IT'S RARE WHEN a small-business owner is enthusiastic on the topic of health care. Each year, rising costs force more firms to drop coverage for employees. But Andrew Field, owner of a web-based commercial printer in Livingston, Mont., tells a different tale: His company's medical plan has gone from bare-bones to better, with a cost savings to boot.
In February 2005, Field switched his 130 employees at PrintingForLess.com from a traditional Blue Cross plan to health savings accounts, or HSAs. The process, he admits, has not been without rough patches. And "we were a little worried that it might have some bad side effects — that it might not be as good as the advocates claim," he says. But the verdict, more than a year later? "It's better than we thought," he says.
HSAs, created by Medicare legislation in late 2003, were designed to help small businesses trim the soaring costs of employees' health benefits. In 2005, small firms (those with fewer than 200 employees) reported a 9.8% increase in health-insurance premiums, according to the nonprofit Kaiser Family Foundation in Menlo Park, Calif. On average, a small business pays $4,032 a year to cover an employee's individual coverage, and $10,587 if the worker needs family coverage. The hefty tag has forced many small businesses to drop health coverage entirely.
The alternative that Field and other business owners are trying is the HSA, a tax-free savings account where employees can store money for medical expenses. The money in the account can earn interest and "roll over" year-to-year, potentially creating a sizable nest egg for the employee. The HSA can only be opened in conjunction with a high-deductible health plan, which is typically cheaper than a comprehensive plan and covers major expenses such as hospitalization and surgery.
At PrintForLess.com, Field had heard employees complain that the Blue Cross plan cost a lot but didn't cover many common expenses, such as the price of contact lenses. The annual premium for a worker's family coverage was about $6,000; of that, the company picked up 60%, or about $3,600, and the employee paid the remaining 40%, or $2,400. "I was getting complaints from people saying, 'I've taken the kids to the doctor once this year...I'm not utilizing it,'" Field says.
With the price of health insurance rising each year, Field decided to ditch the traditional plan and switch to HSAs. The move has allowed him to hold costs steady — and, in his opinion, give his staff a better health plan. The company splits with employees, 60-40, the total cost of fully funding the HSA and paying the high-deductible insurance premium — roughly $6,000 a year. So employees' payroll deductions remain virtually the same.
Under the new plan, employees now have a slightly higher deductible — $2,400 a year for families, and $1,200 for individuals — than they had before. But now, employees can tap into their HSAs to pay for qualified medical expenses, which includes medical, dental and vision care, as well as eye glasses, flu shots, birth-control pills and over-the-counter drugs such as aspirin. (Under federal rules, the maximum contribution to an HSA in 2006 matches the amount of deductible, up to $5,450 for families and $2,700 for individuals.)
Field estimates that it took about six months to put the HSA plan in place — a tedious process made harder by the fact that, in 2004, the accounts were unfamiliar to banks, insurers and employees alike. He settled on an HSA plan using John Alden Insurance though a regional firm, Payne Financial Group in Helena, Mont.
To smooth the transition, the company explained HSAs in a slide show to employees, and Payne Financial representatives came on-site to answer questions. Employees reacted with "trepidation" but most like the new plan, Field says.
"We didn't know how well it would be accepted — with any change, people may think they're being screwed," he says. To make it more palatable, the company funded the first year upfront, so that employees had money in their HSAs at the get-go. (Through a paycheck deduction, the employees paid the company back over the course of the year). Most employees like HSAs over their old plans because they can choose their doctor and pay for services or products with relative ease, using their debit cards or checks, according to Field.
"I wholeheartedly recommend it," says Field. "It fits into our whole philosophy of letting people make their own decisions."
