Alternative goes begging: Health savings accounts drawenrollees, but at slow pace

Despite high expenses this year for children Katie and Alex, Amy and James Both are sold on health savings accounts.

WHEN JAMES BOTH s employer switched from a traditional health-care plan to one with high-deductible insurance and potential income-tax deductions, he was all for it.

It s another opportunity for tax-deferred savings, said Mr. Both, a senior associate at Esync Inc., a logistical consulting firm in Sylvania Township.

But this year he and his wife, Amy, who live in Springfield Township, had to put their young son and daughter in a hospital for tonsil and adenoid surgery. The operations used up their entire family deductible of $4,400 and nearly wiped out their health-care savings account held at a bank.

Mr. Both is not deterred. Personally I like the HSA better [than traditional insurance] even though it was definitely more expensive for us this year.

He is among thousands of Toledo-area workers who have adopted health savings accounts since the plans became available nearly three years ago.

Still, the alternative health accounts have not taken off as experts predicted. Even a year ago, many insurance and employee-benefits experts expected huge numbers would sign up this year, saying the plans were catching on. One forecast called for half of all U.S. companies to offer them within a few years.

The Henry J. Kaiser Family Foundation, in Menlo Park, Calif., said 4 percent of workers are in health accounts this year, about the same as last year.

Researchers said most workers think the cost is too high to justify the tax savings.

A Hewitt Associates study found that employees understanding of and satisfaction with high-deductible health plans are low among those who participate in them. Only 30 percent of employees using high-deductible plans said they understood or were satisfied, and more than half said they would not re-enroll, Hewitt said in a Dallas Morning News story last month.

The health accounts, akin to a tax-deferred 401(k) in which pre-tax dollars are taken out of each paycheck and put into an account to be tapped to pay only for medical care, have spread among consumers. But the gain has been slow.

The Employers Association, a Sylvania group representing about 650 area employers, had 16 percent of members offering the plans this year, up from 5 to 10 percent a year ago.

Nationally, more than 3.2 million people were covered by health savings plans by the end of last year, according to the U.S. Treasury Department, versus the 438,000 reported for 2004 by the America s Health Insurance Plans trade group in Washington.

Treasury s projections are extremely optimistic, calling for 14 million to 21 million accounts by 2010, covering 25 million to 45 million individuals.

Mark Moser, vice president of marketing for Paramount Health Care in Toledo, said his firm signed up 20 employers with about 1,200 workers to the savings accounts this year, and he expects to add dozens more in 2007.

Some big insurance companies are reluctant to break out health savings accounts separately, but Frank Bloomquist, Toledo regional sales manager for Anthem Blue Cross and Blue Shield, said 20 percent of employers offer some sort of consumer-directed health plan.

He expects 70 percent to offer them by 2010.

Anthem said Ohio customers of those accounts quadrupled in the first eight months of 2006, to a total of nearly 55,000.

Kim Pfitzer, benefits consultant with the King Agency in Springfield Township, said the savings plans are catching on.

Companies save money. Employees save money. If employees know they will have to pay [some] of the costs, they will shop around for prescriptions. It s their money, and they want to keep as much of it as possible.

Any money in a savings account that isn t used in a given year rolls over to the next year, and if a worker leaves a company the savings account can be transferred to another plan.

Some participants find the cost-reimbursement process a bit cumbersome. In a sense, they sometimes pay twice through payroll deductions and through medical-bill payments before they get reimbursed, often with checks they write to themselves. Amounts used for non-medical purposes are taxable.

I make clients aware the accounts are to be used only for medical expenses, said Ronald King, president of the King Agency.

But companies can t control how [workers] use their debit cards or checks.

Ron Bell, a partner in Benefit Plans Alternatives Inc. in Sylvania Township, said his firm has enrolled about 50 companies in health savings accounts, up from 30 two years ago. He expects more to do so.

The plans have a deductible amount for which the employee is responsible, and nationally that average is about $1,500 for an individual and $3,000 for a family, he said.

However, one of the most popular plans in this region, offered by Medical Mutual of Ohio, has deductibles of $2,200 for singles and $4,400 for families, Mr. Bell said.

Variations of that plan are offered to Toledo Regional Chamber of Commerce members.

Jim McNerney, a founder and principal of Esync, said he was attracted to the Medical Mutual high-deductible plan partly because his firm has employees in 13 states and he wanted to get more control over the costs.

For example, health coverage in Texas cost $1,700 a month previously, split between company and employees, but now costs less than $500 monthly, he said.

In Toledo, his firm pays 85 percent of monthly premiums of $197 for a single, $388 for a couple, and $588 for a family.

His employees pay the remaining 15 percent, amounting to $29, $58, and $88 monthly. Workers can put as much or as little into their accounts as they want, up to the maximum, which is the same as the deductible.

The federal maximum deductible annual savings amounts, for all types of health savings accounts, are $2,700 for singles and $5,400 for families. In Esync s case, those contributing the maximum pay $366 a month.

Workers can use a debit card to pay for prescriptions and get checks from the bank so they can reimburse themselves, out of their savings account, for medical costs.

After the deductible is met, the plan acts as any other health-insurance policy.

Mr. Both said such a plan better shows what the actual costs of medicine are. Instead of a co-pay of $20 or $30, he now pays the full cost of a $92 monthly prescription for an allergy drug.

If the kids are sick, there s a little hesitation, he acknowledged.

Do we take them to the doctor or not?

The downtown Toledo law firm Anspach Meeks Ellenberger LLP adopted a health savings account plan as an option this year, said Mark Elliott, director of operations. Ten of 46 employees opted for it.

Such plans can appeal to very healthy workers, who can accumulate savings, and also to high users of medicines and doctor visits, he explained.

If you re a high user, you re capped, he pointed out. You know what you re going to spend.

He said he s personally a fan of the accounts.

For me it works, he said. I think it s a good concept.

Contact Homer Brickey at: homerbrickey@theblade.com or 419-724-6129.