Health savings accounts’ buzz
If you can’t afford to give your employees more expensive benefits, at least give them more opportunity to buy the benefits they want. That’s been the pitch of the agents, brokers and insurers that sell voluntary benefits. In an era of rising health costs, increasing workforce diversity and varying employee needs, it’s a pretty good idea–but it has never really caught on in a big way
Although the worksite marketing business, has been growing for 25 years, according to Wes Aiken, president of the Benefits Marketing Association in Twinsburg, Ohio, and vice president of National Worksite Partners in Alpharetta, Ga., voluntary benefits have always taken a back seat to the “everybody-gets-it benefits.”
Employee participation has always been relatively low, with only 10 percent to 20 percent of employees signing up for extra services and insurance paid for by individual payroll deduction. Though the agents and brokers usually handle enrollment, employers are often reluctant to commit time and effort to communicating the programs.
However, that may be chancing as a side effect of the Medicare Prescription Drug Improvement and Modernization Act of 2003 that powers the new Health Savings Accounts (HSAs). HSAs, tied to high-deductible (greater than $1,000 for single employees) health insurance plans, allow employees to stockpile funds on pre-tax basis to pay for medical expenses under the deductible or those not covered by general health insurance, such as vision care or dental treatments (but not dental or vision care insurance).
In July, the Department of Labor and Internal Revenue Service issued guidelines for the use of HSAs and the rules surprisingly turned out to be broader than expected, allowing use of the accounts for employee-paid wellness programs, preventive tests and care–including prescription drugs like blood pressure and cholesterol medications.
The accounts can also be used to pay for Employee Assistance Programs (EAPs) that provide brief personal counseling and gate keeping to wellness programs.
But what set the benefit marketers buzzing at the organization’s national conference, Benefits Marketing Mania in Las Vegas last month, was the IRS permission to use the recounts to pay for long-term care insurance policies and supplemental health insurance that cover specific diseases, such as cancer, diabetes or congestive heart failure.
The ruling is a particular boon for long-term care insurance, which has always been considered too pricey. Fewer than 10 percent of employees offered long-tern care insurance buy the coverage, but HSAs, funded with pro-tax dollars–may make the coverage a bargain by essentially reducing the real cost by 30 percent or so.
Benefit marketers also say that a proliferation of high deductible plans will give employers enough premium savings to offer employees mini-medical plans and gap insurance that fund some medical services under the deductible–even though the coverage cannot be paid for by the HSAs.
Employers who choose to do so can also offer discount plans as benefits–as long as the discount plans don’t actually pay cash benefits for medical treatment.
With the regulations as an invitation to creativity and experimentation, benefit marketers also hope employers will show more interest in some of their more untraditional benefits, though that may be a stretch.
LEN STRAZEWSKI is a regular columnist for Risk & Insurance. He can be reached at firstname.lastname@example.org.
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