« November 2005 | Main | January 2006 »
December 31, 2005
More banks offering Health Savings Accounts to pay bills
A growing number of banks are beginning to offer health savings accounts, which are paired with high-deductible health insurance plans and poised to become the hottest thing in health coverage since HMOs.
Consumers like the convenience because a Health Savings Account can be linked to a checking account, allowing them to use debit cards to pay medical bills.
Banks benefit because HSAs attract customers and deposits can be used for everything from mortgages to car loans.
LaSalle Bank, for instance, introduced its Health Savings Account a week ago and plans to launch an advertising campaign in January.
"Although the high deductible health insurance plans are not the most prevalent offering today, the research we did indicates that is the direction they will be moving," said Diane Berner, senior vice president in charge of the bank's consumer deposit product management.
Created in 2003, an HSA allows individuals and employers to set aside money before it's taxed to pay for doctor, hospital and other medical bills. Unlike flexible spending accounts, the money in HSAs can be rolled over year after year. The money earns interest or can even be invested in mutual funds and remains with the holder through job changes and retirement.
Having the money available allows individuals and employers to buy a less-costly, high-deductible health insurance policy to cover expenses once they exceed at least $1,000 for a single person and $2,000 for families.
It can be a way for individuals to find more affordable health plans for themselves and their families and can be an alternative for employers who want workers to share more of the ever-growing costs of health coverage.
Berner anticipates LaSalle will see some interest from individuals and small-business customers in the first part of the year with a flurry of interest toward the end of the year when companies go through open enrollment for 2007 coverage.
"We have had quite a bit of interest, especially recently," she said. "Definitely there is some pent-up demand."
Blue Cross Blue Shield of California partners with Wells Fargo Bank on its Flexible Blue HSA product.
Employers and employees can work with any bank they want to, but there are advantages to using Wells Fargo, explained Don Whitford, director of product development at BCBS.
BCBS members have access to Wells Fargo investment and lending products, for one.
Employers make pretax payroll deductions directly to Wells Fargo. If an employee chooses to use a different account, the money is not automatically deducted and individuals have to reconcile it on their taxes at the end of the year.
A big attraction to BCBS in deciding to team with Wells Fargo is that the bank requires customers keep only $100 in cash in their accounts and everything above that is invested. Other banks require much higher cash balances -- typically $1,000 or more -- before they will invest it.
"That can take years to build up," Whitford said. "If you think about it, as a member, you're two concerns are 'How much do I have to have in this cash account before I can invest and what are my investment options?' Wells Fargo has six options from conservative to risky."
Blue Cross Blue Shield Association earlier this month announced plans to start its own bank to manage members' health savings accounts. Only one health insurer -- United Health Group Inc. -- has formed its own bank, called Exante.
Whitford said Blue Cross Blue Shield is working with the association in creating the bank, but has not committed to joining it.
"We have to wait and see how it fits into the market and evaluate it," he said.
To set up an HSA, a customer must have a qualified high deductible health insurance plan. It is the bank's responsibility to make sure customers understand that requirement but not to enforce it.
"The burden is on the customer to know what kind of insurance they have," Berner said. "We don't require that potential customers prove they have a high-deductible plan. Banks are not required to be the HDHP police."
Because of the extra reporting requirements, LaSalle charges a $25 fee to customers to maintain an HSA.
The number of banks offering HSAs appears to be relatively small, but it is expected to grow considerably over the next year or two, as more and more employers adopt consumer-directed health plans that typically include health savings accounts.
Posted by Wiley Long at 08:51 AM | Comments (1)
December 30, 2005
Consumer Driven Health Care: A New Debate
In a recent debate between American Enterprise Institute (AEI) scholar Joseph Antos, National Center for Policy Analysis (NCPA) president John C. Goodman and Robert Reischauer, president of the Urban Institute and vice chair of the Medicare Payment Advisory Commission, the consumer driven health care (CDHC) system was discussed.
According to Antos:
- CDHC is a way to break the health inflationary spiral by making consumers more aware of costs, but it puts a premium on information about cost, quality and effectiveness of care.
- We are years away from the kind of information infrastructure needed for an efficient health care system of any kind.
- Directly or indirectly, workers pay for their own health insurance and as a matter of sound policy and social justice, we should redirect government subsidies so that they are better focused on those who need the help.
According to Goodman:
- CDHC is not about shifting costs to employees, it is about shifting money so that employees can manage their own health-care dollars.
- It is also about patient power -- having patients make the often-difficult choices between health care and other uses of money instead of having those choices made by large, impersonal bureaucracies.
