By the end of March 2005, more than one million U.S. residents were enrolled in Health Savings Accounts, which are qualified, high-deductible health insurance plans combined with tax-advantaged savings accounts. The March total was more than double the total number of enrollees in September 2004, according to a survey conducted by the Center for Policy and Research, America's Health Insurance Plans. The survey also revealed that individuals, as opposed to employees enrolled in a group plan, accounted for more than half the total enrollees.
The AVMA Group Health & Life Insurance Trust has also seen interest in HSAs grow. In 2004, 12 percent of the active AVMA GHLIT health insurance coverage was for HSA-qualified, high-deductible plans. By the end of 2005, that figure grew to 21 percent.
Health Savings Accounts were created when Congress included a provision in the 2003 Medicare reform bill that eliminated previous restrictions inhibiting the insurance plans. During the first nine months the HSAs were available, more than 430,000 Americans enrolled in the plans.
Congress created HSAs to allow insureds to have more control over their health care dollar. The AVMA GHLIT provides HSA-qualified, high-deductible health insurance plans to help reduce medical costs for members, most of whom are self-employed and pay for their own health care coverage. In many cases, switching to an HSA-qualified, high-deductible plan can immediately lower the premium. For instance, a 45-year-old male residing in Georgia covered under the AVMA GHLIT traditional indemnity plan with a $1,500 deductible would pay a monthly premium of $429.* The same individual could switch to an HSA-qualified, high-deductible plan with a $1,500 deductible and reduce his monthly premium to $305.* A 35-year-old female residing in Georgia with the same traditional indemnity plan could switch to an HSA-qualified, high-deductible plan and reduce her monthly premium from $320* to $258.*
Raising the deductible on the HSA-qualified, high-deductible plan can reduce the premium even further. In 2006, the maximum deductible for an individual totaled $2,750, up from $2,650 in 2005. The maximum family deductible increased to $5,450 in 2006, compared with $5,250 in 2005.
The savings in premiums is only one component of HSAs. There are other benefits, some of which may be even more compelling in the long run.
Insureds may deposit funds equal to their deductible into a personal HSA. Contributions are deductible from gross earnings for federal tax purposes, and interest on HSA balances accumulates tax-free. These funds may be used for qualified medical expenses, and unused funds roll over from year to year. In effect, an HSA provides a tax-sheltered environment to save for future medical expenses. The definition of qualified medical expenses is rather broad. Along with additional typical co-pays on doctor visits and prescription drugs, HSA funds may also be used for prescription eyeglasses, dentist visits, radiographs, many over-the-counter medicines, and more.
One of the first AVMA GHLIT members to take advantage of an HSA was Dr. Roger Wells, an equine practitioner. As a single parent, he was frustrated with the rising annual premiums.
"With a $1,500 family deductible, most years I never hit enough in expenses for insurance to kick in," Dr. Wells said. "If I'm healthy and my daughter is healthy—and I'm thankful that we are—that money is gone."
At a national meeting of the American Association of Equine Practitioners, Dr. Wells learned about HSAs. He quickly grasped the benefits and realized how an HSA could not only reduce his health care expenses now, but also help him protect against future costs.
"The money goes into the account tax-free, and you can take it out tax-free if you use it for a medical purpose," Dr. Wells said. "At the end of the year, if you stayed healthy, it rolls over and remains in your savings account."
"The private savings account is integral to the insurance," Dr. Wells pointed out. "For younger veterinarians just starting out who feel they cannot afford to fund a Keogh or an IRA, this could serve as a beginning retirement program that also covers medical."
"It's a fantastic program," he said. "I have been a strong advocate to everyone. If you have to buy your own insurance, it's the way to go."
While many insureds will find HSAs to be useful tools for containing health care costs, the bottom-line success of HSAs across the country will depend on consumers making wiser health care choices.
Preventive care is one important aspect, since preventive care is, overall, less expensive than emergency or remedial care. The AVMA GHLIT has an upgraded Wellness Benefit on many plans to encourage veterinarians to be more proactive about their health. The GHLIT also sponsors a Wellness Center at the AVMA Annual Convention to reinforce the Trust's commitment to preventive care and health screenings.
Making wiser health care choices also means being smart about expenditures. The use of generic drugs is a prime example—generic drugs typically cost 30 percent to 70 percent less than their brand-name counterparts.
For veterinarians desiring to take advantage of an HSA, the AVMA GHLIT offers several HSA-qualified, high-deductible health insurance plans, which are underwritten by New York Life Insurance Company (New York, NY 10010). The GHLIT can also provide additional information about financial institutions to contact to establish an HSA. The AVMA GHLIT and New York Life bear no responsibility for the establishment or administration of HSAs. Members are also advised to confer with their tax adviser.
For more information on the AVMA GHLIT HSA-qualified, high-deductible insurance plans, including exclusions, limitations, rates, eligibility, and renewal provisions, call the Trust at (800) 621-6360.
*Based on rates effective Nov. 1, 2005. Rates increase as members attain a higher age bracket and are subject to changes by the insurance carrier. In addition, rates are subject to medical underwriting and can be up to 50 percent higher.