Health plans offer investment

Enrollment in health insurance plans with savings accounts has increased steadily since they became available in 2004, but 2008 could be their breakout year, according to some health care consultants.

August is the month when employers buy health insurance for their employees or switch plans. Health care consultants from Towers Perrin, Mercer and BearingPoint, three of the biggest health care benefits consulting firms in the country, said the current enrollment season indicates that in 2008, health savings accounts will increase dramatically.

“This will be a good year for health savings accounts,” said Tracy Watts, a health benefits consultant for Mercer Human Resource Consulting. “We are seeing employers shift from traditional preferred-provider organization plans and health reimbursement accounts to the health savings accounts for 2008.”

Health savings accounts (HSAs) operate like individual retirement accounts, allowing people to save their own money in a tax-free account for use on health-related expenses. If the money is not spent, it rolls over annually and accumulates until the policyholder is 65, at which time the money can be used for any purpose.

This year, health care consultants predict a significant leap in enrollment as health insurers come around to offering products that are compatible with the savings accounts and employers become more effective at educating their work forces about the benefits of adopting such a health plan.

Consultants predict an increase of about 4 million health savings accounts, which would put the total number of HSAs at about 10 million. The surge is coming through mass enrollment of employees at companies with thousands of workers. Until now, smaller companies were more apt to offer health insurance plans that come with HSAs.

“We’re seeing the big guys come around,” said Jay Savon, a health care consultant for the health benefits firm Towers Perrin. “When the large corporations start to offer these programs, HSAs will really take off.”

Phillips Corp., a technology product-supply company in Columbia, Md., will begin offering an HSA program to its employees next month.

“Our current benefits portfolio was lacking when it came to health care. We wanted to give our partners control to decide how their health care dollars are spent,” said Shelley Brady, who leads the company’s benefits division.

Ms. Brady said the company recently finished its health insurance enrollment period with 32 percent of the company’s employees signed up for an HSA health insurance plan. Phillips, which will offer a traditional health insurance plan as well, will offer a one-time contribution to the plans as an incentive to increase enrollment.

Another goal for employers offering savings accounts is to help curb the rising cost of health care in the United States. Employers are able to save money by offering the high-deductible health insurance plan, which comes with lower premiums. But for the concept to make a significant dent in reducing the health costs facing U.S. employers, a change in work force behaviors and attitudes is necessary.

“Unless we have sustained and positive change in behavior or management, then any cost reduction will simply be a cost shift in the long run,” Mr. Savon said. “These programs are about viewing health as an economic asset.”

Aetna, one of the largest health insurers in the country, conducted a survey last year that showed employers that offer HSA plans experience a 6 percent increase in their heath care costs. That is a 25 percent decline in overall health care costs, which increase at about 8 percent a year.

The primary obstacle facing the growth of health savings accounts is the uncertainty among workers about the cost of health care. Health savings accounts are tied to high-deductible insurance plans, so out-of-pocket costs increase. To combat that concern, many employers offer incentives through contributions similar to a retirement plan.

“Making a contribution to the savings accounts increases volume, which in turn drives down overall health care costs,” said Bob O’Meara, a health care consultant with BearingPoint, a risk consulting firm in McLean. “We’re at a critical mass where employers are searching for ways to offer these plans to workers.”