Health Savings Accounts Expansion

The lame-duck legislature in Ohio is considering a bill by state Sen. Lou Blessing, a Cincinnati Republican, to require that all public employees be given an option of at least three health savings accounts. My sources tell me that it has an excellent chance of passing and being signed by outgoing Gov. Bob Taft. I have written about health savings accounts on numerous occasions. HSAs were authorized in the 2003 Medicare prescription drug law to work in tandem with health insurance policies with high deductibles; the employee gets money in a health savings account and can retain money not spent. The argument is that HSAs encourage policyholders to weigh the cost of routine healthcare and at the same time protect them from catastrophic expenses. After all, your auto insurance doesn't pay you for oil changes but does pay if your car is totaled. Why should a health insurance policy pay for routine, predictable medical expenses but not cover the full cost of catastrophic care?

HSAs are spreading rapidly in the private sector–Wal-Mart is offering them to employees, and they're available to Medicare recipients. By the end of 2005, over 4 million people were enrolled in HSAs, 31 percent of them previously uninsured. But apparently, Blessing's bill is one of the first attempts to have them offered to state and local public employees. They appear to hold down healthcare cost increases, which of course are a huge burden to state and local governments just as they are to private employers. Public-sector unions appear to be leery of the Ohio proposal. One reason may be that the employee with an HSA has in effect opted out of the high-cost, low-deductible health insurance policies that public- and private-sector unions seek and that they hold out as one of the major benefits of union membership.

Supporters of the HSA bill hope that it can serve as an example to the private sector. Ohio has been losing manufacturing jobs at an alarming rate. It has nine Ford plants, seven General Motors plants, and several Delphi plants. Delphi, of course, is the GM spinoff in bankruptcy, unable to meet the huge payroll and benefits burdens imposed by its contracts with the United Auto Workers, which I've written about before. Yesterday the CEOs of GM, Ford, and DaimlerChrysler came to the White House and met with President Bush, and they talked about the huge $11.2 billion the three companies spend on healthcare. One answer could be HSAs. The UAW has a long, historic commitment to high-benefit healthcare plans and, like public-sector unions, claims that health insurance is one of the chief benefits of union membership. But it's pretty clear that high-cost health insurance is bleeding the auto companies and reducing the number of jobs. HSAs could save the companies millions. We in Washington tend to think of healthcare finance issues as being primarily federal. But the decisions taken by others, including state legislators, continually reshape the healthcare finance system.

If Ohio passes Blessing's bill, it could set an example, right under the noses of the Big Three auto companies, that could have national impact.