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Baltimore Business
Journal IN DEPTH: HEALTH
CARE From the August 13, 2004 print edition Much like retirement savings accounts swept the benefits world in the early 1980s, health care providers are expecting health savings accounts to make a splash among consumers. But don't expect it to happen for a few more years. While health savings accounts, known as HSAs, were made available at the beginning of this year through national legislation, health insurers are going through the painstaking work of designing HSAs according to rules issued by the U.S. Department of Treasury. The design of HSAs, which allow users to put aside tax-free money that earns interest for health care bills, is also crucial as companies are expecting heavy competition among providers once consumers start to catch on. Aetna Inc. was able to get its HSA product out the door earlier this summer and has been selling it to larger corporations. No Maryland company has signed up yet, but two large firms in Virginia have signed up to start offering it to their employees. Aetna officials declined to name the companies because their employees had not yet been informed. Owings Mills-based CareFirst BlueCross BlueShield is expected to make its HSA product available in Maryland in October and nationally for its self-insured large accounts by the beginning of next year. Several other smaller health insurance brokers, such as Kelly & Associates Insurance Group in Hunt Valley, also are designing their own HSA product. "Within a short period of time all of the insurance carriers will have all this in place," said Bill Simmons, president and CEO of Group Benefit Services Inc. (www.gbsio.net), a Hunt Valley-based third-party health insurance administrator and provider of employee benefits. "This is the biggest topic item in professional organizations." The congressional Joint Committee on Taxation is predicting 1 million health savings accounts will be sold in 2004, with that figure rising to 3 million by 2013. HSAs are really part of a national movement in health care to give consumers more control over their medical care. Several insurance companies have been offering consumer-driven health plans that offer patients more flexibility in what doctors and hospitals they visit. In most cases the consumer will have control over the assets in their HSA, allowing them to see firsthand the expense of medical care by using their own savings account. "This is the
next step in giving the participant a chance to figure out how they're
spending their money and to understand it," said Sandy Walters,
executive vice president and senior consultant for Kelly & Associates
Insurance Group (www.kaig.com), a Hunt Valley company that administers
group insurance plans and serves as an insurance broker and consultant.
"This will make someone evaluate and really be in control of what
care they need." The process of developing HSAs has been slow as the Treasury Department has put out a steady stream of updates to the regulations on how they're designed. Also, with any new health care product, the education process is lengthy. While HSAs have been available since the beginning of the year, health care officials expect them to not make an impact until sometime next year or even 2006. But once they get up and running, health care officials expect the competition to be fierce. The accounts will likely be offered through employers, insurance companies and banks. Companies say they will distinguish their HSAs from others offering them through the interest rates they can offer, as well as how they're packaged with their other health plan products. Carriers will tout their doctor and hospital network and show that a consumer's money can go farther by using their network doctors. While HSAs must be trusted to a bank, insurance company or a non-bank trustee, the health care industry expects the accounts to mostly be offered by insurance carriers. "The average
account value is going to be very low, so I'm sure they'll be some custodial
fees from the insurance companies and banks," said Greg Horning,
director of Stout, Causey & Horning, P.A., an accounting firm based
in Hunt Valley that consults clients on health plans. "But I can't
imagine that it's going to be a new profit center. The money is still
going to be made on the insurance side of things." HSAs were established by the Medicare Prescription Drug, Improvement and Modernization Act signed by President Bush last December. The legislation requires that HSAs be available through high-deductible health plans of $1,000 for individuals and $2,000 for families. Businesses offering these savings accounts to employees have the option of contributing to the account. The money can then be used by the consumer to cover medical bills, such as doctor's visits and laser eye surgery, accumulated before reaching their deductible. Industry experts say consumers will be attracted to HSAs because they can go with the employee from job to job, much like a 401(k), and having a high-deductible health plan means a lower monthly premium. Consumers are also able to withdraw from their HSAs at age 65 without a penalty. Aetna's (www.aetna.com) HSA plan made its debut June 1, and the company has signed up at least three large firms. Company officials said it was too early to determine the reaction from their clients' employees. "[The companies are] doing it because of interest from some of their work force and having access to a product that if they don't generate any health care expenses, the money will generate income over time," said Mike Bucci, Aetna's market vice president for national accounts in Maryland, Washington and Virginia. But Bucci said the early adopters don't expect too many of their employees to sign up for an HSA. Consumers need time to learn about and digest the new product. Bucci added that people may not have the means to put aside extra money. Companies offering HSAs or those getting ready to offer them say they expect employees of professional services firms who have higher salaries will drive the initial popularity. "[Employees]
consider their health care needs and if their plan isn't going away
and their contributions aren't changing dramatically, they're content
to stay where they are," Bucci said. "The HSA, because of
its high deductible feature, looks very different to the average employee." Part of the slow adoption from corporations can be attributed to bad timing, Bucci said. The Treasury Department was still ironing out its regulations on HSAs in the first six months of the year, while many corporations were already doing their benefits planning for 2005 and even 2006. But Bucci said companies are interested in HSAs and are starting to ask questions. He expects HSAs to be as popular as Aetna's health reimbursement product, which has signed up more than 200,000 customers since 2002. "It's a discussion point at almost all of the meetings we have with customers," he said. "They'll probably wait to see the experience with the early adopters and maybe look to apply such a product in 2006 or 2007." CareFirst (www.carefirst.com), this region's largest health insurer, doesn't have projections on how many of its customers will sign up for its HSA product, but officials expect it will completely change health care. "It's a movement that's really going to change the way health care is delivered," said Cindy Ottley, director of strategic marketing and product development for CareFirst. "The goal is to create an engaged consumer instead of a passive patient." Tania Anderson is a contributing writer in Arlington, Va. © 2004 American City Business Journals Inc. All contents of this site © American City Business Journals Inc. All rights reserved. |
