Release Date: 6/27/2004

As a way to make health insurance more affordable, both President Bush and Florida Gov. Jeb Bush are hawking a new insurance plan that lets consumers pay medical bills from tax-free personal savings accounts.

Health savings accounts -- unlike the more well-known flexible spending accounts developed 20 years ago -- allow employees to roll over the money in their account from year to year and take the money with them when they leave their job. The savings accounts, which must be sold with policies that have high deductibles, can reduce premiums by at least 30 percent, insurers say.

President Bush authorized the creation of the so-called "HSAs" as part of the massive Medicare drug bill he signed into law in December. Gov. Bush, as part of a wide-ranging health insurance bill he pushed through the legislature this spring and signed in June, is requiring health insurers in Florida to offer HSAs to small businesses.

Bush and Lt. Gov. Toni Jennings are hosting a series of town meetings across the state this summer to pitch the new savings plans to employers and individuals. Jennings, who will be joined by state regulatory and insurance company officials, will host a meeting Wednesday in West Palm Beach.

"There is certainly a tremendous amount of interest among employers," said David Saltzman, a consultant with Humana Inc., the giant South Florida HMO that hopes to roll out HSA plans in January. "Anything that helps the industry move to a higher deductible, less expensive premium and helps the consumer cope with those costs is a good thing."

Indeed, with health-care costs still spiraling by double digits annually, industry observers expect HSAs to quickly become an integral part of the American health insurance lexicon.

A survey this spring by consulting firm Mercer Human Resource Consulting found that 43 percent of employers said they plan to offer HSAs by 2005, and 75 percent by 2006. In the typical, slow-to-change health insurance market, such a shift would be nothing short of remarkable and a sign of how desperate people and employers are for help affording coverage.

'Consumer-driven health plans'

The big HSA marketing push comes as insurers are making a concerted effort to sell "consumer-driven health plans" which, while giving consumers more flexibility in choosing a provider also gives them a higher burden of the costs.

That has critics arguing that the accounts will mainly benefit the rich and healthy workers, and could leave older and sicker workers paying most of their own medical costs.

Proponents point out because most people with insurance spend on average $500 a year on health-care costs it's not necessary for them to pay high premiums that limit their out-of-pocket expense. And with consumers paying more of their own health costs there will be much less wasteful health-care spending on unnecessary medical care.

There are two parts to an HSA -- an interest-bearing savings account, and a health insurance policy with an annual deductible of at least $1,000 for an individual and $2,000 for a family. By comparison, most workers have policies with deductibles of $300 for single employees and $600 for families.

With the new type of policies, the money you save with the lower premium can be put in your HSA along with any funds your employer wants to add.

That pre-tax money put in the savings account is used to pay for qualified medical costs such as doctor visits, dental care and hospital stays. You can't use the money to pay your insurance premium, unless you are unemployed, and cosmetic surgery isn't covered.

Health insurers in Florida and nationwide are scrambling to create some type of HSA product. In addition to Humana, Aetna, United and Blue Cross are among the major insurers coming out with the special plans geared to individuals and small groups.

Bob Nay, director of product development for Blue Cross and Blue Shield of Florida, said he's tried for years to find a policy that even his sons, ages 29 and 31, would find affordable. He thinks he's found it with the HSA.

"We are very excited about offering this new option -- even my sons like it because they think it gives them more value," Nay said.

Jenna Martin, spokeswoman for Golden Rule Insurance Co., a United Healthcare subsidiary, said self-employed people will find the HSAs most appealing because they have the most difficulty finding affordable premiums.

"I see this as having a big impact immediately," said Dave Sherrill, president of the Florida Association of Health Underwriters and vice president of Sherrill Insurance Brokers in Altamonte Springs.

Explaining HSAs to be challenging

Sherrill credits Gov. Bush for helping to prod insurers to offer the HSA products. "The small group market needs all the help it can get," he said.

That point is echoed by Steve Birtman, state director for the National Federation of Independent Businesses." We are very optimistic right now about this new option," he said. Small business owners generally want to offer a health insurance plan to their workers and this will help them do it, he said.

Birtman and others agree that insurers and state officials will face a major challenge just explaining to workers and employers what HSAs are and how they compare to the existing health care flexible spending accounts. Only about a third of eligible employees participate in their workplace flexible spending accounts, largely because of the use-it-or-lose-it restriction.

Complicating matters is another health insurance plan called a Health Reimbursement Arrangement, which some insurers began offering last year. It is similar to an HSA, but the employer controls the savings accounts so the money does not travel with the employee when they change jobs.