Summary
Recent experience with health savings accounts and high deductible health insurance policies has confirmed what economists and policy analysts have predicted for the past decade: In a voluntary health insurance marketplace where lawmakers have let the free market write the rules, encouraging high deductible policies combined with tax favored savings accounts, benefits the rich and increases the financial burden on the sick. It is time for Congress to call a halt to this misguided policy and turn its attention to health system reform that will provide guaranteed coverage to all Americans, while improving the quality of care in the system and constraining costs.
Concerns about High Deductible Health Insurance and Health Savings Accounts
Variation of risk in health insurance markets. The health insurance market is different from the market for other consumer goods. When a car manufacturer sells a car, the seller has no reason to care who is buying it: age, sex, health status, income simply do not matter. Health insurance is a different kind of market. Not only do sellers care very much about the nature of the buyer, if allowed they create detailed underwriting rules that discriminate against buyers by design – denying coverage to the sick, excluding any pre-existing conditions (for which the need for care and coverage is greatest), and charging higher premiums to the older and sicker.
The key economic factor that makes health insurance markets different from markets for other consumer goods and services is the tremendous variation in risk of the population. A small percent of the population (regardless of whether you consider the young or the old, the rich or the poor, males or females) tends to account for a large part of healthcare expenditures. Most people are healthy and incur very small if any costs. Consumers take their own health risk profile into account when deciding about what type of policy (and deductible) they should seek. Insurers take consumers’ health risk profile into account when deciding whether to provide coverage.
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