Health Savings Account Blog

Providing top-flight health insurance for workers always has been a high priority at Loop accounting firm Ostrow Reisin Berk & Abrams Ltd.

With competition fierce to recruit and retain accountants, the firm is not about to change its focus now, even as rapidly rising health-care costs eat into profits, said Phil Dunne, administrator at the 85-employee firm.

"We've never tried to take the inexpensive way out," he said. "Our employees work hard and we need them to be healthy."

But as the firm examines the best options this summer in preparation for a Sept. 1 renewal date, what's different this time is the growing number of "consumer-driven" health plans available that include a deductible of $1,000 or more and are tied with a health savings account or health reimbursement arrangement. The plans can be set up so employees have a financial incentive to spend less on health care, often reaping the savings themselves.

In the Chicago area, 23 percent of employers offer consumer-driven health plans, while 29 percent are considering adding one in 2007, according to a survey of 310 area employers conducted by GCG Financial with Milliman Inc., a Seattle-based consulting firm. Many of the plans are new, with 12 percent of respondents indicating they added a consumer-directed plan for the first time in 2006, Levitz said.

As a result, insurers are expanding their offerings. In 2005 Blue Cross and Blue Shield of Illinois signed on 11,000 members to its first consumer-directed plans, said Kirk Pion, director of strategy innovation and delivery. Now 209,000 of its total 6.9 million members are in consumer-directed plans, compared with 5.2 million in standard PPOs and about 860,000 in HMOs, he said.

At employers offering the Blue Cross consumer-driven plans, about 45 percent of employees on average are opting for them, Pion said. Plans married with health savings accounts have minimum deductibles of $1,050 for individuals, but many firms opt for deductibles as high as $2,500 to lower monthly premiums, he said.

Tremendous growth

"Driven by small employers, we've seen a tremendous pickup in HSA growth," Pion said, noting that premiums for consumer-directed health plans tend to be about 15 percent lower than Blue Cross' most popular PPO with a $500 deductible.

Still, it's not always easy to persuade workers to try a new approach, Levitz said. Education plays a big role, while many employers also use financial incentives.

Gurnee-based Eirich Machines, a 70-employee manufacturer of industrial mixers and blenders, first considered a consumer-directed plan in 2005 when it confronted a 20 percent increase in health insurance costs, said Joe Pils, chief financial officer.

It offered the high-deductible plan with an HSA for the first time this January and encouraged employees to try it by paying the monthly premium in its entirety, while employees choosing other options paid $120 a month out of their pocket. As further incentive, Eirich contributed $500 toward single employees' health savings accounts and $1,000 for those opting for family coverage. As a result, 31 of 63 employees on the company's health insurance benefits went with the new plan, he said.

Accounting firm Ostrow also pays the full premium on an individual's consumer-directed health plan, compared with paying 80 percent of a standard PPO premium, but just seven of 55 people on the firm's insurance have opted for the HSA plan, he said. Many people are reluctant to try it because they don't understand it and are afraid of the deductible, he suggested. "Some people can make calculations and figure out their risk, but most people don't know" what their health-care expenses will be, he said.

Curbing costs

Proponents of consumer-directed health plans suggest the plans help curb costs over the long term by encouraging people to think twice before going with the most-expensive care. They encourage workers to look for lower-cost labs and clinics as an alternative to having tests done at a hospital and to choose generics over branded drugs, Levitz said.

But not everyone buys the premise. "I really don't believe people are wasting money on health care," Dunne said. "People are really busy and when you're sick is probably not the best time to be determining which anesthesiologist is the cheapest," he said.

At America's Second Harvest The Nation's Food Bank Network, a non-profit in Chicago with 108 employees, Daphne Logan, vice president of human resources, also has reservations.

"Everyone is talking about going to this consumer-driven model but I don't know that it's necessarily proven," Logan said.

For now, the non-profit is steering clear of the plans because they don't fit its culture of attracting the best workers by offering first-rate benefits, she said. "We've always had a rich benefit menu. We want to be competitive with the market," she said.

Instead, to keep premiums down, the organization has been aggressive about shopping around for the best offering, commissioning GCG Financial for help.

In the past five years its HMO premiums have increased 49 percent while its PPO premiums have climbed 59 percent, Logan said.

With more choices available, picking the best plan is becoming more complicated, even for accountants, Dunne said. "It's a confusing concept," he said. "It's hard to say one is right and one is wrong. It's such an individual decision."

HSA for America can help reduce the confusion. With extensive HSA information and the ability to compare plans side by side, you won't find a better source to learn about Health Savings Accounts.