CONTROLLING HEALTH INSURANCE COSTS

by Linda Mackey

“Health insurance is so expensive!!!”  That’s what my clients tell me everyday and I have to agree with them.  Many small business owners say  the cost of health insurance has risen to the point that it is the second most expensive monthly bill, the first being payroll. 

Many people have tried to explain the reasons for this cost trend.  The reality is that there are many reasons for it.  There is no one thing that can be done to lower the cost, it will take an effort from everyone from the doctors, to the pharmaceutical more   

Changes for HSAs for 2007

by Linda Mackey
 

President Bush signed a new law regarding HSAs for 2007.  These changes will make HSAs even better for individuals, families, employees and employers.  Bear in mind that in order to have an HSA, your employees must be covered under a high deductible health insurance plan

Enrollees are now allowed a one time rollover from an IRA into their HSA account.  The amount is limited to the maximum HSA contribution for the year.  The enrollee must remain covered by the High Deductible Health Plan for a year or face a penalty and taxation.  Traditional and ROTH IRAs can also be rolled over into the HSA account.  SEP and Simple IRAs can not be rolled over.

The other major change is that HSA contributions no longer are pro rated for individuals who do not enroll in an HSA at the first of a calendar year.  This makes High Deductible Plans and the HSAs more favorable to people who enroll later in the year.  Many people used to feel that it was best to wait until January 1^st to change their health plans.

Group administrators will appreciate that the Department of the Treasury will now be required to make cost of living adjustments no later than June of the previous year.  This will allow for better planning for the upcoming years benefits.  This modification will be based on the Consumer Price Index.

The amount that can be placed into an HSA has also changed.  It is now the lesser of the actual annual deductible or $2850 for an individual $5650 for a family.  This amount includes any rollovers.

These are only a few of the new provisions.  Limitations do apply.  As always, it is best to check with a qualified accountant or your financial planner before making any changes to your HSAs or IRAs.  For more information on changes go to http://www.treas.gov/press/releases/hp209.htm. 

Published The Human Resource Magazine February 2007














  HSAs CONTINUED

we need to have health insurance to protect us from catastrophes. But maybe we’re on to something. What if you did have a special savings account, so you didn’t send all that money to the insurance company each year? What if you took out a policy with a high deductible so you would be protected from a catastrophe? Since it was only for unusually high expenses, it couldn’t cost as much as the plan you have now, right? Well, actually we are on to something here. This concept has given way to the High Deductible Health Plans (HDHPs) and accompanying Health Savings Accounts (HSAs) that everyone is talking about now. HSAs are pretty simple, but they are different from what we have grown accustomed to, so we just can’t quite grasp the concept. You start with a high deductible health plan. It costs less than the old low deductible plans that everyone has begun to realize are just too expensive. This plan is cheaper and leaves you some money to put aside in an account. If you already bumped up your deductible to control your premiums, you may have also bumped up the maximum out of pocket expense more than you realize. Maximum out of pocket expenses are usually more controlled in HDHPs. The HSA account is specialized. You can put money into it pretax. Money grows in the account tax-free. You can take it out to spend on your health needs, just like you had planned; only it is still tax-free. So this is actually much better than you thought. It even gets better, because you can get insurance plans that cover all of your health expenses after the deductible is met. These plans offer family deductibles also. The entire family shares the deductible. It gets even better… because you have a network, and the in-network doctors and the insurance company have pre-negotiated rates, you get in-network pricing at the doctor’s office and the pharmacies. You pay a lower cost, not a co pay, but not full price. What if you don’t use the money in your account? You have skated through a few years, the account has grown, and you have more than enough to cover your deductible. There are no restrictions on how little money you can put in your account. There are maximum annual amounts, but not minimums. At any point you can stop adding money. You might prefer to increase your deductible again, and pay less in premiums. Now you have choices. Before your choice was to keep paying more and more money to the insurance company, now you are trying to decide if you want to put more money into the account, stop putting money into the account, or increase your deductible. There may come a time, when finances are strained, and you need to pull money out of the account for a non-medical need. You would pay taxes on the used portion, and pay a penalty of 10%. That’s a stiff penalty, but may be worthwhile if you really need the money. When you turn 65, you can take the money out with no penalty. You just pay the taxes at your then current age rate. HSAs are just like the insurance plan you have been thinking about, only better!!! WE WILL TEACH YOU ALL ABOUT HSA PLANS. WE BELIEVE THAT THEY ARE GOOD FOR MANY PEOPLE, INCLUDING COMPANIES!! CALL US 678 870 9983

Published in Fayette Woman Magazine March 2006













  CONTROLLING COSTS CONTINUED

companies, but most importantly, it will have to start right here with the consumers.

