Overlooked fix can ease health insurance woes
The headlines are ominous: Nearly 44 million Americans lack health insurance, voluntarily or otherwise. More than half of them own or work for small businesses.
One solution is health savings accounts, which were created by the Medicare prescription drug law of 2003.
Trouble is, the vast majority of small-business owners and workers are unaware of these accounts, also called HSAs.
Still, these accounts are emerging as an option for employers to save money while giving benefits to their workers. Widespread acceptance requires more education and further price and tax incentives, experts say.
HSAs, which must be paired with a high-deductible health-insurance policy, allow individuals and/or employers to put money aside for workers' qualified medical expenses up to the amount of the policy's deductible.
The early signs are encouraging to those hoping to reduce the ranks of the uninsured. In the first nine months, 438,000 HSAs were opened nationwide, says the trade association America's Health Insurance Plans. That's four times more than signed up in three years for Medical Savings Accounts, which HSAs replaced.
About 79,000 of the HSAs were at small employers, 16 percent of which had not previously offered employee health insurance.
The attractions are obvious. Premiums for high-deductible policies are relatively low. HSA contributions are mostly tax-free. Employees own their accounts, so they take them if they change employers. Contributions accumulate if they're not used.
HSAs aren't for everyone. High-deductible policies can be a financial drain on people with large families or big medical problems. So far, HSAs have been more popular with high-wage earners. People with low wages are more likely to pick an HMO, where they pay a small charge per doctor visit instead of the full cost of up to a $2,600 deductible.
Carson McBeath & Boswell, a medical practice in Long Beach, Calif., offers its 13 employees an HSA along with HMOs and preferred-provider organization policies through CaliforniaChoice, office manager Susan Olson says.
CMB will pay the full amount for one of the PPO policies. Or, if an employee chooses the less-expensive, high-deductible policy, CMB puts the money it saves into the HSA. The majority of the staff has chosen the HSA.
Both employers and employees must be educated before they will accept HSAs, Olson says, a service provided CMB by broker Lee Freeman of Beta Benefits in Santa Ana, Calif.
''I try to get employers to commit some of their [health insurance] money for HSAs," he says. ''Once companies understand it, they usually encourage their employees to take it."
HSAs should be an option for employees, not the only type of coverage, says Ron Goldstein, president of Choice Administrators, which manages CaliforniaChoice for employers. ''An HSA might not be the best choice for people with several children or medical problems."
Some companies, such as iLeads in Newport Beach, Calif., have great employee participation in HSAs. All 12 employees at the Internet marketing firm have chosen HSAs offered through Blue Cross of California, controller Teresa Luke says.
