HSA Plunge Offers Options (Gwen Moritz Commentary)

Like most companies these days, Arkansas Business Publishing Group shares the cost of its employees’ health insurance. And every fall we — management and employees alike — hold our breaths to see how much higher the premium will be in the coming year.

This year, ABPG employees were given an opportunity to be guinea pigs, and about a third actually volunteered. They chose a high-deductible, lower-premium health insurance plan with a “health savings account” feature.

A lot has been written about newly authorized HSAs — by this publication and others — as a way to help control the endlessly increasing cost of providing health insurance to employee groups. The HSAs allow employees to payroll-deduct pretax dollars into an account that can be used only for medical expenses but which doesn’t have the “use it or lose it” disadvantage of the familiar Section 125 cafeteria accounts. Money can remain in the HSAs indefinitely, can earn interest and can even be passed on to heirs.

In theory, people who accept a higher deductible — in our case, $1,100 rather than $500 — will be less likely to reach into their pockets (or their HSAs) for unnecessary medical services. In theory, they will be more engaged in deciding which services or prescriptions they need. Whether that will really happen remains to be seen — have 401(k)s really created more sophisticated and demanding investors, or are more people just out there winging it? Still, I encouraged several of our young, healthy employees to jump on the HSA option for this reason: Under the plan we offered, they are guaranteed to save almost $1,100 a year in premiums in exchange for taking a $600 gamble on the deductible. Many people rarely reach the $500 deductible, so gambling that they won’t reach the $1,100 deductible is a pretty good bet.

Older folks with more health complaints, parents buying insurance for young children or people of any age who are taking a maintenance medication are not such good candidates for a high-deductible policy — at least not the one we offered. But our employees in those categories still had the option of a $500 deductible and a higher premium. I serve on our benefits committee, and it felt good to be able to offer an attractive, money-saving alternative without creating a hardship for employees who were better served with the old-style plan.

As every manager knows, change is hard. Our employees seemed relieved to know they didn’t have to adopt a very different system if they didn’t want to. And they seemed to appreciate that the HSA option was offered strictly for their benefit. The company has continued to contribute the same amount to the premium no matter which option they chose, so all savings stay with the employee.

We held several educational sessions to explain the HSA option and to compare and contrast it with the familiar plan. Our human resources director, Bill Page, was careful to explain the drawbacks — especially the fact that you don’t get a $20 doctor’s office visit or a $10-$30-$50 drug benefit until you reach the $1,100 deductible. One of the most common questions was, “If I don’t use the money in my health savings account, when can I get it back?” The disappointing answer was, “Not till you are 65.” The tax penalty for spending it on something besides medical expenses is similar to early withdrawal of a 401(k). Ouch.

But there was also this information: You don’t have to set up an HSA in order to take the lower premium and the higher deductible. You can take your chances, or you can set up a passbook savings account with no restrictions. But then you will be using after-tax dollars to meet the deductible. If you do build up a good cushion in the HSA, you can choose to stop adding to it and simply enjoy the lower premiums.

Bill Page has braced himself for an adventurous year navigating a system that is still very new and sure to be buggy. If it is a disaster, a year is not an eternity. But I don’t think that will happen. I think more and more ABPG employees will choose the HSA option in the future, and more and more companies will offer it. Eventually, a high deductible will be all any of us can afford.

(Gwen Moritz is editor of Arkansas Business, the statewide business journal in Little Rock. E-mail her at [email protected].)