The first step in controlling the cost of health insurance is understanding where the cost comes from.  The prices of medical procedures are very well kept secrets.  Great West Healthcare commissioned Harris Interactive (2005) to conduct a survey about consumers and their knowledge of health care costs.  Some of the statistics that the study brought to light are startling.  To offer a reference point respondents were also asked some non health care related questions. When asked about the price of a new Honda Accord, the respondents were over by 1%.  When asked the price of a round trip ticket in coach from New York to Los Angeles, they were over by 8%.  When asked about the cost of an average four day stay in a hospital, they were off by 56% believing that the cost would be around $6,400.00 instead of the actual cost of $14,500.00. Only 15% of respondents asked about the cost of a procedure before they were treated. They also assumed that a 24 hour hospital stay would only vary by 20% based on the location, instead of the actual difference of 60%. In reality, we have not had to take responsibility for this information in the past. With the escalating cost of health insurance, which closely relates to the cost of health care, it is more important now than ever before to take control of these costs. Where do we go from here? For the immediate time, it is important to get information on how much our health care costs. The way to press ourselves into this is simply by taking advantage of high deductible health plans (HDHPs) and health savings accounts (HSAs). In a nutshell, this means that you take a lower cost health insurance plan, and put money into a special tax favored fund (HSA). The insurance will not cover doctor visits or medications or any other health care needs until you exhaust a high deductible (HDHP). The money for all those other expenses comes from your own account (the HSA). When the doctor prescribes a medication, you will find yourself asking for a lower priced alternative in order to preserve your account. You may even find yourself asking the doctor about prices. At no point does anyone believe that a person will choose a doctor, procedure or medication based on price alone. We will begin to determine our medical needs the same way we determine everything else in our lives, by the quality versus the price. Right now we have no reason to determine the prices, because we have the notion that the insurance companies will pay whatever the price is. We neglect to remember that we pay the insurance companies, so we are ultimately responsible for the costs anyway. Another way we can lower our cost is by looking for the company and plan that best fits our needs. Many people are over insured, that is, they pay more out than they will ever get back. Finding an agent that will help you shop is the bottom line on getting the right health plan and company. Many businesses are finding that the insurance companies that they have used for many years no longer offer the best value. They also find out that other companies are much better than they realized. It is important to find an agent who is a thrifty shopper for your health insurance. It is always wise to use an independent agent, because they know all the different companies and the plans offered from each. Obviously, if you can join a group that offers a true discount on health insurance through a reputable company, that is a great source of savings. The Fayette County Chamber of Commerce has a terrific new arrangement for health insurance through Humana. Qualifying members can save 4% off the street rates for the identical products. To help with your future costs, you must first look at the culture your company fosters. A good place to start is your vending machines. Are they full of junk food? Consider starting slowly by adding raisins and pretzels and then every few weeks adding another healthy alternative. Look also at the drink selection. Make sure that you offer juices and non carbonated beverages. Increase the healthy choices over time. People will often eat what is most available. If they crave a candy bar, they will find a way to get it, but you don’t need to provide candy. Make it part of the culture of your business to promote good nutrition and make it more difficult to eat unhealthy foods. Another good idea is to promote a healthy life style. Consider a company bowling team, or softball team. Participate in a walking group or running club as a company. Help pay for gym membership and try to attend aerobics classes as a team. Give out a company t shirt when employees have hit attainable milestones, such as walked for 30 minutes three days out of every week for six months. By making the goals attainable, but challenging, those who have been sedentary as well as those who have been active can achieve them. These ideas can cost anywhere from nothing for a walking club to a small fee for a team or membership. Many gyms will discount memberships for small companies. It is important to find an activity that your employees will enjoy. You must realize that this process may take some time. Health Fairs are a great way to help your employees discover health issues. Many people have found they have high blood pressure through health fairs, and were able to get on medication before it became a serious health concern. If your business is small, perhaps you can work with other companies in your office complex to put a health fair together. You can even attend a community health fair as a company function. Make sure you add information on smoking cessation and nutrition. By encouraging your employees to stop smoking, eat more healthy foods, to live a more active lifestyle, and to find medical issues before they escalate to more expensive problems, you can start the process for some future relief on health insurance costs.    

Published Fayette Forum 2006  November 9, 2006
 http://www.fayettefrontpage.com/bus-insurance.htm