Driving Down Health Care Costs Through the Implementation of Health Savings Accounts (HSAs)

I was privileged to serve on the legislative task force charged with designing this year’s omnibus state employee health care insurance reform plan (Senate Bill 2052). In creating this plan we attempted to draw heavily on best practices which are stabilizing health care costs for other organizations.

One of those best practices is the plan used by the State of Indiana to incentivize the wise use of its state employee health insurance plan through the implementation of Health Savings Accounts.

The Indiana plan was developed by Indiana Governor Mitch Daniels in an effort to provide a consumer directed health care option to state employees.

In the Indiana's HSA, the state deposits an amount of money into an account which is controlled by the state employee, from which the employee pays all his or her health bills. This amount of money can be used to pay co-pays and deductibles and unused money can roll over from year to year. The idea is that plan participants will become more cost-conscious, have a sense of ownership over the money and thus be more careful about over-utilization of health care services or overpayment related to health care charges.

The plan has proven to be popular in Indiana as 70% of its state employees have chosen to use this plan compared to just 2% of public sector employees across the nation. Savings have also been significant as participants in the plan save more than 8 million dollars per year when compared to participants in traditional health care plans. Indiana HSA plan participants spent just 65 dollars for every 100 dollars expended by those taking part in the traditional health care plan.

It is this cost savings that we attempted to achieve in Senate Bill 2052. Working with the organizations representing public employees we sought to guarantee that future state employee health insurance benefit increases would be rolled into funding this plan.

Common sense suggests that when an employee is given the opportunity to have direct ownership over his or her health care dollars, they will make choices to protect that balance from unnecessary expenditures. However, if we continue to utilize a traditional one-size-fits-all health care insurance funding option then it is to be expected that costs will continue to increase. Governor Daniels summed it up this way, “What seems free will always be overconsumed, compared to the choices a normal consumer would make.”

I was very disappointed that our Governor chose to veto Senate Bill 2052. I look forward to once again passing this reform and the health and wellness reform which I wrote about last week. I believe we will have this opportunity when the new Governor takes office next year.