- To improve the system, rationing by waiting -- paying with time -- should be replaced with rationing by pricing, which would let providers compete to solve problems.
According to Reischauer:
- One of the major problems facing the nation's health-care system is rapidly rising health-care costs and it's unlikely that CDHC will prove to be a significant solution to this problem.
- A more sensible approach would be reference pricing; under this system, basic insurance would cover (with some modest co-insurance) the cost of an efficiently provided service that met acceptable quality standards.
Posted by Wiley Long at 09:40 AM | Comments (0)
December 27, 2005
When Do Health Savings Accounts Make Cents for Families?
Health Savings Accounts allow families of all ages and incomes to pay for their health, dental and vision care expenses with "pretax dollars." But they are not a good deal for everyone. Industry expert Mike Chapman explains when Health Savings Accounts can help families save on health care and taxes.
Mike Chapman is a self-employed businessman with a family of six. He figures his health savings account and medical savings account have saved his family over $10,000 in taxes and $15,000 in lower health insurance premiums over the last four years.
"We've been lucky." says Chapman, "I gambled when we opened our HSA that we could stay healthy. That helped us save on our health insurance premiums and invest it in our HSA. Every dollar we put in the HSA we took as a tax deduction. But if a family member had gotten ill, I don't know how I would have met our insurance plan's $5,000 deductible."
"But now, I have enough in the health savings account to cover health care emergencies, and our HSA is growing tax-free just like an IRA. And now we use it to pay for dentist and eye doctor checkups with pre-tax dollars."
Chapman says that Health Savings Accounts and high deductible health insurance plans make sense in the following circumstances:
First, the family members should be fairly healthy, requiring few doctor visits or meds on an ongoing basis. Therefore, families with infants should stick with a traditional plan that offers doctor visit and prescription copays that are absent in high deductible health insurance plans.
Second, you must be able to afford the risk of higher medical expenses for about a year and a half until you have enough money in your health savings account.
Chapman states that the most important factor is that you must be a disciplined saver. He recommends automatic maximum contributions into an HSA, at least until there is enough in the account to cover your insurance plan's deductible. If you aren't a saver, then don't bother with a HSA and high deductible health plan," according to Chapman.
No one health insurance plan fits all. But for healthy families, and especially older adults, HSAs are a great way to save on health insurance premiums and on taxes. "The older you are, the more you can save with one of these plans," Chapman states. "We have clients in their fifties and sixties from across the country who are not eligible for Medicare. They tell us that this is the only way they can afford quality health insurance."
Posted by Wiley Long at 09:43 PM | Comments (0)
December 23, 2005
Health Savings Accounts Motivate Consumers to Spend Fewer Health Care Dollars
A Blue Cross study finds that consumers with Health Savings Account plans use fewer health services.
Health services utilization is lower among enrollees of Options Blue, Blue Cross and Blue Shield of Minnesota's consumer-directed health plan, than those enrolled in other plans, reports the state's largest health insurer. After adjusting for the difference in population health between members in each type of plan, utilization was estimated to be 14 percent lower.
Among the findings of the study:
-- Within Options Blue, health savings accounts (HSAs) appear to be the more motivational plan design: morbidity adjusted utilization is 25 percent lower than health reimbursement accounts (HRAs).
-- Members enrolled in Options Blue are 8 percent healthier than members of the traditional Open Access CMM product
"Options Blue gives members control over their health care needs and their health care dollars," said David W. Plocher, M.D., senior vice president of business intelligence and informatics for Blue Cross, who co-wrote the study with Cathy Lai, M.A., M.A. and Nancy Garrett, Ph.D. "This freedom, paired with the decision tools and support that our online member service center offers, helps members make wise decisions about their health care. The study suggests
that people with these products are more selective consumers and save
significant health care dollars."
Among the consumer-directed health plan products within Options Blue, HSAs have the lowest utilization. HSAs appear to engage enrollees in taking an active role in managing their health care needs and seem to lower health services utilization substantially.
The analysis used Johns Hopkins Adjusted Clinical Groupers (ACGs) as a risk adjustment tool to address the potential difference in health status.
ACGs is one of the most widely used population profiling tools in the health care industry.
About health savings accounts (HSAs)
Blue Cross was among the first health plans nationally to introduce a health plan compatible with HSAs. HSAs combine a high-deductible health plan with preventive coverage and a financial account that's funded by the consumer and the purchaser of the health plan to help pay a portion of the deductible. Once the account is used up, consumers pay the rest of the deductible out of their pocket. Once the deductible is met, the health plan kicks in and pays
for the majority of care until the member's out-of-pocket maximum is met.
