Post-holiday bills and the approach of tax season aren’t the only reasons why some people dread the first few months of the year. This is also often the time when health insurance companies notify employers of hefty premium increases. This ends up being bad news for both employers and their employees.
While politicians, pundits, employers, workers -– and even insurers -– agree something needs to be done about the cost of health insurance, it’s hard to find a common voice on just what that something should be. A growing number of employers and workers, however, feel they have found at least part of the solution, in the form of Health Savings Accounts or HSAs.
“In its 2007 Employer Health Benefits Survey, the Kaiser Family Foundation reports that since 2001, premiums for family health coverage have soared 78 percent,” says Stephen Neeleman, CEO and founder of HealthEquity, Inc., a company that provides health savings plans. “By contrast, the survey also reports that wages have risen just 19 percent and inflation just 17 percent over the same period. Clearly, this is unbalanced and not sustainable.”
Health Savings Accounts offer employers and workers a tool for cutting premium costs but not coverage, Neelman says. “At the same time, the accounts put control of health care decisions -– and costs -– back in the hands of workers.”
How does an HSA work? “Like a flex plan (FSA), but far better,” Neeleman says. The high points of Health Savings Accounts include:
-- Workers sign on for a lower premium health plan that has a higher-deductible for major events, typically free preventive care, and competitive discounts for first dollar care. The money saved on premiums goes into a tax-advantaged investment account that the employee can draw on to pay for covered qualified medical expenses.
-- Both employers and employees can contribute to the account, but the money is ultimately controlled by the employee, who does not need the employer’s or insurer’s approval to draw on the account for qualified expenses.
-- Unlike FSAs that are “use it or lose it,” funds in Health Savings Accounts carry over from year to year. Because of this ability to carry over funds, it is possible to build a substantial account over multiple years. Meanwhile, you can build the account tax-free by investing the money in a variety of investing vehicles, including mutual funds.
-- The account is not owned by your employer. If you leave your job, you still retain ownership of the account and can continue to use and contribute to it.
-- Yearly contribution limits for 2008 are $2,900 for individuals and $5,800 for families. Rates are subject to change every year and are adjusted for inflation. Consumers that are 55 years or older can put additional contributions into the account. There is no cap on how much you can carry over from year to year, or earn through investment of the money.
Health Savings Accounts are not just for the wealthy or the healthy either. John Sweeney, HealthEquity’s vice president of marketing, has type 1 diabetes. Before joining the company and adopting a Health Savings Account/low-premium insurance plan, he was covered under a traditional plan -– that would not pay $1,000 for a much-needed accessory for the insulin pump Sweeney used on a daily basis. He decided not to buy the accessory, which would have reported his blood sugar levels to the insulin pump every five minutes.
After starting a health savings plan, however, he quickly accumulated the money needed for the pump, and changed his mind about buying it.
“Not only have I benefited financially from the Health Savings Account, I’m healthier because of it,” he says.
To learn more about Health Savings Accounts, visit www.HealthEquity.com.
Source: ARAcontent© 2008 ARAContent
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