Health of a nation: entrepreneurs are sick of sky-high health insurance premiums, and the government is scrambling for reform. But can uncle Sam save the deteriorating state of health care?

Entrepreneur,  March, 2005  by Joshua Kurlantzick

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Some experts and entrepreneurs however, think HSAs still have major flaws. Raymond Arth, president of Avon Lake, Ohio-based Phoenix Products, a faucet manufacturer that sells to mobile homes and RVs, believes the U.S. medical system is not yet set up to allow consumers this kind of choice. "If you're shopping for a major purchase, say an automobile, you have access to reliable data needed to make an informed choice," says Arth, 53. "If you need to have a [medical procedure], the [doctor] can't quote a price, you can't check his or her 'performance ratings,' and there is no meaningful information about the outcomes produced by the facility where the procedure will be done."

Others think the savings accounts won't help lower-income workers. "HSAs are for the healthiest and wealthiest without chronic problems," says Joel Marks, executive director of the American Small Business Alliance, based in Washington, DC. He fears sicker employees would not choose plans where they had to pay such a high deductible. Small companies with sicker employees might then find their premiums rising.

Some evidence supports Marks' claims. In a 2004 Kaiser Family Foundation study, more than three-quarters of respondents had an unfavorable opinion of high-deductible health plans, and many feared such plans would leave them vulnerable to high medical bills. And a July 2004 study by the Center for Studying Health System Change, a Washington, DC, nonpartisan policy research organization, found employers worried about how they could possibly provide enough health-care education to employees to help them make educated choices under an HSA.

AHPs have even less support in the health policy community. "AHPs are something I always shake my head in wonderment at because they don't seem to have a lot going for them," says Paul Ginsburg, president of the Center for Studying Health System Change.

Gail Wilensky, a senior fellow and health policy expert at Project HOPE, an international education foundation based in Millwood, Virginia, says AHPs don't offer the kind of purchasing power some expect because many small firms grouped together are a greater risk than one large company. "I don't think you'll find that 1,000 small groups can operate like one big company," Wilensky says.

"Large employers have centralized payroll and data systems that make enrollment and disenrollment [in insurance plans] simple," agrees Scandlen. "An association of small employers has none of these advantages."

What's more, says Wilensky, in previous state-by-state attempts at AHPs, "there have been instability problems--the groups lose or gain members who jump ship out of the AHP when they get a better individual policy." Worse, since AHPs would be run through local business groups, they could be vulnerable to fraud, already a major problem in the insurance industry.

LOOKING LONG TERM

Despite a potential flurry of activity in Congress, long-term solutions remain elusive. Employers will likely continue passing along costs to employees, but premiums probably won't level off. "In 1998, we paid $161.09 per individual for health care," says Peter Perez, co-owner of Carter Products Co. Inc., a 15-person manufacturing firm in Grand Rapids, Michigan. This year, it's $377-40. Says Perez, "We're still going to try to make sure our plan is as good as can be, but government has to do something more."