Members who have Blue Cross' plans accounts are given an extensive, all-in-one online information resource with easy-to-use tools to help them make health care decisions. It includes information on costs, provider quality and prescription drugs, as well as secure access to account information. The account belongs to the employee, even when they terminate employment. Whoever
funds the account benefits from important tax advantages. Health savings accounts can even be used to pay for expenses not covered by traditional health plans, such as laser eye surgery or alternative care treatments.
Meanwhile, unused money in the account earns interest or can be invested. Any year-end balance rolls over to the next year and ontinues to accumulate.
About health reimbursement accounts (HRAs)
HRAs are similar to HSAs in that they combine a high-deductible health plan with preventive coverage and a financial account (see HSAs above). However, HRA accounts are funded only by the purchaser of the health plan and that purchaser (usually an employer) owns the account). Unused funds can rollover and expenses are limited to what the health plan covers.
Blue Cross and Blue Shield of Minnesota, with headquarters in the St. Paul suburb of Eagan, was chartered in 1933 as Minnesota's first health plan and continues to carry out its charter mission today: to promote a wider, more economical and timely availability of health services for the people of Minnesota. A not-for-profit, taxable organization, Blue Cross is the largest health plan based in Minnesota, covering 2.6 million members in Minnesota and
nationally through its health plans or plans administered by its affiliated companies. Blue Cross and Blue Shield of Minnesota is an independent licensee of the Blue Cross and Blue Shield Association, headquartered in Chicago.
Posted by Wiley Long at 11:27 AM | Comments (0)
December 21, 2005
American Express Enters the Health Savings Account Market
Some in Washington, D.C. consider the entry of American Express into the Health Savings Account market to be one of the most important events in the Health Savings Account industry this year.
American Express branding, and there debit card offering certainly is another example of the U.S. financial industry entering the U.S. health care market with new products.
Allowing a credit line to be utilized first, to keep the Health Savings Account funds growing in size as an investment fund, has significant long-term implications for the number of assets in HSAs, should this model be adopted nationally.
Empire Blue's American Express Card for HSA Offers Credit Options.
Under an innovative feature, employees could apply for a credit line so the card could be used to pay for expenses that exceed their HSA balances.
More details on American Express soon.
Posted by Wiley Long at 12:47 PM | Comments (0)
December 19, 2005
Ending Health Savings Account Claims and Paper Chase for Doctors
Doctors faced with a Health Savings Account patient can end the paperwork and claim pain instantly.
Physicians should have the following policy: We do not file claims with health insurance companies if you have a Health Savings Account, and we expect you to pay at the time of your visit, just like you do when the plumber comes to fix your toilet or you take your car to the shop.
The vast majority of Health Savings Account claims fall below the deductible.
In fact, the majority of people with an HSA who spent more than their deductible have had a hospitalization.
And if you take out of the mix those hospitalization cases, the number of people who reach their HSA deductible is really very, very small.
So a physician office that institutes the no file, pay before you leave policy can rest assured that their not filing the claim will make very little difference to the patient - since most who exceed their deductible did so at a hospital.
So, if an HSA patient will pay the doctor at the point of service, why would it be in the interest of the doctor to file the claim, spending all that staff and expense to get paid by the insurer?
Doctors with the pay before you leave policy can offer a price close to the network discount price, and still be ahead financially - but the physician needs to have a set cash price list to do so.
Posted by Wiley Long at 09:38 AM | Comments (0)
December 16, 2005
Blue Cross rolls out new Health Savings Account Bank
Blue Cross announced they will start their own bank, Blue Healthcare Bank, to manage the rollout of health savings accounts (HSAs) and other so-called consumer-driven health plans.
Blue Cross is following in the footsteps of UnitedHealth Group Inc., which launched Exante Bank in 2002. Both health insurers say the banks will help lower costs by allowing consumers to manage their health savings account money the same way they pay bills with their savings and checking accounts. Blue Healthcare Bank, which will be based in Salt Lake City, will debut in late 2006.
"Once we activate consumers, things will never be the same," said Mark Banks, chief executive of Blue Cross of California.
Both Blue Cross and UnitedHealth face stiff competition from bank behemoths such as U.S. Bancorp, Wells Fargo & Co. and Bank of America Corp.
They all are enrolling consumers in HSAs, tax-free savings accounts in which consumers can pay medical expenses and/or invest their money in mutual funds.
