Editor’s Note: Health Savings Accounts (HSAs) are a hot topic these days, especially since earning mention in this year’s State of the Union Address as a promising health care solution for small businesses. But they are not for everyone. HSAs and other health products are explained here by insurance expert Cleeland Green. For more: click
Health Care for the Little Guy
Understanding Health Savings Accounts (HSAs)
by Clelland Green, RHU
Consumer Driven Health Plans (CDHPs) are one of the best strategies available to help small businesses manage their health care costs. CDHPs were developed to address the root causes of the rising cost of health care by providing incentives for the wise use of health services. They also are designed to support people with existing, chronic conditions and to provide tools to help members understand health care quality and cost.
The basic elements of these plans are a Health Savings Account (HSA) coupled with a tax-favored savings account that can be used to cover routine expenses. The amounts not used in the HSA can be saved for future healthcare or retirement needs. There are two types of CDHP programs primarily available to employers.
Health Savings Accounts (HSA)
HSAs allow actual contributions to a savings account either by an employee, employer or both. In 2006, individuals can deposit up to $2,700 and families up to $5,400. The contributions are tax-favored and continue to roll over year after year. In addition, employers save on FICA taxes. The interest earned in the HSA accumulates tax-free. The money in the account is available to the employee for qualified expenses, including doctor, hospital, pharmacy, dental and vision services.
Use of the funds are the responsibility of the employee. When the account balance grows, the employee can invest their health savings in other investment vehicles (similar to a 401(k) plan). These plans must be combined with a compatible HSA health plan. Plans provided by JLBG Health–Assurant Affinity have deductibles as low as $1,000 for single coverage and $2,000 for family coverage. The contribution to the HSA may not exceed the plan’s deductible.
Health Reimbursement Arrangement (HRA)
HRAs are an employer-provided benefit where the employer establishes a certain amount of money for employees to use for qualified benefits. Unused amounts can then be added to the benefit in the next plan year. Typically, employers provide a benefit of $500-$1,000 per single and $1,000-$2,000 per family; however, premium savings to the employer could be 50 percent or more.
These benefits are not allowed to convert into cash. The employee may not contribute to them and the employer can place limitations and exclusions as to what can be covered. The employer only has to provide funding for this account when claims are presented to the plan. If an employee doesn’t have any claims, no money is expensed from the employer, which makes an HRA plan savings even greater than an HSA.
Premium savings from an HSA/HRA-compatible health plan combined with employees who are motivated to use their health care dollars wisely, have provided real savings to employers over the last several years.
Debit Cards, Wellness Programs
The best CDHP plans offer debit cards for access to HSA/HRA funds, high-quality health care information, wellness programs, disease management programs, nurse hotlines and other useful tools to help employees make better decisions about their healthcare.
Regardless of whether you want to consider a CDHP or a traditional program, using JLBG Health-Assurant Affinity can lead your business to real savings. Individual members of the association can get group rates only through the association’s program. As the insurance administrator for OREP, we have the product, expertise and depth you need to select the right program.
About the Author
Clelland N. Green, II, RHU is the Executive Vice President of Marketing for USI Affinity. He has 20 years experience in insurance sales and marketing, is a national speaker on health care trends and has published articles in Health Care and Technology, Consumer Directed Healthcare, Disease Management and others. Mr. Green was a 2001 & 2002 finalist ifor Ernst and Young’s Entrepreneur of the Year Award.
OREP, working with USI, one of the ten largest insurance brokerage firms in the U.S., and Assurant Health, provide a menu of health care options nationwide to members and readers of WRE. To learn more about what is available, click http://affinityhealthplans.com/orep or call (866) 633-6322. For purposes of quoting, mention OREP (or Working RE Magazine) as your association/group.
Group Coverage in California
In California, OREP offers real estate professionals true group medical programs through Kaiser Permanente and Pacific Care. Visit http://www.orep.org/medical-benefits.htm or email firstname.lastname@example.org with “California Insurance” in the subject. Please include a phone number where a qualified agent can reach you.