Health Savings and Open Enrollment

Washington Post Health Special Series

The Washington Post's special issue on health insurance and open enrollment takes a look at the pros and cons of the debut of health savings accounts offered to more than three million federal employees and some private sectors. How have the plans worked for some individuals who bought health savings accounts earlier this year?

Cara Jareb, senior benefits consultant for Watson Wyatt Worldwide, was online Tuesday, Oct. 26, at 3 p.m. ET to take your general questions and comments about health savings accounts and health insurance open season.

A transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

_____________

GloverPark: I recently retired from the Federal Government at 55. As a retiree am I eligible to set up an HSA? If so, under what conditions would it likely be to my benefit? I haven't seen this specifically mentioned in the materials.

Cara Jareb: As a retiree you are eligible to set up an HSA. The only exception to this is post-65 retirees on Medicare are not eligible to contribute to an HSA but can draw down funds from existing HSAs for health care expenditures. In fact, additional contributions are allowed under the law for persons 55 and over.

_______________________

washingtonpost.com: Want to know more about Health Savings Accounts? Read today's Post article Selection Time.

_______________________

rockville, md: Can an employer ever require that its employees enroll in a benefit that is paid for by the employees themselves? That is the case where I work; the premium for disability insurance is deducted from everyone's paycheck. Employer claims it is mandatory and cannot be waived--they just take the money. I'm less concerned with whether the benefit is a good one than I am with the integrity of the pay process.

Cara Jareb: I am not aware of mandatory disability benefits except for workers' comp and Social Security Disability (SSDI). For example, SSDI is in fact paid for in part by employers and in part by employees. Is this the benefit you are referring to? In general, many employers offer disability coverage in addition to SSDI and oftentimes pay for it, but it is rarely mandated when there is an employee contribution.

_______________________

Pompano Beach, Florida: I'm a retired civil servant. My wife & I recently moved to Florida, so our DC-area HMO (MD-IPA) only covers us here in emergencies.

We are both on Medicare, travel a lot, and are trying to determine the best health plan available to us.

Is there any good source (like "Washington Checkbook" for the DC-area) that will help us in Florida?

Thanx-
Joe

Cara Jareb: A non-HMO plan may work best given your situation; look at the fee-for-service offerings within FEHBP for options with more national provider coverage.

_______________________

Anchorage Alaska: I'm now on an individual policy with Blue Cross but the premiums have been skyrocketing in recent years. I want an HSA but am concerned about what my bargaining power would be as an individual with cash buying only one of a service up against the big insurance plans that have the time and knowledge to negotiate cut rates. Is there something PRACTICAL that I can do to avoid winding up paying list price, especially in an emergency situation? Do individuals have any effective bargaining power?

Cara Jareb: With a high deductible health plan through an insurer, you will have access to the pricing that that insurer negotiates during your deductible phase. Hence, you won't have to "go it on your own per se."

_______________________

Anchorage Alaska: I'm a self employed individual but I missed out on signing up for a Medical Savings Account before the HSA deadline ended them. Are the HSA's better then the MSA's or did I loose an opportunity?

Cara Jareb: I believe the HSAs offer more breadth and flexibility than did MSAs. The Post has an article today outlining some of the features of these two products.

_______________________

Kansas City, Missouri: For individuals with chronic or catastrophic illness, is there a benefit to having a high deductible health plan with an HSA?

Cara Jareb: Not necessarily. In fact, one of the criticisms of these programs is that the high deductible health plans with HSAs attract the "healthy and the wealthy."

_______________________

Norristown, PA: What do you know about Health Care Savings accounts? My company offers them but I'm concerned about how easy it is to spend the money, and what happens if I don't use all of it in a year.

Cara Jareb: If you have a Health Reimbursement Account (HRA) or Health Savings Account (HSA) the money rolls over into the next year. With an HSA, the money can even stay with you if you terminate your employment. The Flexible Spending Account (FSA) is the account with the "use it or lose it" provisions in a given year.

_______________________

washingtonpost.com: Not sure how Health Savings Accounts work exactly? Check out Three Scenarios.

_______________________

Vienna, Va.: How can I, a very healthy mid-20s female runner with no injuries or conditions, benefit from spending accounts? Can it be used to cover things like chiropractors?

Cara Jareb: Yes, it can be used to cover a breadth of services not necessarily covered by the employer's health plan.

_______________________

Houston, Tex.: I currently have PPO type of insurance, and in my insurance statement, I see that reimbursment to my physiacian from the Insurance company is less than the amount billed. If I elect to have an HSA account, what would I need to pay the physician: the insurance negotiated amount or the actual billed. What would be counted against the deductible.