The number of HSAs will jump from 1 million this year to 15 million to 25 million by 2010, according to a report by DiamondCluster International Inc., a management consulting firm in Chicago. Those HSAs, in turn, will hold about $75 billion in assets.
Starting a bank, though, is not easy because of the sheer volume of regulations that governs the industry. That's why only major health care providers like UnitedHealth and Blue Cross can do so, said Karen Garrett, a banking attorney with Bryan Cave LLP in Kansas City, Mo.
"It takes a lot of time and resources to start a bank," she said. "It also takes a long time to gain approval."
Created by Congress in 1993, HSAs can help reduce health care costs for employers by shifting to workers more responsibility for how their health care dollars are spent, experts say.
Participants enroll in a low-premium but high-deductible ($2,600 for individuals, $5,250 for families) plan. The money accumulates in the HSA tax-free, carries over to the next year, and stays with employees even if they switch jobs.
For Blue Cross CEO Mark Banks, Blue Healthcare Bank can help lower administrative costs by bundling the 70 million potential HSA customers from 39 Blue Cross plans across the country.
More important, he said, the bank will help consumers make better decisions about health care by providing them with information like monthly account statements and services like debit cards and Internet banking.
For instance, a consumer could pay for a doctor visit by swiping an HSA-linked debit card. As with any savings and checking account, the user could deposit and transfer funds into an HSA and pay medical bills over the Internet.
In the past, "consumers were insulated from the cost of health care," Banks said. "They never saw the bill. Now they can see the cost of health care, which will make them more accountable."
Blue Cross consumers will have the opportunity to invest their money through the bank and let the funds accumulate in the HSA tax-free. UnitedHealth's Exante, for instance, recently announced that HSA customers can invest their money in well-known mutual funds such as Vanguard Global Equity and John Hancock Classic Value.
But significant obstacles remain. It will take time for consumers to comprehend HSAs, said Jon Christianson, professor of health policy and management at the University of Minnesota's School of Public Health.
For consumers to assume greater control over their health care dollars, insurance companies like Blue Cross must find a way to present complicated information like prices in a way consumers can understand, Christianson said.
Banks agreed.
"We have to make it simple for people to use," he said. "We have to reaffirm the trust" people have with their bank and insurance provider.
Posted by Wiley Long at 09:58 AM | Comments (0)
December 14, 2005
Health Savings Coalition Signals Support for Plan on Health Savings Account Expansion
The Coalition on Health Savings Account Coordination -- a group of employers and health plans with the common goal of improving health savings accounts and health care consumerism in general -- applauded the introduction of the "Flex HSAs Act."
Joining Rep. Cantor and House Speaker Dennis Hastert today was Carla Bender, a 12-year employee of Medtronic, Inc., who opened her health reimbursement arrangement (HRA) in 2002, and now saves approximately $1,000 per year in lower premiums. Carla echoed the intent of the Cantor bill by saying, "I'm glad I had the opportunity to choose how to manage my own health care, and the changes proposed in this bill will provide a further incentive for employees like me to do the same."
Early studies show that, while HSAs have enjoyed high adoption rates among the uninsured and small businesses, there seems to be a lag in adoption among employees of medium-to-large companies. For example, IBM has less than 2% of its employees enrolled in an Health Savings plan for 2005, with annual enrollment numbers for 2006 yet to be published.
Under current law, HSA contributions are limited to the amount of the deductible or the out of pocket limit, whichever is less. Also, individuals are not allowed to use flexible spending accounts or health reimbursement arrangements to pay for their out of pocket costs. The Cantor legislation will promote greater adoption of HSAs by lifting the "lesser of the deductible" limitation and allowing coordination of HSAs with flexible spending accounts and health reimbursement arrangements.
Comments from Coalition Members
Deere & Company
"The cost of health care continues to be a major concern for workers in the U.S. and the companies that they work for. Employees want assurance that they will have access to affordable health care," said Mert Hornbuckle, Vice President of Human Resources at Deere & Company. "We join today with other large employers in strong support of Congressman Cantor's HSA coordination legislation. HSAs will provide employees an opportunity to better manage their own cost of health care services and to save for unpredictable medical costs in the future."
Medtronic, Inc.
"HSAs and HRAs are working and gaining participation and acceptance with each year's enrollment," said Dave Ness, V. P. Global Rewards, Medtronic, Inc. "However, if they are to become the mainstream method of financing health care, we need to have more flexibility in determining plan design, contribution levels along with the ability to coordinate more between the two."
