Thirty-two-time MDRT qualifier G. Douglas Blatt, a member of Colorado’s Mile-High AIFA, has been around the industry block a few times. When something that makes financial sense crosses his path, it will catch his eye. Health savings accounts caught Blatt’s eye.
HSAs were initiated when President Bush signed the Medicare Modernization Act into law in November 2003. An HSA is a tax-exempt account established for the purpose of paying medical expenses.
A financial piece
Blatt strongly believes advisors should turn toward HSAs. “The reason our colleagues would want to sell HSAs is because they’re more of a financial piece than just a health insurance policy,” he says. “The consumer likes the fact that there are two components in an HSA—the savings vehicle and the health insurance piece.”
Blatt, seemingly always an optimist, sees only one possible red flag that clients can raise against the HSA. “Maybe I’m naïve,” he says, “but I’ve been selling a ton of these things. The only weakness that I’ve been able to ascertain is that in the first year, the clients may not be able to put their full deductible into the savings account.
There simply may not be enough time because it’s based on 12 months. If you start in the middle of the year, you can only put half of the deductible in until January of the next year, at which point you can put it all in. I talk to clients a lot about that because everybody wants to know what the drawbacks of an HAS are. That’s the only thing I’ve been able to come up with that could cause them a bit of difficulty.”
Not an issue
Blatt balks when asked if older or sicker employees are at a disadvantage when using the HSA option. He provides an example of a company he is working with that has an employee who has multiple sclerosis, and his medications cost him $1,000 per month. “If he has a $2,000 deductible with the HSA, and 100 percent coverage after that, isn’t he better off?”
Furthermore, Blatt points out, the HSA can be used for a wide variety of medical services. “Remember, they can use it for chiropractors, holistic medicine, laser eye surgery. There are so many things you can do with your savings account that you can’t do with your regular plan. That’s a real positive,” he says.
On the other hand
Blatt says he doesn’t have to deflect negative attitudes about HSAs from clients and prospects. Some agents and brokers, however, may be difficult to persuade, he says.
“Initially they would say, ‘OK, my [client’s] insurance premium is going to cost him $250 per month, and the side fund is $250 per month," says Blatt. "That’s $500 per month, and that’s what they’re paying for their PPO, so that’s not a better deal.’ But I ask: If I’ve got $250 of my money that I’ve put into my account above-the-line, and it grows with interest, and I can use it tax free for any health condition, isn’t that a better deal?’ It’s $250 going to the insurance company; the other money is yours.”
Seeing the light
Blatt says that HSA acceptance will require a shift in advisor as well as consumer thinking.
“What I see is a phase-in, especially on the group side first. I think we’re going to have dual-option programs that are going to really get the ball rolling,” explains Blatt. “If we have 10 or more employees, and the worker bees say they couldn’t possibly have a $2,000 deductible so they decide to stay with the PPO, the dual option plan will allow them to do that as long as the company has maybe two people who will take the HSA. Maybe the two owners will go with the HSA, and the other eight will stay with the PPO. That would probably be the initial phase-in, year one.”
“Then after years two and three," Blatt continues, “when we meet with them, employees will have started to hear about the owners who had put $2,000 in their side funds and now have $4,000, and it’s their money. They may say to themselves, ‘I didn’t have many claims so maybe I’ll do this, too.’ That’s probably what will happen. The workers, after a few years, will be happy and much better off with the HSAs.”