Cara Jareb: Generally the negotiated amount is what you would pay from your savings account, unless you received services where the Insurer did not have a negotiated rate. You still have health insurance with a high deductible plan just like you would with a lower deductible option (for example, a PPO) and can obtain the negotiated rate within the deductible payment phase.

_______________________

Harrisburg, PA: What's the difference between an HRA and an HSA ?

My employer is offering each.

What criteria should I use to decide which option to select during open enrollment ?

Cara Jareb: HRA is not vested so if you terminate employment the money is not likely to follow you, where with an HSA the money is yours (similar to a 401(k) in that regard). However, there are more limits associated with an HSA (e.g. you can't fund more than the deductible) and generally the options are priced differently in terms of the employee contribution, so you need to shop wisely.

_______________________

Reston, VA: I have a High-deductible plan with an HSA that covers me, and my wife is covered through her employer. May I use my HSA to pay for medical expenses my wife incurs that are not covered by her health insurance?

The reason I ask is that I just read that you cannot have an HSA if your spouse has a flexible spending account(FSA). However, we know that my wife will incur $6,000 of out-of-pocket medical expenses in 2005 that we were going to pay for using her FSA.

Now I find out that we cannot have both my HSA and her FSA at the same time. So can I use my HSA to pay her out-of-pocket costs, or do we need to find another solution?

Thanks for your help!;

Cara Jareb: No you can't use an HSA to cover your wife's expenses if she has an FSA. You could, however, put additional funds in either your wife's or your own FSA.

_______________________

Washington, D.C.: I need a physcial but no health care, any advice?

Cara Jareb: A very difficult situation...try to find out what a doctor would charge in advance (including lab charges).

_______________________

washingtonpost.com: Have questions? Get the answers and find all your options for individual coverage.

_______________________

Leesburg, Virginia: Can you speak to the trend in public sector employer adoption of HSA's? Does it appear to mirror the national private industry trend or do public sector employers have any special concerns when considering whether or not to offer HSAs and high-deductible health plans?

Cara Jareb: I am aware that the Federal Employees Health Benefits Program has several HDHP/HSA offerings available, which is more than most private sector organizations offer.

_______________________

NewHaven, CT: I am a federal employee who has beeb relying on my husband's health coverage because it was cheaper and for me, provided more benefits than the Basic Blue Cross. My husband's plan for next year, is no longer cheaper and the low deductible is $800.00, and specialists are a 20% copay. I have a daughter who will need outpatient sugery next year and we do use many specialists. Is there any benefit to paying for 2 plans? How does having two insurance plans work?

Cara Jareb: Generally there are coordination of benefits (COB) provisions so that oftentimes more of the total cost is paid with two plans than with one. However, up-front monthly contributions are also higher with two plans so those factors need to be considered.

Read the COB provisions of the plans carefully to determine what's best for you.

_______________________

Overland Park, Kan.: Hi, I'm self employed. Right now I pay $7900/year in premiums for individual family insurance; 100% is deductible as a business expense. If I switch to an HSA, how does deductiblity for self-employment purposes work? I'll have a lower premium (haven't checked HSA ind. policies yet since only 5 carriers write individual policies in this state), say $6000/year if I'm lucky-still deductible. The amount to fund the HSA isn't a business expense, but simply a pre-tax fund similar to a retirement account, correct? So the tax calculation changes? Thanks.

Cara Jareb: I am not a tax accountant; however, an insurer may roll in an HSA fund amount into the premium cost of the HDHP/HSA so I would suspect this type of "product" would be treated similarly.

_______________________

northfield, mn: I am 51 years old. I earn $9.00/hr and receive zero benefits from my employer. My net pay every two weeks is about $580. I have no health coverage. I have savings of $2,500. I'm trying to figure out how health savings accounts help me, please advise.

Cara Jareb: This is a very difficult situation. If there is any way for you to find employment that offers health benefits I would encourage that. Annual costs of health care even for a high deductible plan for an individual age 51 would likely exceed your savings.

_______________________

washingtonpost.com: The Washington Post's special issue on health insurance and open enrollment takes a look at the pros and cons of the debut of health savings accounts offered to more than three million federal employees and some private sectors.

We would like to welcome Cara Jareb, senior benefits consultant for Watson Wyatt Worldwide. Careb, just what exactly is a HSA and how does it work? Also, are all persons eligible for the HSA program? Cara Jareb: HSAs are account vehicles that are paired with high deductible health plans, defined as at least $1050 individual, $2100 family. They offer individuals the ability to contribute up to the deductible annually, roll over monies from year to year (which accumulate tax free), and employees can take the money with them even when employment is terminated. They can be used on a tax-free basis for qualified medical expenditures.