UnitedHealth Group
"In our work with an increasing number of large employers who are sponsoring more consumer-centric health plan designs such as HSAs, Definity Health supports initiatives that advance flexibility which ultimately encourage consumers to be more active in how their health care dollars are spent," said Kyle Rolfing, CEO of Definity Health. "We applaud Congressman Cantor's legislation which enables employers to provide their employees with optimal benefit options to address their health care needs in a meaningful way."
National Association of Manufacturers
"We commend and congratulate Rep. Cantor for continuing to work to improve access to Health Savings Accounts (HSAs)," said Neil Trautwein, National Association of Manufacturers Assistant Vice President for Human Resources Policy. "The only constant in benefit design is in its constant evolution. Rep. Cantor's bill will be a big part of building tomorrow's better HSA."
CIGNA HealthCare
"While today's HRA and HSA plan designs continue to evolve, the goal of these plans -- to enable consumers to have greater ownership of their health care decisions -- hasn't changed," said Michael Showalter, Vice President of Consumerism for CIGNA HealthCare. "The Cantor Flex HSA is an important step that will help consumers use these plans with greater flexibility, and allow companies like CIGNA HealthCare more opportunities for innovation in plan design to support the varying needs of today's employers and consumers."
America's Health Insurance Plans (AHIP)
"Our members welcome Congressman Cantor's leadership in working to improve access to health insurance," said Karen Ignagni, AHIP President and CEO. "This legislation will help expand insurance options for millions of Americans by allowing them to increase savings for health care expenses that might occur in the future and to integrate existing tax incentives and create a better system for consumers."
Background on Coalition
The Coalition on HSA Coordination was created in 2005 to examine the issues underlying the expansion and strengthening of HSAs. Recognizing the positive impact of HSAs on small businesses and the uninsured, the Coalition pairs the experience and leadership of many of America's medium-to-large employers and explores the potential for coordinating an employee's HSA with other consumer-driven health plans.
The goal of coordination is simple: to provide a full continuum of coverage through consumer-driven health plans such as Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs). By allowing the employee to coordinate these accounts, he or she can reduce their total annual costs, saving both the employee and employer from double-digit increases in monthly premiums.
Posted by Wiley Long at 03:07 PM | Comments (0)
December 12, 2005
Health Savings Accounts will fundamentally change the way we pay for health care
In order to have a workable, well-functioning market for drugs, we need to fundamentally change the way we pay for health care, including the way we pay doctors, says John C. Goodman, president of the National Center for Policy Analysis.
The creation of Health Savings Accounts (HSAs) was a step in the right direction. Instead of an employer or insurer paying all the medical bills, about 2.4 million people are managing some of their own health care dollars through these accounts. Instead of relying solely on third-party insurance, people can now partly self-insure in this way.
How can patients spending their own money expect to pay the rock bottom prices for physician services and prescription drugs that large insurers negotiate using their huge buying power leverage?
- Part of the answer is that HSAs are always combined with high deductible insurance and HSA holders usually pay the same discounted physician fee that insurers pay. The same principle can, and should, apply to drugs. That is, when purchasing a prescription drug with an HSA, the patient should get her insurer's drug discount.
- Another part of the answer is that patients can often do better than a third-party insurer. For example, by using minute clinics, call-a-doc services, and by buying drugs and arranging for tests over the Internet, many patients will find they can pay less than their insurer would have paid under a traditional arrangement.
In an ideally constructed HSA insurance plan, patients will not spend a dollar on care unless they get a dollar's worth of value. Incentives under the new Medicare prescription drug law are far from ideal, but they are better than under traditional insurance, says Goodman.
Posted by Wiley Long at 11:36 AM | Comments (0)
December 09, 2005
Opinions mixed over Health Savings Account style Health Plans
Americans are not so ga-ga over the much-touted health savings accounts after all... or are they?
According to a national survey released Thursday, more consumers with traditional comprehensive insurance plans are satisfied with their coverage (63 percent) than those who control their own health care spending with Health Savings Account qualified high-deductible, consumer-driven health insurance plans (42 percent).
The survey also found that consumers with HSA-type plans are twice as likely (35 percent) as those with comprehensive coverage (17 percent) to delay or skip health care decisions because of cost concerns, especially consumers with existing health issues and incomes under $50,000.
This survey of ONLY 1,204 individuals was prepared by the nonprofit Employee Benefit Research Institute of Washington, D.C., and the Commonwealth Fund.
However, a University of Minnesota expert on health care coverage said the Carlson School of Management's TWO-Year study of Health Savings Accounts showed a very different result.
"We found no difference in satisfaction," said Stephen Parente, a health care economist at the Carlson School. "On a scale of 1 to 10, those with a Health Savings Account gave the coverage a 7½."
