Health Savings Accounts
In The Know
"Health Insurance: A Guide for Consumers"
Florida Department of Financial Services
Download this 44-page guide to selecting health insurance, filing claims, medical privacy and other topics.Naples business owner Dustin Goeggle offers a Blue Cross and Blue Shield PPO health insurance plan to his 26 workers. He splits the costs 50-50 with employees. Typically 80% of his employees sign up for the plan, but this year premium increases took their toll, and Goeggle couldn't get the 75% participation required to qualify for small-group coverage.
So Goeggle, owner of Wholesale Screen Printing, tried a new tactic and offered a health savings account, or HSA, option as well as the PPO. Instead of paying $37.51 a week for PPO coverage, employees in the HSA pay only $10 a week for a high-deductible policy. The catch is that rather than a $20 co-pay for doctor visits, the employee must pay the entire doctor's bill out of his own pocket or from money deposited in the tax-free savings part of the HSA (see "HSAs: How They Work"). Goeggle says that only five or six employees chose the HSA option, but the number was sufficient to allow the company to continue offering health insurance.
Although Goeggle says that the HSA plan won't save him much if any money, in many cases business owners will save on their healthcare expenses because an HSA shifts more of the costs to employees.
HSAs were created by the Medicare Prescription Drug Improvement and Modernization Act in 2003. They became readily available in Florida last year when Gov. Jeb Bush signed legislation requiring all insurance companies in Florida to offer HSAs or another type of consumer-driven plan, a health reimbursement arrangement account (HRA). More than a dozen carriers who sell to small businesses, including Aetna Health, AvMed, Humana and United Healthcare, began actively marketing the plans this year.
NEW OPTION: Dustin Goeggle now offers an HSA for his employees.As of July 31, there were 4,058 small-group HSA policies with 31,599 enrollees, up from only 39 policies with 132 enrollees in October 2004, according to the Florida Department of Financial Services.
Citing data from Forrester Research, Cigna Healthcare reports that 38% of all employers will offer a consumer directed health plan like an HSA by 2007 and that by 2010, 44 million people will be enrolled in the plans. Says Jake Biscoglio, vice president for consumer-driven health at Cigna Healthcare, "There is a fundamental shift in the industry."
HSAs: How They Work
An HSA combines a savings account with a high-deductible (or catastrophic) health plan. Contributions made to the HSA by employees are tax free. The money can be withdrawn and used to pay for the health insurance deductible and any qualified medical expenses.
As of 2004, 19.2% of Floridians under age 65 were uninsured, according to the Florida Health Insurance Study, a telephone survey managed by the Agency for Health Care Administration. That number is up from 16.8% in 1999.
Florida was one of only a few states -- along with Delaware, Montana, Tennessee, Oklahoma, South Carolina, Massachusetts and New Hampshire -- that showed an increase in the percentage of uninsured from 2002-03 to 2003-04, according to the U.S. Census Bureau's August 2005 report "Income, Poverty and Health Insurance Coverage in the United States."