The new anatomy of health care - includes related articles and glossary of medical terms - Panel Discussion

Chief Executive, The, Jan, 1996 by J.P. Donlon, Barbara Benson

Here's how an MSA works: We take the deductible up to $3,000. Since the cost of catastrophic coverage above $3,000 is less than the cost of coverage with a $500 deductible, you take that savings and use a piece of it to fund a savings account for the employee, who becomes responsible for the first $3,000.

You usually can fund that account with enough that the employee's out-of-pocket expenses with an MSA are equal to or less than they were with an indemnity plan. If the employee has money left in the account, he or she can pocket it or - hopefully - roll it over into the next year's savings account.

At Golden Rule, we offer MSAs to our employees as an alternative to the basic plan. Now, people have said MSAs might only appeal to the healthy and the wealthy. Wrong. At the beginning of any year, none of us know whether the next year is going to be good or bad health-wise. Even if you become sick, you're better off spending the entire savings account and using the catastrophic coverage than you are with your traditional indemnity plan. Why? You will have spent less out of pocket. And if you have a healthy year, you have money left over.

Does it work? It's worked for us. The first year, we gave back to each employee an average of $700. Last year, we gave back $1,000 per employee. Our healthcare costs have not increased during that time. We energize health-care consumers by creating an economic incentive to be careful about what they buy. We've found that employees ask the doctors questions they normally would not.

Tabak: If employees want to maximize the accumulated value in their account, do they defer diagnostic services?

Whelan: That's a fear everyone expresses. Our data do not support it, and our experience is that people, in fact, do get the care. We've conducted surveys since we began this system two years ago, and we found that, in the second year, 27 percent of our employees used medical services they never used before, because they now have the dollars available to purchase them.

Liguori: But in this system, the employer comes out cost-neutral. At the end of the day, when the employer should have saved money, he or she is still paying it out - only now it's to the employee and not to the health-care provider.

Rosen: We're missing the point. The real criticism of this plan is that although the employer might save money, there will be a lot of cost shifting, and the plan will attract the healthy who think they can save money. Once you segregate the healthy and unhealthy, the government or some other part of the system will have to pick up the tab.

Whelan: We think health-care costs will fall with widespread use of MSAs in combination with other techniques. I don't mean to suggest that MSAs alone are a panacea.

Weston: How many lives are we talking about?

Whelan: We have about 1,000 employees who use MSAs. And in the marketplace, we have about 1,000 groups in place. Forbes magazine has an incentive plan, and it reported that health-care costs fell by about 20 percent the first year, 13 percent in the second.