HSAs/HRAs for Dummies -

HSAs/HRAs for Dummies – Pt. 2

In the first part, that was published last month, I stated that there are 5 common
objections that people bring up about HSAs/HRAs. I argued that anyone who actually believed any of these statements was acting like a dummy. The objections that I am talking about are:

“I can’t do a HSA/HRA because of:

1. Lack of clarification and regulations from the IRS/Treasury.
2. There are no tested, fully functional administrative software or Administrators out there.
3. There are no easy-to-follow steps and methods to evaluate Provider/Vendor for
   HSAs/HRAs.
4. There aren’t any good High Deductible Health Plans (HDHP) available in my
   area.
5. I cannot find a good trustee/custodian.”

I feel that I answered the first two objections in part number one of this article. Now, I would like to address the last three.

3. How to compare Providers/Vendors for HSAs/HRAs-
I am positive that most of you have thought about how should HSAs/HRAs be
implemented and if possible, without too much pain and without ruining the bottom line.
However many of you have not found an answer yet and that breeds fear and delay. To relieve you from this burden I propose you use the Internet or a consultant to help you find some Providers and Vendors. Then ask them these questions below (these questions are contained in the pdf here)  and rate their answers. Then determine who has “won” with the best answer and best capability. As a dummy, this seems easy to me.

There are good High Deductible Health Plans (HDHP) available

To implement a HSA you need to identify insurance companies that offer a HDHP in
your state. The Internet is a good resource to do that but another solution might be to contact an independent broker. You may look at major benefits publications or the Internet for case studies and plan designs on HSAs. Find out who was providing the HDHP for those HSAs. Attend a Web conference, local meeting, or national conference
and ask who has a HDHP in your area. Commonly mentioned as HDHP qualified carriers are: Assurant Health ( formerly Fortis Health), Golden Rule, BCBS (in almost all states), Aetna, Pacificare, United Healthcare, CareGain and others. A good place to look is at the website of the National Association of Health Underwriters (NAHU) www.nahu.org .
The number of HDHP existing in the area is surprising.

Consumers Choose Higher Deductibles and Lower Co-payments
Data from this sample shows that there is a clear consumer purchasing preference for higher deductible plans. As shown in the chart(chart available here) below, 57 percent of all plans purchased by individuals have a deductible of $1,000 or higher. Families purchased plans with deductibles of $2,000 or higher nearly 40 percent of the time. These are the deductible levels a health insurance plan must have to be eligible for pairing with a Health Savings
Account. Additionally, three-quarters of policies have office visit co-payments of $20 or less.

The HSA is very attractive in combination with an HDHP because of the cost savings.⁴

It is very important to know that 71 percent of people who bought HSAs in 2004 paid $100 or less per member per month (PMPM) for HSA-eligible health plans.

Even if you might think the opposite it is not easier for individuals to find a HDHP than for a company to find a fully insured Group HDHP. An employer with over 50
employees might look into a self –funded plan.
We think the entire insurance industry (including fully insured carriers and brokers) will

want part of this market and they will need to develop HDHPs quick so that they can meet the demand

5. Where can I find a good Trustee/ Custodian?

If you are going to implement a HSA- the monies contributed must be placed in a Trust and there must a Custodian of the account. Many employers are complaining that they
cannot find a good Trustee/Custodian.

I have good news for you. Any current insurance carrier, bank or financial institution, qualified Medical Savings Account (MSA) Administrators, or major stock firm are probably already a Trustee/Custodian (by default) for HSA Accounts.

The IRS has even published a further List of NonBank Trustees/Custodians on its website at www.irs.gov. As of December 31, 2002- (the new List as of 12/31/2003 is in draft form and has not been released yet) the IRS had approved 238 such firms. More are being approved as new NonBanks seek formal approval. The IRS has told me that there has
been tremendous new interest in becoming a HSA Trustee/Custodian.

Still don’t believe me? Then ask Calvin Thompson of the Employee Plans, Tax Exempt and Government Entities Division- IRS. (202) 283-9596. Just don’t tell him who gave you his phone number.

Summary-
The purpose of this article was to clarify some issues regarding HSA/HRA, with the goal of getting you to act now. The key points are the IRS/Treasury are already working on clarification and regulations and you can find administrative software or Administrators
out there. We also suggested some easy-to-follow and inexpensive steps to implement HSAs/HRAs. If you look hard enough you can find good High Deductible Health Plans (HDHP) available in your area.

Learning all the information provided in this article will probably make you rethink about waiting and you will start implementing in 2004 a CDHP with HDHP linked to HSAs/HRAs.

Bottom line: "don’t be a dummy!” Hopefully this article has answered some questions you have had. If this will lead you to action, then this article has made its point.

There is a new bestseller from Kirk Cheyfitz that seems to be support that position. Its entitled: ”Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business”. Free Press, 2003.
Cheyfitz’s very first of his 12 Timeless Rules is: ”Don’t do anything stupid!” Who could argue with this?

Don’t do anything stupid and don’t be a dummy. Make this your business motto!

About the Authors-
Rob J. Thurston, President of the Human Resources Consulting Group, has been a national speaker and noted author on HR
consulting and systems development since 1981. He has implemented and designed some of the largest selling employee benefits software systems nationwide while part of an international
brokerage firm, a national administration firm and while as a consultant. Currently, he is working on the development of several advanced technology systems for both HR and for employee benefits.

Anamaria Szekely, Organizational Development Consultant for Human Resources Consulting Group, has worked in several international locations (Europe) and in the United States as a human resources consultant. She graduated from the Babes-Bolyai
University, Romania, her major being Organizational Behavior (Psychology). She designed and implemented various projects on areas like organizational diagnosis, job security and performance
evaluation.

Rob J. Thurston & Anamaria Szekely
Hrconsultinggroup@msn.com