Blues Preparing To Offer HSAs

August 30, 2004
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SPRING LAKE — Moving to meet emerging market demands, Blue Cross Blue Shield of Michigan is preparing to roll out a trio of health savings account products this fall.

Blue Cross Blue Shield will begin selling three HSAs in early October, in time for Jan. 1, 2005, enrollment. The Blues will add three HSA products to its lineup of traditional and managed-care health plans.

The move comes in response to strong interest from large and small employers who are considering an HSA as an option for their employee health benefits, said Jeff Rubleski, Blue Cross Blue Shield’s sales team manager for West Michigan.

“We’re following the market,” Rubleski said. “What we want to do is give our customers what they need, when they need it.”

A new style of health benefits created under the Medicare Reform Act that President Bush signed into law in December, HSAs are combined with lower-cost, high-deductible health plans. Working in similar fashion to IRAs or 401(k) retirement plans, HSAs allow employees and employers to make pre-tax, tax-free contributions to an individual account.

Participants can use the money in their health savings account for medical expenses such as doctor and dentist visits, prescription and over-the-counter medications, buying medical products, premiums for long-term care insurance, deductibles or co-pays on a health plan, and to continue coverage under COBRA when they leave a job.

Under the new law, anyone under 65 years old and covered under a high-deductible health plan or insurance policy — with a minimum $1,000 deductible for individuals or $2,000 deductible for families — is eligible for a health savings account.

Employees or their employers, or both, can contribute up to the amount of the health plan’s deductible, to a maximum $2,600 a year for individuals, or $5,150 annually for families, into the account. A “catch-up” clause allows people between 55 and 64 years old to make additional annual contributions of $500, an amount that will increase by $100 a year through 2009.

HSAs are seen as one potential solution for employers frustrated with rising health-care costs and the double-digit annual premium increases of recent years. They play into an emerging trend in health benefits known as consumer-driven health care, which places a greater responsibility on employees for their health-care decisions.

Rubleski believes employers can save anywhere from 10 percent to 40 percent on their health-care costs by using an HSA, depending on their plan design.

The thinking behind HSAs and consumer-driven health care is that by connecting people directly to the financial implications of where they go for care and how they access the system, and by providing incentives for healthy lifestyles and behavior, they will become better health-care consumers and make better decisions, which ultimately will begin affecting utilization rates that are a key driver in the escalating cost of health coverage.

“We’re trying to empower a consumer. How that employee uses these tools is going to be the end result that will change the system,” said Ed Ozark, a senior consultant with Varnum Consulting in Grand Rapids.

Ozark and Rubleski spoke last week in Spring Lake at a seminar on HSAs that was sponsored by The Chamber of Commerce of Grand Haven. Ozark believes that HSAs, which mix cost containment with consumerism, represent a “new era” and will become the prevalent form of employer health benefits in the years ahead.

“People are looking for new, long-term strategies,” Ozark said. “This is a new benefit paradigm. This is not just a new benefit plan to throw into the mix and see what happens.”

While employers have shown a high interest in HSAs, they’ve been slow to sign up, largely due to not wanting to be the first to try a new product, a limited product offering in the marketplace and concerns over administering the accounts.

Rubleski believes the latter two issues will resolve themselves as health insurers begin fashioning and introducing HSA products in response to market demand and fund trustees and administrators emerge.

“The banks and the mutual funds are going to come into this in droves,” Rubleski predicted. “It’s supply and demand.”

In addition to Blue Cross Blue Shield, the largest health insurer in the state, Grand Rapids-based Priority Health plans to roll out an HSA product during the first quarter of 2005, bringing further competition to the market in West Michigan.

Employers that are considering or that decide to offer an HSA option on their health benefits can expect significant administrative efforts to educate employees about how they work, Rubleski said.

Another concern about HSAs centers on shifting a greater burden of the cost for employer-sponsored health care onto employees.

But escalating premiums are now the norm for employers and cost-shifting to employees has accelerated the last two years through higher co-pays and deductibles, tiered prescriptions plans, and employers paying a smaller percentage of premiums, Rubleski said.

Although recent data suggest an easing of the double-digit increases in premiums that employers have experienced since 1999, even single digit increases equate to a 40 percent cost increase over five years, forcing even more cost-shifting and leading employers to seek out new options, or even drop health coverage altogether, Rubleski said.

“They’re all saying, ‘we’ve got to do something,’” he said. “This gap here is not sustainable.”

Through an HSA, employers that are going to shift more costs to employees anyway can at least introduce consumerism into the equation and begin affecting the trend, he said.    

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