President Bush in his State of the Union address encouraged Americans to open health savings accounts (HSAs). He said that it would help to fight the nation's out-of-control medical costs. It was well received by many lawmakers. But the local employers say that HSAs are the means by which the doctors cure the country's health finance ills.
Gary Laugharn, regional client leader in Houston for Hewitt Associates said that HSA model creates obstacles to companies who are trying to use it in a meaningful way.
AdvertisementHe said that its major drawback is that workers have an aversion to high-deductible health insurance policies, which by law must be coupled with the savings accounts.
Brett Haugh, a principal at Houston-based Employee Benefit Solutions, said that in a local employer survey it was seen that only 8 of the 137 respondents offered their workers health savings accounts. And recently in Houston, interest in HSAs is begun all this results in the aversion for HSA plans by the employees.
HSAs were created in 2003 as tax-sheltered savings accounts that employees can take with them when they change jobs. According to the law, the accounts must be paired with health insurance plans which carry high deductibles in the order of $1,050 for an individual and $2,100 for a family but has a lower monthly premium.
But there is a limit on the investment in the accounts each year. Contributions are limited to $2,700 for individuals and $5,450 for families.
The money has to be spent only on medical care. HSAs can be rolled over but if the new employer doesn't offer a required high-deductible health plan, then the worker has to discontinue his contribution to the savings account. But the worker can either spend or save money from the account.
Bush and other advocates of HSAs feel that this would reduce the health care costs as people are more likely to spend less money on medical care and are wiser about their treatment. The president is proposing a tax credit for all those who buy HSA-eligible, high-deductible health insurance on their own rather than from their employers. He also plans to increase the minimum amount that should be invested in the savings account.
But problems may arise due to the lack of available, objective information about the cost and quality of health care providers, facilities and procedures. Hence Haugh said that transparency in pricing is very essential.
Jim Wilhite, director of compensation and benefits at Baker Hughes, said that the oil services are offering HSAs to their employees and that 70 of its 12,900 employees have signed up. This low rate is due to the lack of good information about health care for consumers. Hence medical community should step forward in providing vital information about to the employees.
Laugharn also said that workers generally don't like high-deductible plans and would rather prefer their monthly premiums. This is seen in the case of Continental Airlines.
Mike Ellis, senior director of benefits and compensation at Continental, said that due to the diverse work force certain decisions have to be made which will benefit a large percentage of the employees.
At Baker Hughes, Lisa Turner, the benefits supervisor said that the number of workers enrolling in high-deductible plans has doubled in the current year. But the number is still low with just 350 workers. The majority of them are enrolled in the company's lower-deductible preferred provider organization.
Critics of HSAs say the accounts favor the wealthy, who generally have more money to sock away in savings accounts and who more easily can afford high deductibles. The Consumers Union decried the plans and the proposals.
Bill Vaughan, senior policy analyst for Consumers Union, said that the tax detections do nothing as most of them are in the zero or 10 % tax bracket.
In some cases for example in Missouri city the employee insurance committee offered only HSAs with high-deductible plans to its 267 workers. It said that by HSA the city would save $1.1 million on premiums, nearly half of its previous total cost of $2.8 million.
Haugh said that it will take some time for the HSAs to pick up speed. 22 company survey respondents plan to give serious consideration in incorporating the HSAs plan in 2006.