Thursday, October 28, 2004
A revolution is under way
[Mary Beth Franklin & Kimberly Lankford, "A New Way to Save on Premiums," Kiplinger's, November 2004.]
The latest issue of Kiplinger's magazine includes this excellent article on HSAs:
Looking for relief from soaring health-insurance costs? You just might find it this fall as more employers -- including the federal government -- begin offering a new choice: a high-deductible policy tied to a health savings account (HSA). The high-deductible policy will cut your monthly premiums while the savings account will cut your taxes.
If your employer doesn't offer the option during this year's open season, you might want to start agitating to have it added ASAP. If you're self-employed and buy insurance on your own, you may already have a high-deductible policy because anything else can be prohibitively expensive. If so, you may open a tax-saving HSA on your own.
The plans became available this past January, but you're forgiven if you know little about them. Employers are just beginning to build them into benefit plans. By this time next year, though, HSAs will be widespread. A survey of nearly 1,000 employers, conducted by Mercer Human Resource Consulting, found that three-fourths of them expect to offer HSAs for 2006. "We're looking at a major market change unlike anything we have seen before," predicts Linda Havlin of Mercer's health-care and group-benefits consulting practice.
Bill Lomel, who owns a roofing company in Atlanta, is an early convert. "I was just so discouraged about the cost of health insurance," he says. He was already struggling to pay $750 a month for insurance for himself and his three children when he got a notice that the cost of the group policy for his employees was going to soar. "I thought, There's no way I can charge enough for anything in my business to cover that expense. I want to offer good competitive benefits to my employees, but I can't."
Now, maybe he can. He started by opening an account for his own family. After searching eHealthInsurance.com for HSA-eligible policies, he selected one from Golden Rule that cost just $250 per month. The deductible is a hefty $5,000 per year, but Lomel is saving $6,000 a year in premiums and investing almost that much in a health savings account. He'll use the HSA to pay extra out-of-pocket expenses and to save for future costs.
Lomel was so impressed with his experience that he plans to fund HSAs for his 25 employees in lieu of offering group health insurance that was costing him up to $1,100 per month for each of his employees' families. By switching to high-deductible policies, he'll save thousands of dollars in monthly premiums. He plans to use some of that money to contribute to his employees' HSAs, which they can then use for out-of-pocket costs.
"What I like about HSAs is that they force consumers to be invested in their health care," says First National Bank president Mark Young. He notes that when an employee's son injured his ankle, the doctor diagnosed a sprain and prescribed a boot and crutches, which his office could supply for a fee. The employee decided to buy the boot at a discount drugstore and borrow crutches from a neighbor. "Therein lies the benefit of an HSA," says Young. "If consumers don't spend the money, they can carry it forward to the next year."
For many self-employed people, early retirees and part-timers without benefits at work, an HSA will often prove the best choice. That's what Carl Blachowicz discovered when his wife, Debbie, retired from AT&T. As the owner of a one-man auto-repair business in Orlando, Carl didn't worry about insurance as long as Debbie was working: The couple paid about $80 a month for coverage for themselves and their two children. But when Debbie retired, the premium would have jumped to more than $1,200 to stay on the AT&T policy.
Then Blachowicz discovered a better way to protect the family. Debbie stayed on the AT&T policy -- for $440 a month -- while Carl and the kids shifted to a policy from Assurant Health that had a $5,000 deductible. Premiums cost $230 per month. Most of the savings goes into an HSA.
HSA contributions lower the family's tax bill, and because Carl is self-employed, he can also deduct 100% of his premiums. He currently keeps the HSA money in Assurant's fixed-rate account, which is earning 3% per year, and will switch to an investment account once he builds a bigger balance. "It's one of the better things I've done since I've been in business," he says.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
[Mary Beth Franklin & Kimberly Lankford, "A New Way to Save on Premiums," Kiplinger's, November 2004.]
The latest issue of Kiplinger's magazine includes this excellent article on HSAs:
Looking for relief from soaring health-insurance costs? You just might find it this fall as more employers -- including the federal government -- begin offering a new choice: a high-deductible policy tied to a health savings account (HSA). The high-deductible policy will cut your monthly premiums while the savings account will cut your taxes.
If your employer doesn't offer the option during this year's open season, you might want to start agitating to have it added ASAP. If you're self-employed and buy insurance on your own, you may already have a high-deductible policy because anything else can be prohibitively expensive. If so, you may open a tax-saving HSA on your own.
The plans became available this past January, but you're forgiven if you know little about them. Employers are just beginning to build them into benefit plans. By this time next year, though, HSAs will be widespread. A survey of nearly 1,000 employers, conducted by Mercer Human Resource Consulting, found that three-fourths of them expect to offer HSAs for 2006. "We're looking at a major market change unlike anything we have seen before," predicts Linda Havlin of Mercer's health-care and group-benefits consulting practice.
Bill Lomel, who owns a roofing company in Atlanta, is an early convert. "I was just so discouraged about the cost of health insurance," he says. He was already struggling to pay $750 a month for insurance for himself and his three children when he got a notice that the cost of the group policy for his employees was going to soar. "I thought, There's no way I can charge enough for anything in my business to cover that expense. I want to offer good competitive benefits to my employees, but I can't."
Now, maybe he can. He started by opening an account for his own family. After searching eHealthInsurance.com for HSA-eligible policies, he selected one from Golden Rule that cost just $250 per month. The deductible is a hefty $5,000 per year, but Lomel is saving $6,000 a year in premiums and investing almost that much in a health savings account. He'll use the HSA to pay extra out-of-pocket expenses and to save for future costs.
Lomel was so impressed with his experience that he plans to fund HSAs for his 25 employees in lieu of offering group health insurance that was costing him up to $1,100 per month for each of his employees' families. By switching to high-deductible policies, he'll save thousands of dollars in monthly premiums. He plans to use some of that money to contribute to his employees' HSAs, which they can then use for out-of-pocket costs.
"What I like about HSAs is that they force consumers to be invested in their health care," says First National Bank president Mark Young. He notes that when an employee's son injured his ankle, the doctor diagnosed a sprain and prescribed a boot and crutches, which his office could supply for a fee. The employee decided to buy the boot at a discount drugstore and borrow crutches from a neighbor. "Therein lies the benefit of an HSA," says Young. "If consumers don't spend the money, they can carry it forward to the next year."
For many self-employed people, early retirees and part-timers without benefits at work, an HSA will often prove the best choice. That's what Carl Blachowicz discovered when his wife, Debbie, retired from AT&T. As the owner of a one-man auto-repair business in Orlando, Carl didn't worry about insurance as long as Debbie was working: The couple paid about $80 a month for coverage for themselves and their two children. But when Debbie retired, the premium would have jumped to more than $1,200 to stay on the AT&T policy.
Then Blachowicz discovered a better way to protect the family. Debbie stayed on the AT&T policy -- for $440 a month -- while Carl and the kids shifted to a policy from Assurant Health that had a $5,000 deductible. Premiums cost $230 per month. Most of the savings goes into an HSA.
HSA contributions lower the family's tax bill, and because Carl is self-employed, he can also deduct 100% of his premiums. He currently keeps the HSA money in Assurant's fixed-rate account, which is earning 3% per year, and will switch to an investment account once he builds a bigger balance. "It's one of the better things I've done since I've been in business," he says.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
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