Health Savings Accounts: A New Option for Employers and Consumers

Florida, like other states, is working to make sure our residents have access to health care insurance.

The recent Medicare reforms passed by Congress gave states an important new option: tax-free savings accounts to pay for medical expenses, known as Health Savings Accounts (HSAs). HSAs put health care choices in the hands of the patient, and are a critical first step in creating a competitive health care market, which ultimately will lower prices and increase access. Consumer driven health care is the vision for the future, and here in Florida we took the federal provisions one step farther.

New legislation will require all insurance companies in the state to offer HSAs, and based on stories like Dr. Mark Peterson’s, we know this legislation will make a difference to businesses and their employees.

Dr. Peterson, a dentist on Florida’s Treasure Coast, use to offer his three employees group insurance, but the cost was so prohibitive he had to drop the plan. He picked up an individual policy to cover his family, but that expense also became too much of a burden, and he dropped that as well. Then, he learned about HSAs. He now pays a $350 monthly premium for his family policy, a vast improvement over the $1,800 for traditional coverage. The savings were so significant, Dr. Peterson is now looking to make the HSA option available to his employees.

We think when Floridians hear of benefits like those experienced by Dr. Peterson, they’ll also want to try HSAs. Town halls around the state this summer will help educate employers and employees about this important new option.

How HSAs work
HSAs provide new opportunities for Floridians to more closely manage their health care costs. The account consists of two key components:

High-deductible health plan: To qualify as an HSA, the health plan must have a minimum deductible of $1,000 for an individual and $2,000 for a family policy. The insurance premium is paid for outside of the HSA.

Tax-free savings account: Under the new law, individuals may make deposits and distributions for health care expenses tax-free. All surplus money and interest that accrues in this account remains the property of the individual, and is fully transferable between jobs and to different states.

Once the money is in the HSA account, it’s available for health care use. The funds will accrue interest for the duration of the consumer’s lifetime. When combined, these provisions help both employers and individuals to save money on health insurance premiums—thanks to the high deductible—while receiving tax savings on every dollar saved in preparation for health care expenditures. The HSAs that have begun to be sold in 2004 represent the most flexible consumer-directed approach devised to manage health insurance costs.

Plans benefiting Floridians
Florida is on the leading edge of promoting and implementing HSA programs, helping employers provide strong, flexible health plans that can benefit all Floridians.

With the ability to accumulate funds in HSAs, using only the deductible and co-payment amounts needed, residents can determine exactly how much they need to spend on health benefits, while surplus dollars accumulate year after year, providing a fair rate of return. Plus, HSA programs will provide Floridians with more choices. Employers and individuals will benefit from the increased competition among insurance providers and will ultimately be able to offer employees even more options.

Floridians benefit by saving because once they contribute to an HSA account, the money is theirs to spend – tax-free – on health care. Funds not used remain in the account to grow tax deferred, and after age 65 the funds can be used, without penalty, for anything – just like an IRA. At all times, the money in an HSA belongs to the consumer.

HSAs provide a more cost-effective way for employers to offer high-deductible health plans to employees, while employees will have more incentive to save money for medical expenses. Plus, if a consumer is unemployed or laid off and is collecting unemployment insurance, the consumer’s health insurance premium can be paid, also tax-free, using HSA savings.

Ensuring implementation
The passage of this component of the federal Medicare Modernization Act is only the first step towards successfully providing consumers the benefits of HSAs. Our state legislation is helping Florida lead the nation by working to help employers and individuals manage their health insurance costs.

The state must continue to communicate with Florida’s employer community, making employers aware of available HSA programs. Furthermore, all stakeholders must ensure all regulatory and legislative changes needed to make HSA use as simple as possible are adopted.

Gov. Jeb Bush was elected Florida’s 43rd Governor in 1998 and re-elected in 2002.

Topics Florida Legislation Commercial Lines Business Insurance