Health care costs are often listed as a top concern by business leaders.
Some companies have faced multiyear double-digit increases and watched as health care costs ate into profitability. Shopping around only gets you so much savings, and scaling back services can hurt recruiting efforts.
The Health Savings Account might be an option worth considering.
HSAs are a relatively new option (legislation created them in 2004) that allows participants to control their own health care spending. Plan participants must also have a high-deductible health plan.
“The idea behind them is to make consumers more aware of the actual costs of health care services,” says Janet Trautwein, vice president of governmental affairs for the National Association of Health Underwriters. “HSAs are good for everybody. The employer provides a high-deductible health plan and also makes a contribution to the HSA that goes with it. The money in the account is designed to cover what’s not covered in the deductible.”
Employees can use the money in the HSA for a variety of health care expenses.
“It can be used for any number of things not covered by the plan: Eyeglasses, dental or even over-the-counter medication,” says Trautwein. “Any amounts left over roll over from year to year.”
Because employees have direct control over how the money is utilized, it is in their best interest to shop around and use the money wisely. That puts the dollars and the health care decisions directly in the hands of the consumer.
In March, 1 million people were covered by an HSA.
“That’s a very quick start-up for any type of new plan design,” says Trautwein. “There is lots of interest among employers of all sizes.”
There was some fear that consumers would simply not obtain services if they had to pay for them out of their own money, but so far, that hasn’t proven true.
“The statistics don’t indicate they are not obtaining services,” says Trautwein. “They are shopping around more and using generic drugs.
“One of the nice things for the employer, though some don’t like the idea, is that the employer is not responsible for making sure the participants are spending the money on the right thing,” Trautwein says. “They don’t have to turn in a claim like they do on a flexible spending account. If the person gets audited (by the IRS, which oversees the program), and they can’t show what they spent the dollars on, then they’ll have the problem, not the employer.”
Some employers are uncomfortable with putting the consumer in charge because the company’s contribution to the account immediately becomes the property of the person — there is no vesting period. Even though the company is not responsible for misspent funds, some do not like the idea of the potential for improper use. But as a result of putting the responsibility on the shoulders of the employee, the company’s administrative burden is very low.
“Employers can offer an HSA through a 125 plan, which they probably ought to do because it gives them an immediate tax break,” says Trautwein. “These plans can be very simple for all involved. It’s much easier to understand coverages because it isn’t a co-pay for this or that, a percentage of coverage for one procedure while something else isn’t covered at all. It’s very straight-forward.
“Employees like it, because something like acupuncture that might not be covered under another type of plan would be under an HSA.”
By offering an HSA under a 125 plan, employers also can be much more flexible as to offering employees at different levels of the organizations varying amounts of contributions.
“With an HSA, people are more careful of what kind of health care consumer they are,” says Trautwein. “They ask a lot more questions, and they’ll be in better health if they do that.”
HOW TO REACH: National Association of Health Underwriters, www.nahu.org