Parente said the Carlson study also did not find that consumers were skipping or delaying health care actions because of cost. He said that anecdotally, the companies he surveyed that offered a Health Savings Plan reported high employee satisfaction.
Obviously, opinions to date are mixed on the success of Health Savings Accounts. However, at HSA for America, we believe as the health care industry adapts more to accomodate individuals and families with HSAs, the satisifaction with HSA High Deductible Health Insurance Plans will only continue to get better.
Posted by Wiley Long at 12:46 PM | Comments (0)
December 08, 2005
Congress Got Something Right with Health Savings Accounts
Health savings accounts (HSA) allow people to purchase a relatively inexpensive, high-deductible insurance and deposit money into a tax-free account. In effect, they give Americans more control of their own health care, says Dr. David Gratzer, a physician and a senior fellow at the Manhattan Institute.
This is the second anniversary of the legislation that created the Health Savings Account, the Medicare Modernization Act of 2003, so it's worth celebrating HSAs -- and considering what needs to be done to make them better...
Gratzer recommends:
- Allowing individuals to deduct from their taxes the premiums of high deductible health insurance when purchasing an HSA. Not only would this be fair -- it corrects the historic bias toward employer-based insurance -- it would make HSAs even more attractive.
- Passing Rep. John Shadegg's Health Care Choice Act, which would allow out-of-state purchase of health insurance. Modeled after interstate banking laws, this legislation would create a national market for health insurance.
- Making HSAs available to public employees. Despite the dire financial condition of most public plans, only the federal government and Arkansas offer HSAs.
- Allowing individuals and companies to allocate a certain amount, pre-tax, into health care to be used for premiums or health accounts, or both. Insurance companies will then design products with different mixes of health accounts and insurance.
Americans have cause to celebrate the first two years of HSAs. But with these steps, the third anniversary could be even bigger, says Gratzer.
Posted by Wiley Long at 11:08 AM | Comments (0)
December 07, 2005
BlueCross Blue Shield Association To Establish Bank for Health Savings Accounts
The Blue Cross and Blue Shield Association plans to charter a bank to manage enrollees' health savings accounts directly, the Wall Street Journal reports (Fuhrmans, Wall Street Journal, 12/5). The association, expected to announce the move on Monday, is planning to begin bank operations by summer, pending regulatory approval (Vrana, Los Angeles Times, 12/5). Blue Healthcare Bank is intended to simplify the administration of HSAs and other similar plans offered by Blue Cross insurers throughout the U.S., according to Scott Serota, president and CEO of the association (USA Today, 12/5).
Until now, BCBS insurers have partnered with established banks to handle the savings accounts that members use to pay their out-of-pocket expenses. BCBS executives noted that Blue Healthcare Bank, which currently has the support of 31 of 39 locally operated BCBS companies, could help decrease transaction costs for the HSA health insurance plans. The move follows the creation in November of a jointly branded debit card with Visa for accounts linked to health plans. UnitedHealth Group is the only other major health insurer that has formed its own bank (Wall Street Journal, 12/5). Blue Healthcare Bank will offer debit cards for health care costs and credit lines if enrollees' costs exceed their savings. It will not provide mortgages or other types of commercial lending. Glenn Melnick, health care financing expert with Rand, said that the move is logical, adding, "With the growth of HSAs, there should be $10 [billion] to $20 billion in those accounts by 2010, and the insurers are hoping to hold on to that money. It's a growing market" (Los Angeles Times, 12/5). Serota said, "We're not getting into the banking business per se. This is about the sole function to support health care transactions, a business we know a lot about." However, some analysts said that health insurers lack the "critical mass" and "expertise" to compete with established banks, the Journal reports (Wall Street Journal, 12/5).
Posted by Wiley Long at 10:01 AM | Comments (0)
December 05, 2005
Could dietary supplements become a valid Health Savings Account qualified expense?
There is a new revolutionary bill pending in Congress. Introduced by Congressman Chris Cannon (R-Utah) with bipartisan support, the Dietary Supplement and Healthy Meal Replacement Tax Parity Act (H.R. 1545) will allow the IRS to consider certain meal replacement products and dietary supplements as deductible expenses under Health Savings Accounts (HSA) and Flexible Spending Accounts (FSAs). If passed, this bill will offer health savings account supplement consumers a financial incentive to continue practicing their healthy lifestyles and will bring the health care system one step closer to recognizing nutritional supplements’ role in health.
