Vermont has high rate of growth in HSAs
Kelley, Kevin
Rapidly growing numbers of Vermonters are choosing health savings accounts (HSAs) over traditional forms of health insurance.
Enrollments in a high-deductible health plan – a prerequisite for opening an HSA – have more than tripled during the past three years, according to the state’s Department of Banking, Insurance, Securities and Health Care. About 22,500 Vermonters were covered by high-deductible plans in 2006, compared to 7000 two years earlier, Mischa reports.
For the purposes of qualifying for an HSA, a high-deductible plan must require an individual out-of-pocket expenditure of at least $1100, while for a family the deductible is set at double that amount.
Private insurers offering HSA-related coverage also report a steady rise in demand for this type of policy. “It’s been the fastest-growing segment of our’ product selection,” says Blue Cross/Blue Shield of Vermont spokesman Leigh Tofferi.
“Cost and flexibility are the most attractive features” of HSAs, Tofferi suggests.
Money deposited in a health savings account remains tax-free as long as it is not withdrawn for other than medical purposes. A wide range of health costs can be covered through HSAs, including doctors’ visits, dental and eye care, prescription drugs and some non-traditional therapies such as acupuncture.
Insurance coverage linked to an HSA becomes available when the costs of services exceed the deductible.
Untapped deposits in an HSA can also be rolled over from year to year. And an account set up through an employer goes with an employee when he or she changes jobs.
Some Vermont banks say they are experiencing strong growth in both the number and size of the HSAs opened by their customers.
“The average balance has been steadily increasing and the number of new accounts keeps increasing too,” says Dave Estes, a senior vice president withthe Vermont branch of TD Banknorth. Estes declines to reveal either figure, but he does indicate that Vermont has the largest number of HSAs and the most money on deposit in such accounts among the eight states where TD Banknorth does business. That’s a remarkable ranking, given Vermont’s tiny population in comparison to the seven other states, all in the Northeast.
Estes speculates that a disproportionate share of Vermonters are turning to HSAs in part because health maintenance organizations have not proven as popular here as in other parts of the country.
The Northeast has generally been “a late adopter of HSAs,” Estes adds. In the nation as a whole, however, this form of coverage is attracting more and more interest. The U.S. Treasury Department estimates that as many as 30 million Americans will have opened HSAs by 2010.
Some 10,000 HSAs have been opened at Chittenden Bank in the past few years, says Robert Sims, Chittenden’s director of product management. “It has far exceeded our expectations of success,” he says. Sims attributes the strong response partly to his bank’s efforts to inform its customers and Vermont employers about the advantages of HSAs.
But many Vermont employers remain reluctant to replace familiar forms of insurance with HSAs, says Lisa Ventriss, director of the Vermont Business Roundtable. “There’s sort of a contract with employees that many businesses have. Going to HSAs would mean moving away from an old world and into a new world of individual responsibility,” Ventriss says.
Some firms have introduced the accounts as a coverage option, but most are still waiting to see how the plans perform, she adds. Small businesses in particular could be primed to take up HSAs. Companies with fewer than 10 employees account for 80 percent of all Vermont businesses, and half of them do not currently offer their workers any form of health insurance. HSAs could thus represent an affordable option for small firms that do want to provide employee health benefits.
According to one business owner, his company, like other small businesses in Vermont who do offer health insurance, simply can no longer afford the rising insurance premiums and have switched to an HSA so he could continue to offer his employees health coverage
At present, the vast majority of high-deductible health policies in Vermont are written for individuals, not through businesses. Most of the 22,500 plans in Vermont have been purchased from Blue Cross/Blue Shield; MVP Health Care and Cigna also offer HSA-type policies.
The Vermont Chamber of Commerce is among the private-sector entities that have begun shifting to HSAs from other types of coverage for their employees. “We wanted a way to reduce premiums we were paying,” chamber president Duane Marsh explains. And to encourage employees to open HSAs, the chamber paid $50 per month into the accounts for the first couple of years that they were available, Marsh says.
Senior Vice President Chuck Nichols is among the Vermont Chamber employees who took up the HSA offer. “It took some adjusting,” Nichols says of the switchover. Because he was paying more out of pocket for health care, Nichols says he felt compelled to ask more questions about the prices charged for services.
“I also ask myself now, ‘Do I really need to run to the doctor for this?’ There’s less unnecessary treatment but there’s also the risk that you don’t go when you should,” Nichols says.
As administrator of an insurance plan available to members of most chambers of commerce in Vermont, Nichols makes health-coverage decisions on an informed basis. And he says he’s satisfied with his move into an HSA.
Critics of the accounts emphasize the worries about risks that Nichols expressed.
“People with HSAs are often sicker when they do go to the doctors,” says Richard Davis, director of the Vermont Citizens Campaign for Health. “It ends up costing them more rather than saving them money.”
Primarily for that reason, Davis prophesizes that “there’s going to be a backlash against HSAs.”
The accounts do nothing to alleviate systemic problems in American health care, he adds.
Davis and other detractors acknowledge that HSAs make financial sense for those with middle-class incomes or higher. “They’re meaningless for everyone else,” he says.
An HSA is also a poor choice for anyone with chronic health problems, says Dr Deb Richter, director of another Vermont campaign for universal coverage. “If you’re a healthy person, it makes sense for you to sign up for an HSA,” Richter says. “If you’re not, it makes no sense.”
The appeal of the accounts to healthy, wealthy and wise investors will likely continue to grow as banks structure HSAs for higher returns. “We’re moving into the next phase of HSAs,” Estes of TD Banknorth says. “We’re looking to offer a range of investment options.”
Chittenden Bank is taking the same route. “We’re working with HSA customers to move those dollars intoinvestment instruments,” product management director Sims says.
It has been possible since the inception of HSAs to use them as vehicles for retirement savings, although they become taxable if retirees withdraw funds for non-medical purposes.
Congress continues to sweeten the HSA option as well. Lawmakers recently raised the yearly maximum deposit to $2850 for an individual and $5650 for a family. That compares to the $11,480 in yearly premiums that a self-employed individual now pays on average for family health cover-age, according to a recent study by the Kaiser Family Foundation.
Copyright Boutin-McQuiston, Inc. Jun 01, 2007
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