Employers can choose to offer or not to offer these types of programs. In general, everyone (except Medicare enrollees) is eligible to contribute, but because employment based health insurance is often the most cost effective vehicle, if an employer chooses not to offer this approach it may not realistically be available.

_______________________

Los Angeles, CA: Must the HSA funds be deposited with a bank that states it is an HSA trustee? Why wouldn't any savings account suffice, especially if the expenses are subject to audit by the tax authorities.

I've checked the HSA Insider web page and there are numerous trustees listed. Has anyone rated them for reliability?

Cara Jareb: I think it's safest to go with an HSA trustee, which are extremely common in the marketplace. Not aware of rating agencies yet, but these are fairly new vehicles.

_______________________

Gettysburg, PA: I cover my entire family in my employer's plan. My spouse has asthma, high blood pressure, and high cholesterol and daily takes 4 routine medications (that are obtained through mail order Rx). Everyone else in the family is very healthy.

My employer is only offering an HSA option or a PPO option for Jan. 1st. The key differences are deductible amounts, how much my employer will also contribute to my HSA account monthly, and of course, my portion of premium is less for HSA.

Sounds like my family is not going to fair well in an HSA. What do you think ?

Cara Jareb: Hard to say, but I would suggest you do the math. Calculate your current covered costs (not just what you paid but the total cost paid by you and your employer)for medical care and project your expected 2005 expenses based on that. Then apply the plan provisions you would pay for each (e.g. $1500 for the HDHP/HSA vs. $300 for the PPO, perhaps). Add to that your monthly contribution annualized to see which option is likely to cost you more out of pocket. For many individuals with chronic care needs these options may not be preferred but without doing the math it's hard to say.

_______________________

Washington DC: I'm considering a High Deductible Health Plan through the FEHB program for Fed Employees.

Are the contributions that employees make
taken out of our pay checks before taxes or are fed employees taxed on the money and then get to deduct from our tax return later on?

Cara Jareb: I believe the former but I would contact OPM to make sure.

_______________________

Kansas City, Missouri: Do all of the health plans in the federal market provide automatic employer contributions to the HSA?

Cara Jareb: I believe they do but I would contact OPM to make sure.

_______________________

outside the beltway: HSAs will present Americans with a moral choice about the future of our country:

1. Do we move toward a Darwinian world, where the fittest survive and those dealt with chronic illnesses mire in poverty?

2. Or do we see to it that all Americans have access to preventive health care and across the board quality treatment that doesn't divide us by the luck of our draw?

HSAs obviously move us toward #1. Over time, they will lure the healthy out of the HMO pool, leaving those with chronic conditions -- type 1 diabetes, multiple schlerosis, heart disease, you name it -- and one-time catastrophes behind. Those in the middle class will sink into lower class, burdened by out-of-control premiums.

There's no other way of looking at it. Do we treat our neighbors as we'd be treated, or do we look the other way from others' challenges and miseries?

Thanks.

Cara Jareb: It is not clear that the future is so dire as I believe these HDHP/HSAs will be offered alongside other options like PPOs and HMOs. In addition, the data suggests so far that it is not necessarily always the healthiest folks who enroll in these plans; many are older demographically (who tend to be costlier). They are oftentimes people who are willing to take on the higher financial risk, which I am not certain that most people are.

_______________________

Minneapolis, MN: Two questions -
What is considered preventive care? Is it the same standard the feds use for HRA's?

and........
Do you think the feds will continue to require HSAs to include prescription drug coverage?

Cara Jareb: Preventive care is defined in the Treasury guidance around HSAs. For example, immunizations are considered preventive care. Drugs that are preventive in nature are also excluded from the high deductible.

_______________________

Charlotte, NC: Are you aware of any benefits calculators on a website that would help compare benefits between plans?

Cara Jareb: We provide our clients (employers) with benefits calculators for their employees but I am not aware of anything more generally available in the market.

_______________________

DC: Are dental expenses typically covered by HSAs?

Cara Jareb: Depends on the expense. A dental (limited purpose) FSA is allowed in conjunction with an HSA.

_______________________

washingtonpost.com: We would like to thank Careb Jareb for joining us today, unfortunately that is all the time we have for today. If you are looking for more information on Health Savings Accounts, please read the Post article Selection Time. Cara Jareb: Thank you.

_______________________