Over the past several years, rising health care costs have outpaced inflation significantly, making it increasingly difficult for businesses to offer health benefits to employees and for individuals to afford personal health coverage.
As reported in a recent USA Today article, in the past year alone health care costs have risen 13.5% for mid-size companies and more than 20% for small firms. Mostly because of these prohibitive costs, more than 40% of businesses with 10 or fewer employees don't offer health insurance benefits, according to a 2002 Kaiser/HRET survey.
Consumers and employers are desperate for more affordable health care while keeping the benefits that people expect in a health care plan. They need agents and brokers to bring them solutions.
While new products frequently are introduced to the market to satisfy consumers' desires for insurance tailored to their needs, few products have been as targeted and popular as health savings accounts (HSAs). This solution to more affordable health care emerged on Jan. 1, 2004, when HSAs were offered to companies and consumers for the first time.
Since then, Assurant Health has received applications to cover more than 97,000 people. Significantly, more than 40% of HSA applicants have reported no previous health care coverage.
The tremendous appeal of HSAs for consumers and small businesses gives agents, brokers, and financial planners a great opportunity to sell to new markets, expand their client base, and increase revenues.
HSAs and the concept behind them, consumer choice health care, represent a new way of looking at health care -- and the most dramatic change in health insurance since the advent of HMOs.
HSAs give individuals and employers unprecedented flexibility and choice in coverage. A health savings account coupled with a high-deductible health insurance plan also protects the consumer from a catastrophic financial loss due to unforeseen illness and injury, in the same way that traditional plans do. HSAs, however, also offer the additional benefits of reduced premiums, lower taxes, and tax-free or tax-deferred savings.
For individual consumers
Whether the producer occasionally sells a health policy, is a health insurance specialist, or is a financial planner, HSAs give him or her a great opportunity to provide an affordable health insurance option to consumers and assist in his continuing to position himself as a trusted financial adviser.
Our national network of more than 200,000 independent agents has reported that consumers find HSAs beneficial for several reasons. HSAs allow consumers a more affordable and flexible health care plan. In addition, HSAs align with consumers' desire for more control over their health care costs and put them in the driver's seat when making health care decisions. For example, one customer decided to buy an HSA policy because it enables her to control her health care spending, plan for retirement, and manage her finances.
My company's producers have found it helpful to create scenarios for consumers to demonstrate the savings and benefits of an HSA versus a traditional health care plan. For example, a producer will illustrate the savings in premium costs that an HSA coupled with a high-deductible plan offers versus a traditional plan. In addition, HSAs provide a significant tax savings, depending on the consumer's tax bracket. After a producer has illustrated these savings, consumers often realize they can get a health insurance plan comparable to traditional plans but for a much lower cost, all while saving for the future.
In essence, HSAs provide consumers with the flexibility, choice, and portability they want while creating a new investment option in a tax-free account. They also allow producers to meet the needs of consumers who want an affordable health care option.
For small businesses
HSAs enable businesses to offer employees health coverage at a cost that averages 20% lower than a traditional plan. The employee and employer more equally share health care costs, and businesses and employees can qualify for a tax deduction. Another benefit of a small business offering employees HSAs is that smaller firms can remain competitive with their larger resource-rich counterparts -- because small employers can contribute directly to employees' HSAs.
Producers have reported that family-owned-and-operated businesses, groups that already have dropped coverage because of high premiums, and groups with employees who want to better control their tax responsibilities are especially receptive to HSAs. In addition, employers who want different plans for themselves than for employees and employers who can provide only limited benefits have used HSAs as a viable and attractive health care option. Overall, HSAs give employers the opportunity to offer employees health insurance at a reasonable cost to the employee and employer.
Expanding your role
We believe that educating our producers is critical to successfully promoting HSAs in the market. We regularly conduct ongoing training seminars that are CE-credited and work diligently to help underscore the agent's HSA expertise to consumers. Educational programs such as these ensure that producers successfully can convey the many benefits of HSAs.
Many producers find that consumers appreciate the additional benefit of no-fee, seamless administration that some HSAs offer, including no hidden administration, setup, or user fees, and access to a wide variety of investment options. Any purchaser of a high-deductible insurance plan can take advantage of this benefit.
Given the investment options of the HSA, producers now can position health insurance as part of a consumer's overall financial portfolio. In fact, producers report that some consumers see an HSA as a tax-free alternative to an IRA. They also are a tremendous investment and a superior way for individuals to create a tax-sheltered nest egg for retirement.
In addition to providing retirement savings advantages that other options like IRAs can't match, HSAs also enable producers to change consumer perceptions of insurance. Instead of being merely something that's beneficial in time of need, health insurance now can be thought of -- and effectively sold -- as a sensible investment. HSAs create a new customer appreciation for the benefits of insurance and foster goodwill that can yield lifelong customers.
