> Are HSA's Good For You?

The rising cost of medical expenses and health care insurance has caused many companies to quit or cut back on funding health coverage for their employees, leaving many people uninsured. Health savings accounts (HSAs) were created to help solve this problem.

HSAs are part of a breed of consumer-directed health care plans that try to get consumers more involved in their health care decisions. They were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis.

“We can’t solve our health insurance problem until we let health insurance become insurance again,” said Ken Daniel, CEO of Midway Wholesale and chairman of the Topeka Independent Business Association. “Insurance should be there to cover people in case of a catastrophe, and the health care part should be handled separately.”

One of TIBA’s objectives is to teach businesses in Shawnee County how to use HSAs.

How HSAs Work
The HSA ties to a high-deductible health plan and works like car or homeowners insurance. The individual pays a premium, then pays for any medical expenses at the PPO discounted rate until reaching the deductible, when the insurance plan kicks in. Money leftover in the HSA rolls over year after year, and there is a tax break on money put into the account.

Qualified health plan deductibles—most commonly $2,000 or $2,500 for an individual—tied to an HSA generally are 35-40% lower than traditional lower-deductible PPO plans, said Beverly Gossage, director of HSA Benefits Consulting and a consumer-driven healthcare consultant and HSA specialist who has been invited to speak at the Small Business Administration, the National Federation of Independent Businesses and the White House. Many employers use that savings to contribute to their employees’ accounts.

Most policies carry 100% co-insurance where the insurance company covers everything after the deductible. Some policies carry 80-20 co-insurance, where the insurance company pays 80% of the expenses after the deductible, and the individual pays 20% up to a maximum out-of-pocket for an individual of $5,100.

The individual, employer or a combination puts money into the HSA, which they can use to cover all medical expenses, even those such as dental or vision care, which may not be covered by the health plan. The individual’s covered medical expenses—doctor visits, prescriptions, lab work, hospitalization, etc.—apply toward the deductible. The co-pays in traditional health plans do not count toward the deductible.

Benefits
HSAs provide an easier transition to large deductibles, said Joe DeWerff, Blue Cross and Blue Shield regional manager for Topeka. If the consumer doesn’t use all of the money in the HSA, they have a savings account. With a typical traditional health plan with a high deductible, there’s no money sitting there if you don’t use the services.

“Higher paid employees tend to participate in HSAs because they see them as another investment vehicle and another tax shelter for their money,” said Kevin Kennedy, director of sales and marketing for Century Health Solutions.

HSAs are portable, meaning individuals can keep their HSAs even if they change jobs or medical coverage, become unemployed, move to another state or change marital status. An HSA provides tax deductions when you contribute to your account, tax-free earnings through investment and tax-free withdrawals for qualified medical expenses.

Acceptance
Getting people to accept HSAs is an educational process.

“There are a lot more moving parts,” Kennedy said.

He said the product’s appeal is growing, but he has not had an employer choose an HSA-based plan yet.

Getting companies to accept HSAs is an evolutionary process, Kennedy said. One of his clients just moved to a $1,000 deductible-base plan at renewal time.

“They weren’t ready yet to move to the HSA’s $2,000 or $2,500 deductible, but next year, we’ll talk about them again,” Kennedy said. “You build step-by-step.”

Still, more companies are giving HSAs a try. Daniel started offering an HSA plan at Midway Wholesale two years ago. The first year, only six out of 80 employees chose the HSA, but the second year, that number increased to 36. He said once they get it figured out, most will be on the HSA.

Silver Lake Bank also started offering a HDHP with an attached HSA a few years ago, along with a traditional health plan. About 30 percent of employees have chosen the HSA, said Kay Graham Scott, sr. vice president. Silver Lake Bank contributes to employees’ HSA accounts and allows employees to deduct their own contributions from their paychecks.

“As an employer, we are always looking for different types of plans to offer,” Scott said. “Every year we look for better benefits for our employees, giving them the most help we can while watching our expenses.”