The Wall Street Journal on Monday profiled Paul Zane Pilzer, an economist and entrepreneur who has recommended that employers "stop providing group health insurance and help employees get individual policies instead." Pilzer recommends an alternative method of health insurance based on a "tax wrinkle" that allows employers to establish health reimbursement arrangements, the Journal reports. HRAs are similar to health savings accounts, but the "key difference is that employees can use the money in an HRA, but generally not an HSA, to buy health insurance," according to the Journal. For employers with "generally healthy employees, an HRA plan, in effect, allows the owner to cover a good chunk of most people's insurance bills at a fraction of the cost of a traditional group insurance plan," the Journal reports.

Pilzer in March 2006 established Zane Benefits, a company that administers HRA-based health plans for small businesses. Zane to date has enrolled more than 300 employers with about 3,000 employees, and the company has attracted the attention of UnitedHealth Group, which has encouraged independent agents to take a course offered by Zane on how to market individual health insurance to employers that offer HRAs.

In addition, Extend Health -- a company founded by Pilzer that Revolution Health has acquired -- and Sam's Club have partnered to market HRA-based health plans to small businesses.

Pilzer said, in contrast with group coverage, employees who purchase individual health insurance can retain their coverage when they lose or change jobs and can select their levels of coverage based on their medical needs. "I feel I'm doing God's work switching people from group plans to individual insurance," Pilzer said.

Criticism
However, critics of the recommendations proposed by Pilzer maintain that many employees who have pre-existing medical conditions cannot purchase individual health insurance. "It's poor public policy," Greg Matis, counsel for Utah-based health insurer SelectHealth, said. He added, "Here, it will only be healthy people who get individual policies, and the ones who need coverage the most -- the highest-risk people -- will be left holding the bag."

Pilzer said he believes that employees with pre-existing medical conditions can receive help through state-based programs or other sources. According to some critics, the recommendations violate federal and state laws that require employers to offer equal health insurance to all employees.

Insurance regulators in Texas have advised employers in the state not to follow the recommendations. Mila Kofman, an associate professor at the Georgetown University Health Policy Institute and a former official at the Department of Labor, said, "I think this is blatantly illegal," adding, "I would not advise any employer to do this." Pilzer denied that his recommendations are illegal. DOL "is aware of the controversy and is consulting with other parts of the federal government over possible clarification of the rules," according to the Journal (Terhune, Wall Street Journal, 7/30).

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© 2007 MediLexicon International Ltd