Medical Savings Accounts Study: Case Studies Progress Sharing Company
A health plan, employee benefits broker, and insurance company located in Saco, Maine.
Principal: Frederick A. Prince, CLU
Coverage: Health Benefits
Cost Management/Investment Plan: Health Wealth Plan
The Health Wealth Plan offered to employers by the Progress Sharing Company contains one element of a medical savings account. Deposits are made into a savings account owned by the employee. Prefunding a portion of first dollar coverage is an important part of this program. The consumer actively participates in health care decisions.
Fred Prince established the Progress Sharing Company over ten years ago. He provides individualized benefits, brokerage, insurance, and investment services to a number of companies. Prince claims favorable results with his Health Wealth Plan.
As described in the June 1990 issue of Broker World, the Health Wealth Plan works by increasing the medical insurance deductible and directing the difference in premium into savings and life insurance. Funds in the savings plan are available to pay out of pocket expenses. A report in the April 10, 1990 issue of Insurance
"Forbes employees acknowledge they are making more cost-efficient health care choices by looking for the best value for their health care dollar."
Times highlighted the advantage of this method of financing health care. "This approach is clearly a major improvement over merely moving to a higher deductible without funding it."22
Prince says The Health Wealth Plan provides strong incentives for the employee to become an informed consumer. "As 70-90% of medical claims are less than $500, it does not make sense for every employee to pay $4000 annually in insurance premiums to cover $400 worth of claims."
The Health Wealth Plan is based on a straightforward incentive—pay employees cash as a reward for good health and for not spending money on unneeded or unwanted care. With the Health Wealth Plan healthy employees and families can accumulate as much as $10,000 in savings over 10 years. As active consumers, employees see positive rewards as their savings grow in their personal accounts.
What have been the results?
The Spurwink School in Portland, Maine has used the Health Wealth Program for nearly three-hundred employees since 1987.23 In four of the last eight years they experienced rate reductions for employee and family coverage. The reported 1987 to 1995 health insurance premiums are as follows:
The individual health benefit premium more than doubled from 1987 to 1995 with an increase of 107.7% overall and an average increase of 12% per year. The family health benefit premium also doubled in the same time period. The annual average increase was 11.3%.
The Health Wealth Plan for the Spurwink School is an interesting example of innovative health benefits planning. However, beyond a "savings" component, this example should not be called an MSA program or variant.
The John Alden Insurance Company provides a traditional indemnity plan. The health benefit under this plan requires a deductible of $250/person to a maximum of $750 for three persons and coinsurance amounting to 50% of $2000/person. The out of pocket maximum is $1250 for single employees and $2500 for the family.
"As 70-90% of medical claims are less than $500, it does not make sense for every employee to pay $4000 annually in insurance premiums to cover $400 worth of claims."
"With the Health Wealth Plan healthy employees and families can accumulate as much as $10,000 in savings over 10 years."
The savings plan is funded by matched employer and employee contributions of $10 each week totaling $1040 annually. Five dollars of the monthly contribution pays for life insurance premium and fifteen dollars goes into a mutual funds account. There are no "managed care" limitations such as gatekeeper requirements or provider restrictions. There are insurer negotiated charges when network providers are the source of care.
At a March 23, 2005, House Appropriations hearing on a bill to gut the voter-approved I-601 spending limit, Rep. Jim McIntire (D) asked a supporter of I-601’s two-third supermajority requirement for the legislature to raise taxes the following question:
"Can you name a time when we [legislators] have actually not just set it [supermajority requirement] aside by majority vote? I mean, this is in many respects a procedural motion that has no bearing. It’s a statutory constraint that cannot constrain any legislature that chooses as a majority to set it aside . . . have we ever used a supermajority [to raise taxes]?"
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