Medical Savings Accounts Study: Case Studies
The Forbes, Inc. Health Benefits Plan

• Sponsor: Forbes, Inc. of New York City, New York

• Coverage: Traditional indemnity plan coupled with incentive plan

• Number of employees: 500

• Summary effect of plan: 27% overall reduction in premium for 1992 and 1993; 40% of employees received incentive bonuses; cost of coverage was 8% of payroll in 1993

• Year of origin: Forbes Inc. established a plan designed by Malcolm S. "Steve" Forbes Jr.

"Give employees an incentive to look at costs the way management does—an incentive to make health care decisions as if it were their own money at stake. We (Forbes) set aside a yearly account of $1000 for each employee and simultaneously established a health plan deductible for health expenses equal to 1% of salary.

The plan called for every $1 of health claims filed by a plan subscriber to cost $2 from the $1000 set aside account." Thus Steve Forbes set in motion a health benefits incentive program for all Forbes, Inc. employees. The plan calls for an explicit reward paid as a cash bonus to employees and families who file few or no health insurance claims and/or use their own funds first. (See Appendix for excerpt from Forbes, Inc. Employee Handbook)

Forbes reports a 25% reduction in dollars paid to reimburse overall health claims. Furthermore, 40% of employees reap annual bonuses by following the incentives under the two for one formula. With incentives to live healthier lives and spend fewer of the company's dollars, health insurance premiums are lower.

"The employee is placed in the center of health care transactions and they understand whose money is being spent and for what purpose."

According to an NBC News Report (November 1994, Irving R. Levine), Forbes, Inc. spent $460,000 less than anticipated on medical claims. In addition one-hundred fifty employees shared bonuses amounting to $350,000. 100 employees received the full amount of the bonus while the remaining fifty received lower amounts.

Forbes employees acknowledge they are making more cost-efficient health care choices by looking for the best value for their health care dollar. Without these incentives, employees who use the company's dollars to pay for care perceive they have greater benefits or even "free care."21

The Forbes bonus plan succeeds precisely because it acts as an incentive-based form of demand management. This places the employee once again in the role of principal actor and benefactor of personal health decision making. The Forbes plan has taken pains to make sure the incentive (possible cash bonus) keeps pace with inflation. In 1994 the maximum sum an employee may receive is $1300 if no claims are filed in the year.

Asked what he might do to get even better results, Steve Forbes replied:

"I would seriously consider raising our deductible to $3000 and paying our employees the difference between the current deductible and the $3000 (about $2000). In short, you would provide your people with a catastrophic policy and pay them a separate salary for health care dollars that you would save from having a higher deductible. Employees would make wiser health care decisions and you would save a bundle on paperwork and a bundle on your health insurance."

In those few words, Steve Forbes described in full the essence of Medical Savings Account programs: MSAs coupled with catastrophic health insurance.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org