Dietary supplements eligible as an HSA qualified expense include those that qualify for a FDA-permitted health claim. Meal replacement products, in order to qualify for the deduction, must also have an FDA-approved health claim, be low in fat, and must represent a good source of protein, fiber, and multiple essential vitamins and minerals. Under the bill, tax-deductible dietary supplements could include antioxidant vitamins, calcium, folic acid, omega-3 fatty acids, and soy protein.
“Unfortunately, when talking about our health, we often focus on treatment rather than preventative measures,” Cannon stated in a press release. “Doing everything we can to encourage individuals to eat right and to exercise will lead to a healthier population which in turn leads to less expensive healthcare for all of us.”
We at HSA for America applaud Congressman Cannon for taking the reigns of a bill that will contribute to the health of every American. Cannon personally uses dietary supplements and has remained an outspoken supporter of conducting research and education on nutritional products. In addition to introducing the bill, he recently announced the creation of a bipartisan caucus on dietary supplements, which he will co-chair with Congressman Frank Pallone (D-NJ).
Please contact your congressional representatives and tell them you wholeheartedly support the Healthy Meal Replacement Tax Parity Act (H.R. 1545). By doing so, you help to transform America’s health care system from one that reactively treats disease to one that proactively fosters good health.
Posted by Wiley Long at 01:32 PM | Comments (0)
December 02, 2005
Year-end Health Savings Account Strategies
2006 is just around the corner, and there are several issues to consider if you currently have a Health Savings Account, or are planning on getting one in 2006.
100% of the deposit you place in your Health Savings Account is deductible on your federal income taxes. All but a handful of states also make Health Savings Account contributions tax-deductible on state income taxes. If you are looking to reduce your 2005 tax burden and/or put away more money for retirement, your Health Savings Account is the first place you should put your money if you have not yet maximized your contribution.
The maximum you can contribute to your Health Savings Account in 2005 is the lesser amount of your deductible, or $2,650 for singles and $5,250 for families. Individuals who are 55 or older may contribute an additional $600.
Note that contribution limits are pro-rated, based on the number of complete months during the year in which the taxpayer has a qualifying health insurance plan. If you obtained a qualifying health insurance plan in 2005, you may use our HSA Contribution Calculator to quickly determine your maximum contribution.
You have until April 15 (or later if you file for an extension) to make your 2005 contribution. If you do not fully fund your account for the current year, you cannot make a catch-up contribution for 2005 after this deadline. However, you can reimburse yourself in later years for qualified expenses incurred in 2005, even if you do not have the funds in your account to reimburse yourself at this time.
In 2006, the maximum annual HSA contribution will go up to $2,700 for individuals and $5,450 for families, and people 55 or older will be allowed to contribute an additional $700.
To maximize your tax benefit for 2006, it is important to have your HSA-qualified health coverage in place no later than January 1.
Record Keeping
In order to pay for a medical expense from your HSA, it must be a qualified expense. Now is a good time to make sure you have an accurate record of your medical expenses for the year. Make sure you separate the expenses for which you have reimbursed yourself from your HSA from those that you paid for out-of-pocket. You'll want to keep receipts for all medical expenditures paid from your HSA with your 2005 tax records. Place the "non-reimbursed medical expenses" in a separate file, keeping them with the concurrent year's tax records in whatever year you decide to reimburse yourself.
Over-funded Accounts
The penalty for over-funding your HSA is a whopping 6%. I actually over-funded my own account, because I had set it up in January yet made the maximum deposit as if it had been in effect since January 1. (Yes, I should have known better!)
You have until April 15, 2006 to withdraw excess funds for the 2005 tax year to avoid the penalty. My HSA administrator fortunately notified me of my mistake, but they had no obligation to do so. It is your responsibility, so make sure you check into this if you think you may have over-funded you account.
2006 Deductible Changes
The minimum deductible for HSA-compatible health insurance plans in 2005 was $1,000 for individuals and $2,100 for families. In 2006 this will increase to $1,050 for individuals and $2,100 for families. If you currently have an HSA-qualified plan with the lowest eligible 2005 deductible, that deductible will automatically go up on January 1 to the new minimum.
Strategies to Maximize Your Tax Benefits
There are basically three different strategies you can take when deciding how to fund your health savings account.
1. Put no money in the account, except when you incur a medical expense. This strategy allows you to legally "launder" any money used to pay medical expenses. In other words, by depositing money into your HSA, then immediately withdrawing it to reimburse yourself for medical expenses, you are making your medical expenses all tax-deductible. You may want to use this strategy if you are on a tight budget and want to keep your cash outlay as low as possible.
