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Over the next 12 to 24 months, small business owners will hear a lot
about "health savings accounts" (HSAs) as "the solution"
to lowering health insurance costs. HSAs will even be a compelling, extra
option for large companies to consider. Besides short-term tactical insurance
cost relief, some companies will figure out how to use HSAs as a tool
for recruiting and keeping better employees to achieve better service
and continuous improvement capability.
What Are HSAs?
For the full answer and lots more go to www.hsafinder.com
and/or buy "The Small Business Guide to HSA's" by JoAnn Mills
Laing. The short answer, for now, is that HSAs can only be set up when
an employee has a qualifying high-deductible, low-monthly premium health
insurance policy. HSAs are then similar to IRAs in that both employees
and companies can put pre-tax contributions into them on a regular basis
to be invested tax free, and the employee owns the account and takes it
wherever they might work. A big difference is that individuals can withdraw
money from HSAs with both debit cards and checks to pay for a wider range
of medical expenses than most insurance policies cover.
Why Have They Become a Big Deal Now?
From a legal and tax point of view, HSAs are still rapidly evolving. A
US congressional law made HSAs possible in December 2003. Then the IRS
published tax guidelines for HSAs in mid-2004. Most states must comply
with federal legal and tax guidelines by the end of 2005. And finally,
the Bush administration is currently pushing for additional tax credit
benefits for both companies and employees who make contributions to HSAs.
Who's Using Them So Far?
About one million individuals were covered by HSAs in 2004. These people
were mostly self-employed or with small firms that did not previously
offer health insurance coverage. A consensus forecast from the private
sector for how many people will be covered by HSAs by 2010 is about 20
million, while the latest proposed federal budget is forecasting only
6.3 million for perhaps three reasons.
- To understate the budget deficits, because HSAs reduce tax revenues.
- To not wave a red flag in front of the medical establishment that
correctly sees HSAs as being subversive to total insurance pool economics.
Smart, healthy people and companies will use HSAs in order to stop cross-subsidizing
the heavy users of traditional health insurance.
- To continue to legislate even richer terms for HSAs in order to cause
the current, dysfunctional health system to collapse so some form of
non-government reform can emerge based on consumer choices that will
inject free market economics into both well-care and sick-care.
Initial Questions to Ask
If 20 million people are covered by HSAs in 2010, what percent of service
companies that believe in "high-performance service economics"
(best total pay gets/keeps best people who execute best
total service value which delivers best growth and profits) will be
using HSAs?
If a distribution company needs industrial athletes for drivers and warehouse
people, couldn't they recruit and retain better employees with a good
wage plus a $1-$3000/year, tax-free contribution into these employees'
HSAs and still save on total health insurance costs?
Wouldn't firms that figured out how to use HSAs as a strategic recruiting
and retention tool for healthy people (and perhaps a negative recruiting
and retention one for heavy, health service users) be able to poach best
employees from firms that were offering traditional coverage? Wouldn't
this be a first-mover, strategic advantage for a company that believed
in high-performance distribution economics?
Although high-deductible policies will give all employees big, new incentives
to improve wellness habits and then shop aggressively for healthcare when
needed, will the bottom 80% of the payroll do anything different? Many
have not, to date, shown much interest in or aptitude for improving their
personal health or been disciplined savers in their IRAs or 401K plans.
What role could and should companies play in further educating, stimulating
and supporting wellness and long-term saving? What are the simplest, most
effective wellness programs and methods that a small company can effectively
pursue?
If a company wants to react faster than competitors to opportunities
and change through innovation, where does the energy to act come from?
Do too many employees act like it is all they can do to get through their
daily chores? If many employees improved their health, energy levels and
self-esteem, wouldn't that add up to more change energy for the company?
What Steps Should Every Firm Do?
Every (small) business should:
- Research HSAs and stay on top of the on-going tax legislation and
case studies that will start to emerge.
- Do the math for what the firm is currently spending on health insurance
and what it might spend on different scenarios involving HSAs. If the
results are compelling, then...
- Engage discussion groups of employees about the pros, cons, and how
to's of moving from the traditional health insurance plan to one centered
on HSAs. Pre-identify the different sub-groups of employees who will:
love it, not be sure and have big doubts. Make sure that each group
is represented. Each will need to understand different sets of benefits.
Every firm has employees with unhealthy habits that are costing both
the company and the healthy employees serious money at today's insurance
rate premiums. The unhealthy need help and pressure from a health-culture
to literally shape up. There are a number of simple, low cost ideas that
companies can use for wellness programs, but local leadership is critical
for long-term success.
Conclusions
Don't expect the alarming trends for U.S. sick-care to change on their
own. Although none of us can do much individually to effect big picture
healthcare issues, the Bush administration has provided a set of tax-related
tools that will allow any small business to opportunistically: Improve
its health insurance costs; and, use HSAs with tuned deductibles and corporate
contributions as a strategic recruiting and retention tool for best employees
who, in turn, can improve our service and change energy.
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