Insurers and producers appear to be putting more muscle into promoting supplemental health insurance products and other add-ons to health savings account-compatible high-deductible health plans.
For workers who have HSA-compatible HDHPs, the main HDHP accessory is the HSA itself.
But some marketers are trying to increase revenue and help employers fill in HDHP gaps by recommending that HDHP owners consider buying other insurance products along with the HDHPs.
Nationwide Better Health, a unit of Nationwide Mutual Insurance Company, Columbus, Ohio, recently announced plans to add new voluntary, worksite products aimed at workers who are moving into HSA plans and other account-based health plans.
The Fringe Benefit Group L.P., Austin, is rolling out the Framework Passage program, a collection of supplemental health-related benefits designed specifically to complement an HSA-compatible high-deductible health plan.
This seems to be a good time to introduce HSA-compatible add-on products because “there are so many high-deductible health plans now,” says Brian Robertson, executive vice president at Fringe Benefit Group.
Today, more than 6 million U.S. residents have HSA-compatible, high-deductible health coverage, according to America’s Health Insurance Plans, Washington.
Congress created the HSA add-on niche in 2003, when it passed the Medicare Prescription Drug, Improvement and Modernization Act.
To encourage taxpayers to save for everyday health care expenses, and to discourage taxpayers from making frivolous use of health care, Congress required HSA owners to buy high-deductible health plans.
But Congress also described types of no-deductible, “first-dollar insurance that HSA holders could own along with HDHPs.
The Internal Revenue Service later elaborated on HSA product compatibility rules in a series of notices.
HSA-compatible HDHPs and add-ons cannot offer general, no-deductible or low-deductible medical coverage. But HSA-compatible plans can cover preventive care, such as checkups, mammograms and prostate screenings, without requiring a deductible.
HSA holders can use HSA assets to pay for qualified long term care insurance, health insurance obtained while they are unemployed, and health insurance obtained while they are getting coverage through COBRA or some other federal health insurance continuation law.
HSA holders cannot use HSA assets to pay for most other types of insurance, but they can own critical illness insurance, hospital indemnity insurance, disability insurance and many other types of coverage along with the HSA-compatible HDHP coverage.
The IRS is continuing to release guidelines on how to decide which add-on products are and are not HSA-compatible.
Earlier this year, for example, IRS officials ruled in IRS Notice 2008-59 that a limited-benefit medical plan that provides hospital indemnity benefits and also pays insureds a fixed amount for ordinary physician office visits is not HSA-compatible.
Although the compatibility rules are still evolving, some agents, brokers and health insurers mention in benefits brochures, Web sites and presentations that they offer products that can complement an HSA program, or that products they are selling are HSA-compatible.
Colonial Life & Accident Insurance Company, Columbia, S.C., a unit of Unum Group Corp., Chattanooga, Tenn., introduced the S.I. Secure “HSA-permitted” hospital confinement indemnity product in 2005. Newer Colonial Life hospital indemnity products are also HSA-compatible.
Allstate Workplace, a division of Allstate Corp., Northbrook, Ill., offers HSA-compatible, individually based, payroll-deduction accident and cancer options.
The HumanaOne unit at Humana Inc., Louisville, Ky., offers a menu of HSA add-on products that includes term life insurance, dental insurance and an increase in the lifetime maximum benefit as well as a supplemental accident benefit.
Value Benefits of America Inc., Scottsdale, Ariz., notes, for example, that its Value Hospital Plan sickness and accident hospital indemnity insurance, which pays a fixed amount each day an insured is in the hospital, is HSA-compatible.
But many efforts to promote HSA add-on products have been low-key, and using general-purpose search engines or health insurance quote sites to find HSA add-ons can be difficult.
Fringe Benefit Group has chosen to emphasize HSA-compatibility in the design of the Framework Passage program.
“This program combines some of those worksite products that have been popular and puts them in a little different package,” Robertson says.
The package includes fixed daily indemnity benefits for insureds who need inpatient hospital care, intensive care or skilled nursing facility care. The package also provides accident coverage, some fixed indemnity coverage for inpatient mental health care, and a critical illness insurance option, Robertson says.
Standard Security Life Insurance Company of New York, a unit of Independence Holding Company, Stamford, Conn., is underwriting the program.
Rates start at $33.75 per employee per month. Fringe Benefit Group designed the package as an employer-paid product, and the best rates will go to employers that pay 100% of the premiums, Robertson says.