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Life Health > Health Insurance > Life Insurance Strategies

Employees Embrace Health Savings Accounts

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While it is still too early to tell what the outcome of the health care reform debate in Washington will be, new research provides additional motivation for brokers to continue recommending health savings accounts to their clients.

Brokers who sell health plans that qualify individuals to establish HSAs understand that employers are increasingly turning to HSAs because they lower premium costs, promote tax-free savings and help engage employees in their health and well-being.

Now brokers have another selling point: HSA owners overwhelmingly like their accounts and would recommend them to others, according to a new national survey of HSA owners conducted by OptumHealth.

The survey showed 82% are satisfied with their accounts, and nearly three-fourths would recommend them to a friend or family member. Three out of 10 respondents said they wouldn’t have any health insurance at all if it were not for their HSAs.

The research is timely, serving as a backdrop against health care reform. In many cases, HSAs already deliver on the goals of health care modernization, including reducing the number of uninsured, promoting preventive treatment and expanding access to care. According to the survey, 78% of respondents believe the continued HAS availability should be part of any health care reform passed by Congress.

HSAs provide brokers another option in a rapidly changing market that requires alternatives to traditional solutions. Here are some of the advantages of HSAs.

Moderating costs. HSAs are tax-free health spending and savings accounts available to individuals and families who have qualified high-deductible health insurance policies as determined by IRS regulation. Individuals deposit money on a pretax basis to pay for doctor visits, prescriptions and other expenses, as well as to save for future medical expenses and build savings long-term.

HSA-eligible health plans typically have lower premiums than other plans because of their higher deductibles. Premiums decline an average of $3,836 when an employee switches from a PPO plan to an HSA plan, according to the Kaiser Family Foundation and Health Research & Educational Trust. Affordability is a key attraction of HSAs. OptumHealth’s survey found 56% of the respondents said they selected an HSA plan because it was the most affordable health insurance choice.

Premium savings can compensate all or in part for the difference in individual financial responsibility for out-of-pocket costs. When health coverage is employer-sponsored, employers can also contribute to employee HSAs. Account owners keep their HSAs even if they change jobs, get married, have a child, divorce or retire.

No “use it or lose it” rule. Unlike with flexible spending accounts, employees with HSAs can decide whether to spend their money on medical expenses now or build savings for expenses later. In some respects, HSAs are similar to IRAs or other tax-deferred retirement savings programs, but with a major difference–when account holders spend their HSA dollars is entirely up to them.

Saving for future medical expenses. Employees open and deposit money into their HSAs for a variety of reasons, including saving money on taxes and receiving employer contributions. But the number one reason cited by HSA owners surveyed by OptumHealth was to save for future health care expenses.

Understandably, employees are concerned about how they will pay for their medical needs as they grow older. With the recent decline of the stock market and with the long-term viability of pensions, retiree health plans and the Social Security system in question, many people are taking matters into their own hands by building up nest eggs in their HSAs.

That nest egg will need to be significant. According to Fidelity Investments, a 65-year-old couple retiring in 2009 will need approximately $240,000 to cover medical expenses in retirement, even with Medicare insurance coverage. Retiree health care costs have increased 50% since 2002.

Engaging consumers. Another advantage of HSAs is that HSA owners of all ages and incomes are also more deeply involved in managing their health care costs and well-being.

Three-fourths of HSA owners surveyed said having an HSA plan has prompted them to be more conscious of how they spend money on medical care. And 64% said they inquired about generic options for medication. Increasingly, that kind of active employee engagement is what employers are looking for from their health plans and health account providers.

Rising HSA enrollment. HSAs are quickly being adopted by employers and individuals. America’s Health Insurance Plans reported earlier this year that the number of people with HSA-eligible coverage rose to 8 million in January 2009, up nearly 2 million from the year before.

More than one half of large companies offer workers such a plan, according to a Watson Wyatt Worldwide and National Business Group on Health survey. Another 8% said they expect to adopt a consumer-directed plan by 2010.

Satisfied owners. Employers who are introducing HSAs often worry that employees will be confused by them and reluctant to accept more responsibility for their health and their health care spending. This concern is often unfounded.

Employers can–and many do–help employees navigate these new responsibilities with ancillary benefits such as wellness coaching, smoking cessation programs, and health and wellness events that address the unique needs of their populations. For example, some employers bring mobile mammogram units right to the workplace every year.

With increased employer demand, more HSA use by consumers, and the positive responses from HSA owners about their experience, these accounts remain a valuable tool for brokers.

Jim Priebe is vice president of sales and marketing for OptumHealth Financial Services, part of UnitedHealth Group Inc., Minnetonka, Minn. His e-mail is [email protected]. Karli Dunkelberger, vice president of regional sales for OptumHealth, is based in Orange County, Calif. E-mail: [email protected].


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