Health care cost increases are causing consumers to change their behavior
Programs that incorporate health savings accounts, health reimbursement arrangements and other types of personal health accounts could start to have a noticeable effect on the group health market starting in January, says a benefits executive.
Researchers at Celent Communications, Boston, say workers will hold about 740,000 HSAs with a total account value of about $800 million in 2006, and hundreds of thousands of other workers have HRAs.
Jerry Ripperger, director of consumer health at Principal Financial Group Inc., Des Moines, Iowa, says he sees plenty of evidence of the rise of the “consumer-driven health plan” market at Principal.
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Earlier this year, “there were a lot of employers kicking the tires,” Ripperger says. “They’re going to buy on Jan. 1.”
The Internal Revenue Service gave birth to the HRA in 2002, by issuing a revenue ruling that permitted HRA holders to roll over account funds from year to year without including the rolled over assets in taxable income.
Congress included the provision that created the HSA program in the Medicare Modernization Act of 2003.
The HSA law offers employers and employees attractive tax breaks but requires employers to combine the accounts with specific types of high-deductible health coverage and to turn control of the assets over to the employee account holders.
Employers that offer HRAs can combine the HRAs with any type of health coverage, and they retain control over HRA assets.
For now, the HRA seems to be surviving the arrival of the HSA, Ripperger says.
The HRA is more popular with large employers that want to offer rich benefits and smaller employers that want control over account assets, while the HSA tends to be more popular with owners of small and midsize businesses who want to cut their taxes, Ripperger says.
Ripperger continues to see some room for improvement in the rules governing the HSA program.