2. Fully fund the account, or at least put in as much as possible based on your budget. Take money out of the account any time medical expenses are incurred, and let the rest grow tax-deferred. This strategy will maximize your tax deduction, while making your HSA funds available to pay any non-covered medical expenses before your deductible is met.
3. Fully fund the account, but pay all medical expenses from a non-HSA account. Reimburse yourself for medical expenses at a later date. This strategy will allow you to maximize your tax deduction, and will also allow you to maximize the tax-deferred growth of your HSA. You can then reimburse yourself, tax-free, at any time in the future for medical expenses incurred over the ensuing years. (For an example of this strategy, see Maximize Your HSA, Issue 3).
To maximize the potential growth of your funds, you may want to make your 2006 deposits as early in the year as possible. Any growth in your account is tax-deferred, like an IRA. I plan on making my deposit the first week in January.
If you do not yet have an HSA-qualified health insurance plan, please give us a call at 866-254-5121 as soon as possible. By getting your HSA-qualified health insurance in place by January 1, not only will you be able to maximize your tax benefits, but you also may be able to lock in 2005 rates for the next 12 - 24 months.
Posted by Wiley Long at 12:46 PM | Comments (1)
December 01, 2005
Council of Insurance Agents Survey Shows Health Savings Accounts Gaining Traction in Marketplace
After initial skepticism from employers, the concept of Health Savings Accounts (HSAs) coupled with High Deductible Health Plans (HDHPs) is beginning to gain traction in the marketplace, according to the latest Employee Benefits Market Survey released Monday (11/28/05) by The Council of Insurance Agents & Brokers.
The Council represents the leading domestic and international commercial insurance brokers who annually write 80 percent of the commercial property/casualty premiums and administer billions of dollars in employee benefits accounts.
The fall 2005 survey showed a definite uptick, compared with spring 2005, in the number of commercial clients who are viewing High Deductible Health Insurance Plans and HSAs as a health benefits option to be offered in the workplace. In the spring, 40 percent of survey respondents said only a handful of their customers - 1-10 percent - were inquiring about the HDHP/HSA approach. This fall, those reporting minimal interest from their clients had dropped to 22 percent, while almost one-third of the respondents said more than half of their customers were interested in HDHPs and HSAs.
In addition, 71 percent of the respondents reported actually selling an HDHP-HSA plan for 2006 compared with 65 percent who reported selling a plan in the spring survey.
According to the fall survey, about two-thirds of employers who offer an HDHP-HSA plan do so as an option, rather than a replacement for an existing plan. Asked how much the typical employer is contributing to the employee's Health Savings Account, 29 percent of the survey respondents said their clients were offering between $500 and $749 a year. But 23 percent of the respondents reported that their employer clients were not making any contribution whatsoever.
The most common reason cited for resistance to HSAs in the workplace was the complexity of the concept and the amount of education required for plan participants, according to 86 percent of the respondents. Forty-seven percent cited the inability of those plans to carve out prescription drug coverage, and 34 percent said difficulty in coordinating HSAs with existing flex spending or health reimbursement accounts as the reasons employers were wary of the new approach.
The survey showed that group medical expenses increased for all sizes of accounts during the past six months, with three- fourths of the large accounts (502 or more employees) experiencing rate hikes of from 1-20 percent when they renewed their medical insurance. The rate increases were even sharper for small (50 or fewer employees) and medium (51 to 500) businesses, with nearly two-thirds of those accounts experiencing a 10-20 percent increase in premiums, and an additional 12 percent of small accounts and 7 percent of medium accounts experiencing premium increases of 20-30 percent.
The benefits brokers reported that employers are dealing with the rising price of group medical coverage by increasing deductibles and co-pays for their employees, increasing the employee share of premium costs, assessing prescription drug co- pays and instituting up-front hospital and outpatient co-pays.
The least likely option taken by employers, the survey showed, was discontinuing medical coverage. Ninety-six percent of the respondents said only 1-10 percent of their customers picked discontinuing medical coverage as an answer to rising costs.
"Benefit design has not deteriorated even in the face of rate increases because employers are having a very difficult time finding and retaining qualified people," said one benefits broker from the Southeast.
The brokers said the cost of group life benefits has held steady or dropped 1-10 percent for the vast majority of their accounts of all sizes. The only significant increase in group life premium rates reported in the survey was for small accounts, where 25 percent of the brokers reported that premium rates for renewals had increased 1-10 percent since the last survey in May 2005.
Posted by Wiley Long at 10:19 AM | Comments (0)