Market trends turn more groups to health savings accounts

In most American homes, the rising cost of good health care – like the rising costs of gasoline and home heating – remains a perpetual kitchen-table discussion. It is especially front and center right now as we have just entered the annual open enrollment season – when companies decide which health plan they will offer their work force for the coming year.

This year, two underlying trends are catching the attention of consumers and industry alike, and it appears they will continue to increasingly shape the health coverage market.

The Kaiser Family Foundation reports the percentage of companies with less than 200 workers that offer health benefits is down to 59 percent and falling. Two out of every five of these workers are now without coverage and have to find health insurance for themselves – and their families – some other way. The number of workers searching for their own health insurance is expected to continue to grow.

Search is on

As more Americans search for alternative, affordable ways to find coverage for health care, they are increasingly being drawn to health savings accounts. The Treasury Department forecasts that by 2010, 25 million to 30 million Americans will be covered by HSAs.

Initially a boutique health coverage product, HSAs are now being offered by virtually all of the top insurance companies such as Aetna, Cigna and Blue Cross Blue Shield. The company that pioneered the HSA concept, UnitedHealthcare’s Golden Rule Insurance Co., reports that more than 40 percent of its entire customer base is now covered by HSAs.

Consumers and employers are driving this trend in the market. The percentage of all companies – not just those with less than 200 workers – now offering HSA plans is up to 40 percent. The 75,000 people who work for Kodak will be offered three health plans this open enrollment season, including a plan in which they would not have to pay any premiums but hold a higher deductible – and that plan will include an HSA.

Small and self-employed businesses – where the overwhelming majority of American jobs are being created – continue to turn to HSAs as a cost-effective way to cover workers. Tom Terrill, a suburban Chicago insurance broker, recently told the Chicago Tribune that small businesses are turning to HSAs in greater numbers in the Chicago area because “data is mounting to demonstrate their merits.”

Government is part of the trend as well. In a new contract with Orange County, Calif., the county’s 1,600 sheriff’s deputies have a provision that phases in HSAs as a substitute for what the county traditionally grants to retirees.

Even some labor unions are proposing HSAs be put in their next contract. In Tiverton, R.I., the teachers union proposed moving from traditional health insurance to a high-deductible plan that would include an HSA. The city and the union eventually agreed on a contract without HSAs, but the union’s proposal is noteworthy. Past congressional debates over HSAs once featured organized labor’s opposition; the Tiverton teachers union is an affiliate of the National Education Association, proof that minds and hearts change in time.

Savings and control

The growing popularity of HSAs is rooted in the product’s middle name: savings. A consumer will typically save up to 50 percent on an HSA plan premium compared to traditional health plans.

Equally appealing are the tax advantages. Savings go into an HSA tax deductible, accumulate interest tax deferred, and can be withdrawn tax-free as long as they are used for qualified medical expenses, including vision and dental care.

Further, HSA policyholders have more control over health care budgets, deciding when to spend and when to save. And the money that isn’t spent accumulates year after year earning interest – reserves that can help meet the increased health costs of later life and retirement.

Consumers can now access HSA-specific sites such as www.hsacenter.com, which make it even easier to get information and options.

The market is changing. Employers, self-employed people, workers, consumers and governments are adjusting. But in this cost-conscious environment, it is virtually certain these trends will continue, and many consumers can still benefit from what have been positive changes in health coverage options.

Karen Kerrigan is president of the Small Business and Entrepreneurship Council, a national trade association representing more than 70,000 member small businesses. She may be reached at kkerrigan@att.net.[[In-content Ad]]