A Critical Moment for Health Care in America

Published March 1, 2004

Pamela Wimbish of Aurora, Illinois has the distinction of being the nation’s first person to hold a Health Savings Account (HSA) insurance policy.

Her policy took effect January 1, the first day HSAs became available. The policy was issued by Milwaukee-based Fortis Health through insurance agent Scott Leander of Wheaton, Illinois.

“This was a no-brainer,” Wimbish said of her insurance policy purchase. “One hundred percent of the deductible can go to the HSA for any medical expense, even ones that may not be covered by the policy. It’s funded with pre-tax dollars, and as a self-employed person, I’m always looking for ways to save money.

“Being over 50, faced with the reality of having potential higher health care costs, it’s nice this money can be in this account and used for that. If I don’t need it, I can pull it out after 65 to pay for non-medical bills.”

Wimbish, a wholesale furniture manufacturer representative, nicely summed up key provisions of HSAs, which were approved last December by Congress as part of the Medicare Prescription Drug, Improvement, and Modernization Act.

HSAs make health insurance more affordable by allowing consumers to save money in a tax-free account to pay for health care costs. Individuals with self-only policies can make a pre-tax annual contribution of $2,600, while families can make an annual contribution of up to $5,150, into an HSA.

“The recent passage of the Medicare reform legislation is a critical moment for health care in America. Included in that legislation are Health Savings Accounts, an innovative approach to paying for health care in which consumers are offered more flexibility, choice, and tax advantages,” said Speaker of the House J. Dennis Hastert (R-Illinois), sponsor of the legislation. “This is an extraordinary step in the ever-changing landscape of health care in our nation that will give people more options and affordability in making their health care decisions.”

Bring it Home

As an Aurora resident, Wimbish is one of Hastert’s constituents, a point not lost on Kerry Smith, director of government relations for Fortis Health.

“We were thrilled that the first policy was issued in Speaker Hastert’s district, because he was such a big part of this legislation,” Smith said. He said the company had received more than 1,000 HSA applications in the first two weeks of January.

Fortis Health, which owns Fortis Insurance Company, Fortis Benefits Insurance Company, and John Alden Life Insurance Company, is one of the nation’s leading health insurers, with more than 150,000 agents in 43 states. The company also has agreements to sell health insurance through other insurers, including State Farm, the nation’s largest property-casualty insurer.

Fortis was one of the few health insurers to sell Medical Savings Accounts (MSAs), which Smith said were kept from taking off in a big way because of restrictions imposed by Congress. In February 2003, Fortis started working with Congress to expand MSAs.

Not for “Runny Noses”

HSA policies typically feature high deductibles, which result in low monthly premiums. Wimbish said her coverage costs $250 a month with a $2,550 deductible.

“I don’t look for insurance to cover every runny nose,” she said. “If I’m in an accident or need surgery or something major, that’s what I look for insurance to cover. My out-of-pocket costs, checkups and everything, are probably less than $1,000 year. The premium savings makes it worth it.”

Scott Leander, the Fortis agent who sold Wimbish her policy, said he has the endorsement of the International Home Furnishings Representatives Association, to which Wimbish belongs. As a Fortis representative, he was able to offer them MSAs.

“I would show them a typical PPO with co-pays and MSAs, and most of them would choose the MSA, and now we have HSAs,” Leander said. “Because there was legislative ambiguity with MSAs, that caused hesitancy with many insurance companies. They didn’t think they would be something that would last.”

Consumer Power

“Now with HSAs,” Leander continued, “they’re going to get involved. HSAs are getting to the way insurance was meant to be.

“We have auto insurance against catastrophic accidents. We don’t insure against oil changes and tune-ups,” Leander pointed out. “We don’t insure homes against furnace cleanings. We insure against fire. Those managed-care plans, with their $20 co-pays and free doctor visits, are like insuring against tune-ups and furnace cleanings.”

Wimbish said as the amount of money in her HSA account grows, she will likely purchase higher deductibles to drive premiums even lower.

That is the kind of thinking Smith and Fortis executives want to hear.

“The more you pay for insurance, the more you want to use it,” Smith said. “That culture will bankrupt the system. We believe that with high deductibles as part of HSAs, we will see a dramatic change in how health care is delivered in this country.”

He said with HSAs being tax-free and allowed to accumulate over time, and with no penalty for withdrawing HSA money for any purpose after retirement, it is actually a combination health insurance and retirement vehicle.

“It’s a myth that this is only for the young and healthy,” he said. “Data does not support that. Our average MSA customer is a couple of years older than the typical client. It’s a financial product attached to health insurance. People in the individual and small-employer market buy insurance on need. If it’s part of an investment, they tend to keep it. That promotes a positive insurance pool across the country.”

Smith said Fortis’ next effort probably will be directed toward helping the uninsured.

“We can help people through high-risk pools, through tax credits for the purchase of private coverage,” he said. “We’re going to push hard for those kinds of things to solidify the private market.”

Steve Stanek is an Illinois-based freelance writer. His email address is [email protected].