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Published April 2006

Increasing health-care costs
give rise to HSAs, HRAs

By Steve Schmidt
Guest Columnist

Right now in the United States, there are few issues more important than health care. In his State of the Union address in January, President Bush stressed the need to confront the rising cost of health care.

Spiraling medical costs are forcing many businesses, especially smaller companies, to stop offering health insurance. According to the Kaiser Family Foundation, in 2005 just 59 percent of small firms nationwide offered employee health benefits; among the smallest employers (fewer than 10 workers), the percentage falls to 47 percent. Alarmingly, these percentages are dropping annually by nearly 5 percent.

In Washington, more than 860,000 people, or 16 percent of the population, under the age of 65 are uninsured.

This leaves some workers with the daunting choice of purchasing insurance on their own — or go without. This is frightening, considering that half of Americans who file for bankruptcy do so at least partly because of medical costs, according to a study by Harvard University.

Further, according to the Institute of Medicine, lack of health insurance causes roughly 18,000 unnecessary deaths each year in the United States. It begs the question: How many of these deaths could have been prevented if the uninsured had coverage and therefore access to potentially life-saving treatment?

However, there is good news. These pressures have forced health-care companies to develop new types of insurance that will protect both workers and their employers. One of them, a Health Savings Account (HSA), is a fund that allows employees and their employers to put away money, tax-free, for health-care expenses. Unlike most employer-sponsored health insurance, the money in these accounts belongs to the employee and is portable, meaning employees can take it with them when they change jobs or retire.

HSAs have enabled employers, especially small-business owners, to continue offering health coverage to their employees. According to America’s Health Insurance Plans, more than 3 million consumers nationwide have enrolled in HSAs since the plans first became available in January 2004.

Another type of health insurance is the Health Reimbursement Account (HRA). Unlike an HSA, the HRA is funded solely by the employer and stays with the employer if the employee leaves or the plan is terminated. Employers determine the funding level of the HRA, which employees use to pay for routine, preventive health-care services.

Since 2002, midsize and large employers have increasingly been offering HRAs to maintain health-care coverage for their employees and keep premiums affordable.

A UnitedHealth Group study of 20,000 HRA enrollees found they were more likely than people who remained in a traditional plan to utilize preventive services and less likely to visit the emergency room or specialists and utilize outpatient surgery, radiology and lab services. HRAs are helping people become active and engaged participants in their own health care through more selective, responsible use of health services.

While there is still no silver bullet to end the health-care affordability crisis, everyone deserves a basic level of health-care coverage. It is up to each of us to find new ways to keep health care affordable. But HSAs and HRAs are a good start.

These “consumer directed,” or “consumer driven,” health insurance plans are enabling employees to become better health-care consumers, which in turn is providing small businesses throughout Washington health care that is more affordable — and therefore more accessible — for their workers.

Steve Schmidt is chief executive officer of UnitedHealthcare of Washington.

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