company came out thousands of dollars ahead.

At the personal level, Sally Wilkins, who has a rare form of cancer and considerable medical bills, says financially, the new plan is about the same as or maybe even better than the old one.

I expect to be no worse than I was before, for others, I hope that they will be ahead of the game.
I hope it works, I know its an experiment.

In this experiment, the generosity of the employer is the big unknown. HSA's cushion the worker from the brunt of high deductibles. With a large enough HSA, the financial impact at the end of the day for employees can be the same as with traditional insurance. But Wilkins says most other companies she knows are much less generous she is.

One of the pioneers of consumer health care plans in New England is Dr. Philip Boulter, the former Medical Director of the Tufts Health Plan. Boulter says year to year control over those HSA contributions, gives employers a flexibility they never had before. If premiums go up, it is completely up to them to cut back on their share of the spending accounts.

What happens with these products is, is that it is a wonderful tool for the employer to gently cost shift to the employee over time.

Boulter says everything depends on the details of each individual plan and he emphasizes, how the risk of paying for poor health is shared can't be judged on a single year. You have to look at how it plays out over the long run.

It's another dimension of this experiment in health care.

For NHPR, I'm Jon Greenberg