Despite their benefits that include lower premium costs for health insurance and the potential to decrease overall medical spending, health savings accounts (HSAs) don’t appear to be gaining significant acceptance in the Mississippi marketplace.
HSAs combine a tax-free savings account for medical expenses with a high-deductible health insurance plan. In addition to tax advantages, HSAs have been touted for their potential to help reduce healthcare inflation because participants have a greater motive for careful spending since it is their money at stake.
“HSAs haven’t taken off like some people expected them to,” said Brad Robertson, vice president, Renasant Insurance, Tupelo. “The healthcare crisis isn’t solved by the HSA. It is an option, but it is not a solution. I don’t know what is.”
Robertson said his experience is that, first of all, many employees don’t understand HSAs. Educating people about the benefits of HSAs will take time. But perhaps more important is the mindset. Faced with the choice of a HSA that doesn’t pay any benefits until a high deductible has been paid, and a plan that might cost 10 to 15% more but has benefits like co-pays for doctor visits and medications, most people are opting for the more traditional plans.
“When you propose a HSA to most rank-and-file employees, it doesn’t get very good reception because they don’t have the money to put in the savings account to cover things like prescriptions and office visits,” Robertson said. “Based on my experience with the HSAs, they seem to be more attractive to professionals. But most other people, the majority, don’t have that kind of money to put into the account. They have to come up with money out of their pocket until their deductible is met. It is a cash flow issue.”
The HSA may get more popular in the future because it seems inevitable that health insurance plans will have to start cutting back on co-pays for office visits and prescriptions. That’s because the soaring cost of such plans is becoming a burden.
“Some of these insurance companies are raising the co-payments now where it is pretty significant because it costs the plan so much money,” Robertson said. “In the future I think a lot of carriers will go back to just deductibles and co-insurance without all the bells and whistles. Consumers will have to pay more out of pocket before the insurance kicks in. It will be a more catastrophic plan.”
HSAs can encourage people to be more careful about how they utilize healthcare. That’s because the money for office visits and other medical expenses come out of the individual’s HSA.
There is another major reason why HSAs haven’t gained much traction in Mississippi. The largest insurance carrier in the state, Blue Cross & Blue Shield Mississippi (BCBSMS), doesn’t offer them.
“Blue Cross & Blue Shield is the largest carrier with 70 to 80% of the business in the state,” said David White, CEO, Morgan White Group, Jackson. “Other carriers do offer them, but as long as BCBS doesn’t offer them at all, it takes away the significance. Do they work? Yes, I think they work great. But we have not had the opportunity to much enjoy them here. Why is BCBS not doing it? There is not much competition, so they don’t have to.
“I think they aren’t pushed to do it so they aren’t going to do it. I’m not saying Blue Cross is doing anything wrong because they are here. Thank God they are here and provide what they do. But what drives prices is competition. The lack of competition is one of the problems we have in Mississippi and why we don’t see as much innovation and not as many people offering HSAs. What we need is more carriers and that would drive prices down and drive innovation. If carriers are going to spend investment dollars, they are going to spend them in a place where they can get the greatest volume coming back to them.
“Mississippi is such a small marketplace, representing less than 1% of the national market, that it doesn’t attract a large amount of competition. A lot of the major players don’t consider it worth the effort to open an office in Jackson, do all the filings that are necessary, hire employees and train agents.”
White has had some large employers inquire about HSAs. But most are covered by BCBSMS, and they would have to leave BCBSMS in order to get HSAs. The employers are reluctant to do that because other health insurance companies don’t have as many doctors and hospitals in their networks.
Access to hospitals and doctors statewide can be an issue. White said another plan, for example, might have Delta Regional Hospital in its network but not hospitals in Jackson. If a serious illness occurs, having hospitals in Jackson in your network could be important even to people in the Delta.
“That is why BCBS has such a great advantage,” White said.
Another possible reason why there isn’t more competition in the state could be its reputation regarding jackpot justice.
“One of the reasons is our past with lawyers,” White said. “We sued a lot. Now we have tort reform and things are moving the other way. But sometimes carriers in other states are slow to learn we have improved.”
Nita Miller, administrative manager at Fox Everett, Jackson, said while HSAs have been slow to catch on, she is seeing more interest in them each year. She recommended employers can help remove one barrier to HSAs by helping fund them with premium savings.
“The hurdle with the general employee is the thought of giving up office co-pays and pharmacy co-pays,” Miller said. “What is real key is that the employers make an investment into the HSA for employees so they begin to have money in it. Then they aren’t so intimidated by not having the co-pays.”
Miller said the types of health insurance plans most employees have now amount to “crutches.” By providing co-pays for office visits and pharmacy costs, employees haven’t recognized the true cost of healthcare. That makes it easier “to run to the doctor for every sniffle.”
Once you get a HSA installed in a workplace, and get people’s participation, there tends to be a domino effect with participation increasing each subsequent year. People find out the HSAs are very user friendly.
HSAs can actually work the best when they aren’t used. Miller said that if money isn’t needed to pay medical expenses, the HSA can become a tax-free retirement savings account.
“The word savings is key,” she said. “If you can put it in there and save it, you’re better off in the long run. You can save that money permanently from taxes if distributions are handled properly. If you will put that money in there and let it grow tax free, you can withdraw it tax free at any time for qualified expenses and never owe taxes. It is best if you can leave in there and invest it. Let it grow like a 401(k) plan. The potential of another true retirement account is there. When retire you can pay Medicare premiums with it and that is a qualified expense not subject to tax. And you can pay medical expenses without it being subjected to taxes.”
While most HSAs receive a fixed interest rate, after accruing $1,000 the money can be invested in mutual funds and other types of investments as long as you are using an IRS approved custodian or trustee.
One of the top companies offering HSAs in the state is Humana, which has approximately 15,000 commercial customers in Mississippi.
“HSAs are a central element in Humana’s consumerism business strategy because they engage the consumer in making more informed, more effective decisions in choosing and using their healthcare benefits for themselves and their families,” said Mitch Lubitz, Humana Southeast media relations manager.
However, consumer-directed offerings (low-premium, high-deductible health plans) that feature a HSA or health reimbursement arrangement (HRA), have been slow to gain acceptance and adoption by employers in Mississippi, Lubitz said.
Currently, an estimated 9.6 million Americans are enrolled in HSAs or HRAs. Research shows HSA and HRA enrollment has the potential to increase to approximately 66 million by 2012.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.