Magazine article Workforce Management

Most Businesses Taking a Wait-and-See Approach to Health Spending Accounts

Magazine article Workforce Management

Most Businesses Taking a Wait-and-See Approach to Health Spending Accounts

Article excerpt

Large companies are expected to weigh the options, "watch the dust settle in 2005" before committing

CALL 2005 the year of great expectations. On January 1, early adopters will roll out health savings accounts for their employees while the rest of corporate America watches, waiting to learn from their successes and mistakes.

For all the recent attention HSAs have received-research reports, articles in the consumer press, Web sites explaining how things work-companies will probably not quickly shift to high-gear adoption of the plans.

It's not for lack of expectation. HSAs and the high-deductible health plans attached to them are being held out by everyone from the newly re-elected President Bush on down. They're seen as a way to curb runaway medical insurance costs while giving people more control over what they spend and where they spend it.

HSAs can be thought of as medical IRAs: Employees pay for health-care expenses with pretax dollars kept in accounts they control, up to $2,600 annually for individuals and $5,150 for families. Funds in an HSA can be invested, rolled over from year to year and are portable, so if an employee leaves, they do too.

The accounts are tied to insurance plans with minimum deductibles of $1,000 a year for individuals and $2,000 for families. For employers, the attraction lies in higher deductibles and lower insurance expenses. Employees who invest wisely build up a tax-free nest egg they can use for routine care, elective surgery or retirement-if the money lasts that long.

But while the federal law that created HSAs is nearly a year old, companies remain cautious. Treasury Department guidelines outlining how the plans could be implemented weren't completed until summer, and insurers spent the better part of the year putting together their offerings.

That wasn't enough time for all but the most progressive-or financially desperate-companies to offer HSAs this year or for 2005, according to insurers, financial institutions and others familiar with the plans. The first wave of organizations offering workers HSAs includes a smattering of Fortune 500 businesses such as Textron, Pitney Bowes and Guidant Corp., and hundreds of smaller companies. The U.S. government will offer an HSA through Aetna to about 4.5 million federal employees January 1. That's half of the federal workforce.

Industry watchers expect most businesses to spend the coming months evaluating what's out there and, if they opt to offer HSAs, drafting education programs so employees are prepared for open enrollment for 2006 or 2007. Big companies "will watch the dust settle in 2005, then make their move," says Chris Delaney, vice president of marketing at Definity Health, a consumer-driven plan provider.

While company executives do their homework, look for major insurers such as United Healthcare, Aetna and Cigna and consumer health-care specialists such as Definity Health and Lumenos to continue building awareness for their insurance and HSA products.

Next year, expect to sec investment options multiply as more banks, mutual fund companies and stockbrokers join the financial institutions that started offering HSA investment products this year including Mellon, Wells Fargo, Vanguard and JPMorgan Chase Bank. Many players will also add "smart" cards that work on MasterCard or Visa debit card readers and automatic account debits for monthly prescriptions and other regular expenses.

If things fall into place as expected, by 2006, about 73 percent of U.S. employers are likely or somewhat likely to be offering HSAs, according to a survey by Mercer Human Resource Consulting.

Some early adopters are seeking alternatives to traditional medical coverage to halt health-care spending that jumped 11.2 percent in 2004 alone, the fourth straight year of double-digit growth, according to a 2004 employer benefit survey from the Kaiser Family Foundation and the Health Research and Education Trust. …

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