HSA Said To Make Business Sense

September 24, 2004
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GRAND RAPIDS — Doug Barber is an enthusiast about health savings accounts who has a somewhat different perspective on the product as it makes its way into the business world.

“I’m not saying it makes sense for everybody,” he told the Business Journal.

“It might not work for older people in some circumstances or people who are chronically ill. But it can be very attractive to many business people — for example, some of the physicians’ and dentists’ groups we work with.”

Barber is a certified financial planner and a certified life underwriter who works out of Jackson for the Rehmann Financial Division of the Rehmann Group. He also is a sales rep for Blue Cross Blue Shield

He said the attraction that the HSA has to the owners of businesses such as medical practices is that they usually already have contributed the maximum possible to their 401(k) accounts.

“What a health savings account does, then,” Barber said, “is enable them to shelter quite a bit more money from taxes.”

He said the prospect of high deductibles frightens many employees at first because, previously, insurance companies made most of their health care decisions for them. Moreover, he said, the idea of shopping for health care is new to them. But he said the upside is that the savings aspect of HSAs usually has a strong appeal.

In Barber’s view, HSAs’ incentive to shop will bring to bear a great deal of badly needed market discipline in the health-care industry.

He said he also believes HSAs can have very important long-term and old-age financial benefits for most participants, especially those who work hard to maintain their health.

“Take me, for instance,” he said.

“I’m 41 years old, married, two kids, 6 and 10. If you go back — I’ve been married 15 years this week — if you look back at the 15 years I’ve been married, and say I had a high-deductible plan, there’ve only been three of those 15 years that I’ve ever hit the deductible.”

Those three years, he said, were when his children were born and, this year, when his wife required minor surgery.

“If you go back and look at every other year,” Barber said, “I’m the kind of guy that this makes a lot of sense for. I’m healthy and in 3 1/2 years with the Rehmann Group, I haven’t had a sick day yet. My family is not sick.”

He explained that if high-deductible HSAs had been around for the past 15 years and he had maxed out the savings, he and his family now would have a $60,000 medical savings account, plus the tax-free interest it would have accumulated.

He explained that if he stays healthy, the money would be there in the future as a guarantee of personal independence.

“I’ll go for putting that into a savings account, knowing I’m going to have it year after year. I’m not likely to use it.

“If I do, I have full coverage for catastrophic issues,” he said.

“But otherwise, it’s in an interest-bearing account and it will roll over year after year. There’s a pretty good likelihood that when I’m 65, I’m going to have some extra money for retirement. Or the law allows you to purchase long-term care, or Medicare Part B. 

Aside from that, Barber said, the program also benefits his employer.

“If you did a comparison with a traditional plan — say a Community Blue Plan I or Plan III, depending upon your area and your industry and some other factors — the family premium’s going to be $1,100 to $1,000 a month.

“Well, if you go out and write a similar plan with a $5,000 family-deductible plan,” Barber added, “then those premiums go down to $400 to $500 a month.”

To Barber, the truly interesting potential in HSAs is how high deductibles would reveal to health consumers exactly what health care costs.

“Look, let’s say you’ve got a $3 prescription drug card,” he said.

“As consumers, we’ve gotten used to that entitlement. We have no idea how expensive that drug is. It might cost 10 bucks; it might cost 150 bucks.

“I’ve been going to the same dentist for 20 years,” he added. “I never have questioned what his rates are because insurance covered it. In fact, he’s now a buddy of mine, but I have no idea whether he’s expensive or cheap.

“Because of insurance, we don’t shop.”

He said he believes that if health-care consumers start seeing the true cost of their care, they certainly will change their habits and start shopping.

And he implied that a shopping health-care public will cause doctors and dentists, accordingly, to begin charging competitively — that is, to some extent according to what health-care consumers will pay rather than according to the rates that insurers arbitrarily dictate as being “reasonable and customary.”

“It puts decisions back in their hands,” Barber said. “They’ll be thinking, ‘If I’ve got this money, and I chose wisely — if I do a little shopping and I’m cost-conscious — my utilization will stay lower,’ and lower utilization is ultimately going to affect the trends in insurance costs.

“It’s taking that control back,” he said.    

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