HSA Program Protects Employers

September 23, 2005
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GRAND RAPIDS — A new debit card program for Health Savings Accounts can save employers money and make health-care payments more manageable for employees.

MedDirect Health Benefits has a new debit card program, MedDirect HSA Plus, which will help ensure that companies do not lose money contributed to an employee's health savings account.

HSAs can be funded by the employee, the employer, or contributions from both. If an employer deposits money into the account and then an employee leaves the company, the money would be lost, said Carl Jasperse, vice president of health benefits for MedDirect. Instead of putting the money in the account, the company can wait until the debit card is used and not risk losing the money.

"By offering access to credit rather than putting hard dollars into the savings account, the cost is dramatically lower to the employer," he said.

MedDirect HSA Plus also can be an advantage for employees by giving them a line of credit up to the deductible amount. When an employee uses the smart debit card and they do not have enough money in their account, the money will be deposited into the account in the form of a tax-deductible employee contribution and then used to pay the bill.

The employee will then be billed by MedDirect and the minimum payment on their credit line will be deducted from their paycheck, in addition to the regular contribution to the HSA, which continues unchanged.

"Really, this is just applying modern credit options to an employee's account," Jasperse said. "It's just making these accounts much more user-friendly."

The minimum payment required of 2 percent of the balance owed or $15 is deducted from an employee's paycheck before they receive take-home pay.

"That's pretty budgetable for most people," Jasperse said.

Employees who do not want to put money in the HSA every paycheck also can wait until it is necessary to use the debit card and then pay it off. The program ensures that employees will have the funding when they need it, even if it is at the beginning of the year, when deductions have not yet been put in their account.

The debit card can be used with any insurer that is HSA-qualified.

"We would set our credit line to whatever is the high deductible of that plan," said MedDirect CEO Greg VandenBosch.

If an employee leaves the company before they have repaid their debt, they can pay off the entire debt at that time or continue to pay as they did previously, but not out of their paycheck.

"We would not change their payment schedule at all," he said.

If the employee fails to pay within 90 days of leaving the company, then the company would pay MedDirect the balance of the loan from an escrow account that is set up at the beginning of the program. The employer is then responsible for collecting any debt from the former employee. But Jasperse said that risk is offset by the use of HSAs, in which employers are paying 15 percent to 40 percent less than they were paying with more traditional health-care benefits programs.

Annual interest on the debit card loans to employees is 13.81 percent. Employees are not able to pay off the loan with money from their HSAs.

"In the new model, they're truly spending their own money," he said of the employees.

Amy Chambers, legal counsel for sales and consumer engaged health-care products at Priority Healthy, said there are two sides to the HSA debit card.

"I think that it will be a nice tool for people who are given an HSA but may not have money set aside for a rainy day," she said.

But if consumers do not stay informed, it could lead to problems, Chambers said. With HSAs, the third-party payment system is stripped away and clients know what they are paying for services, instead of simply making a co-pay. She said that if employees rely on a credit card, that may mask the cost of service and stop customers from considering whether they truly need the health care, or how to get it at the most affordable cost.

"These plans are really aimed at getting people in touch with how much medical services cost," Chambers said of HSAs. "So long as they don't act to mask the cost of the service, then they're on the same page as consumer-directed health care."

Chambers said the industry will continue to see banks working with insurance providers and HSAs.

"I think the whole banking side is really going to grow by leaps and bounds," she said. "MedDirect was certainly ahead of the curve with this product."    

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