Health Insurance Can Be More Affordable

By EILEEN ALT POWELL

The Associated Press

Thursday, July 14, 2005; 6:36 AM



NEW YORK -- When the Rev. Ronald Standiford learned that his family's health insurance coverage was going to cost more last year, he shopped for a more affordable policy. His solution was a combination of a new insurance plan and a tax-sheltered Health Savings Account.



Standiford, 56, pastor of Redeemer Presbyterian Church in Kingsville, Md., said the new plan has lowered the premiums the church pays for him, his wife and their two teenage daughters. It lets him put away some $2,000 a year in pretax money to cover deductibles _ the money he has to pay doctors or hospitals before the insurance kicks in _ and other out-of-pocket health expenses.





"The premium went down drastically for the church, and the money I put in every year can roll over to the next year," Standiford said. "It's a very good deal for everyone."



More than 1 million Americans have made a similar choice, signing up for high-deductible health insurance policies and associated HSAs since the program was introduced in late 2003, according to the Washington-based industry group America's Health Insurance Plans.



The new plans are a bit complex, but a growing number of insurers offer them.



Under federal law, the policy must have a minimum deductible of $1,000 a year for an individual and $2,000 for a family; maximum out-of-pocket expenses _ for example, copayments required for surgical procedures _ cannot exceed $5,100 for individuals and $10,200 for families.



Policyholders, meanwhile, can set up HSAs that they fund with their own money. Employers also can contribute to their workers' HSAs. HSA contributions, generally set at an amount equal to the policy's deductible, can be used to cover health care costs, and unused money can be carried over at year's end. This differs from company-sponsored Flexible Spending Accounts, health care savings plans in which unused money is forfeited after Dec. 31 of each year.



Christopher Calvert, a senior health consultant with The Segal Co., an actuarial and consulting firm in New York, said some companies are replacing existing catastrophic health coverage plans with the new plans because they see HSAs as a good way for workers to handle the higher deductibles. Others, Calvert said, see them as a way of making workers more mindful of their health care spending decisions.



Calvert believes the new policies should be especially attractive to young singles, people in relatively good health and higher-income people who can afford to cover high out-of-pocket costs.



Gary Lauer, chief executive of eHealthInsurance Services Inc. based in Mountain View, Calif., said the new policies also are attractive to small businesses and the uninsured.



He said that of the new policies purchased through eHealthInsurance, where Standiford found his plan, more than 40 percent were purchased by people with annual incomes below $50,000, almost half were families and more than one-third had been uninsured.



"It's the affordability," he said. "They get a lower-cost premium. And the money they probably would have been spending anyway, they can run through a savings account to buy day-to-day medical services."



Lauer also believes more companies will adopt the plans "because the trend is that more of the burden for health benefits is going to be moved to the employee."



Steve Kroll, executive vice president of Answer Financial Inc. of Encino, Calif., said the main drawback of the high-deductible plans with HSAs is that families need to have the resources to fund the savings accounts.



"Like IRAs (Individual Retirement Accounts), the HSAs are great tools," he said. "But if you don't have money, they don't help you."



On the other hand, people who can afford to fund the HSAs and don't need to draw them down entirely to cover annual medical expenses will be able to let them grow tax-free. In retirement, the excess savings can be used to purchase long-term care insurance and to pay for other qualified medical expenses.



"That means that they're more popular for those approaching retirement age, especially if they don't have company plans available to them," Kroll said.



Still, he said, there are many health insurance alternatives, "so it's important that people assess their individual needs."