Health Savings Accounts Are Working in Indiana

Gov. Mitch Daniels of Indiana, who is looking more and more like a GOP 2012 presidential candidate, writes in the Wall Street Journal about the successful program of health savings accounts which has reduced costs in Indiana and insured state employees without raising taxes:

As Washington prepares to revisit the subject of health-care reform, perhaps some fresh experience from Middle America would be of value.

When I was elected governor of Indiana five years ago, I asked that a consumer-directed health insurance option, or Health Savings Account (HSA), be added to the conventional plans then available to state employees. I thought this additional choice might work well for at least a few of my co-workers, and in the first year some 4% of us signed up for it.

In Indiana's HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker's permanent property. For the very small number of employees (about 6% last year) who use their entire account balance, the state shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely protected.

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.

What we, and independent health-care experts at Mercer Consulting, have found is that individually owned and directed health-care coverage has a startlingly positive effect on costs for both employees and the state.

Read the rest of the piece for examples of how well this has worked for Indiana.

Health savings accounts have been proposed for years but rarely implemented because it does something that government hates - it puts people in control of their own health care expenses. When the money you're spending is your own you start being a little more careful about how you spend it. You shop for deals, don't spend it if you don't really need it, and let the competitive market work for you. It's the removal of the health consumer from the real costs which has cause the soaring prices we see today.

I remember when we had an HMO with a $5 co-payment for doctor visits. We didn't hesitate to take the kids in with every sniffle because it cost practically nothing. Had we been paying for these visits out of a health savings account we probably would have been a little less quick to run to the doctor would have used the services only when we felt it was really important, and might even have shopped for services among different doctors. All of that would have reduced our usage of the health care system and therefore the total costs. And I don't think our family's health would have suffered.

It's a good idea and needs to be used on a wider scale.