August 28, 2007
@ 11:32 AM
As a small business owner, I’m constantly amazed at the rising cost of health care.
Currently, the cost for health care coverage under my plan with Aetna
is $770 per month. And believe me, it’s a fairly bare-bones plan.
So I’ve been thinking about those new health care savings accounts
(HSA's). In my research I found a report this week from the Conference
Board that says such plans are growing by leaps and bounds.
But they could even be more popular if the health care industry did a
better job explaining how health care savings plans work – and offered
a wider variety of them.
“If people find the information they’re offered about HSA plans
too confusing, the programs will fail,” says Jon Gabel, author of The
Conference Board report and senior fellow at the National Opinion
Research Center. “People are unlikely to switch to plans that they
don’t understand.”
Also known as consumer-driven healthcare plan, health care savings
accounts are a high-deductible health plan combined with a
tax-advantaged spending account. HSA's, which were created by the
Medicare Prescription Drug Improvement and Modernization Act of 2003,
are individually-owned and fully-portable spending accounts. Employer
contributions to HSA's are optional.
The data I found mostly relates to employees who use such plans,
although small business owners and self-employed people can use them,
too. But the numbers look much better from a savings point of view.
The Board reports that in 2005, about 2.4 million U.S. workers, or 3.5
percent of employees with job-based insurance, were enrolled in a
consumer-driven healthcare plan. An average had a deductible of
approximately $1,900 and an employer contribution of $553 in HSA plans
– annually.
Compare that to my $770 per month and now we’re getting somewhere.
In the five case studies included in the Conference Board report, three
of the plans included experienced lower increases in medical claims
expenses during the first year of operation (compared to traditional
health care plans). What does drive the cost of HSA’s up is
catastrophic illness. Some companies experienced increases in claims
expenses related to such illnesses that were similar to or higher than
those in traditional plans, the Board reports.
I’ll keep my eye on health care savings plans and report back
accordingly. But what I’m seeing right now is that HSA’s represent a
significant cost savings compared to traditional health plans, although
that cost could rise if you or someone on your family has a serious
illness or injury.
In that regard, I guess you could call HSA’s the “fingers crossed” plans. We’ll see if that’s really the case.