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Health Savings Accounts Added to BU’s Insurance Options

High deductible plan lets you save for expenses tax-free

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A high-deductible health insurance plan, married to a tax-free health savings account (HSA), will be offered for the first time to BU employees next year.

The new BU Health Savings Plan, the University’s least expensive health insurance plan in terms of premiums, is being introduced and the BMC Preferred Plan is being eliminated. Premiums are the amounts deducted from your paycheck for your insurance; deductibles are what you pay yourself for medical care before the insurance plan starts picking up the tab. With an HSA, you use the savings account to pay eligible out-of-pocket medical expenses, such as the cost of a physical exam, until you reach the deductible.

The University’s two other insurance options—an HMO (Network Blue New England) and a PPO—remain. But the former has been changed to include a financial incentive for employees to choose a primary care physician affiliated with Boston Medical Center. HMO subscribers who have a BMC primary care doc will have lower copayments for care than subscribers who don’t—for example, $15 versus $25 for a doctor’s office visit, and no copay versus $200 for inpatient hospital admission, including maternity.

All employees have until December 5 to enroll in a plan for next year. All plans are offered through Blue Cross Blue Shield of Massachusetts. Employees choosing to remain in their current BU plan don’t have to do anything, but those enrolled in the BMC Preferred Plan must choose a new plan. If they don’t, they will be automatically enrolled in the University’s HMO plan.

About 14 percent of employees who have University health insurance currently are in BMC Preferred, says Nimet Gundogan, Human Resources executive director of employee benefits.

The University is replacing that plan with the HSA, she says, because the latter, with its “incentives for employees to utilize BMC physicians and services, will expose a larger number of employees to BMC’s services.

“A high-deductible plan, coupled with a health savings account, is becoming increasingly prevalent,” she says, “and is unique in the way an employee accesses health care as compared to other health plan options.” According to the New York Times, more than 10 million Americans last year enrolled in such plans.

Yet the University and outside experts caution that HSAs may not be for everyone. Generally speaking, HSAs work best for healthy people who expect few medical bills. A chart comparing all three plans’ premium costs is available here. See a chart comparing annual deductibles and other features of the plans here.

The aim of HSAs, created by the federal government in 2003, is to cut health care costs by making workers responsible for, and thus more careful stewards of, their medical spending. The premiums are low, and you can put pretax dollars (deducted from your paycheck and thus earning a tax deduction) into your HSA; for next year, BU employees can put up to $2,600 in their University HSA for single coverage and $5,750 for family coverage. You pay no tax on earnings on, and eligible medical withdrawals from, your HSA, and money in the account rolls over from year to year and can also be taken with you if you go to another job outside BU.

If you open your HSA with Fidelity Investments, the University will deposit $500 in the account to start you on your way.

On the downside, illness or injury can leave you paying that steep deductible ($1,500 for employee-only coverage and $3,000 for family coverage, assuming you use a network doctor. Those deductibles double out of network). You also need to save every medical receipt to prove you used money from your HSA for qualified expenses; if you use the money for an ineligible purpose, you can lose the tax advantage.

Information meetings are being held on both campuses about the changes; a schedule is available online.

6 Comments
Rich Barlow

Rich Barlow can be reached at barlowr@bu.edu.

6 Comments on Health Savings Accounts Added to BU’s Insurance Options

  • Jane on 11.15.2011 at 10:16 am

    Actually, I think that this plan is setting up the staff for economic disaster. Who can least afford to pay 10% of a hospital bill after $1,500? The staff. Look at the job offerings at BU and then ask yourself, what happens when you, a young healthy person, have to go into an Emergency Department with an appendicitis attack. Suppose the doctors misdiagnose the cause of your pain and send you home, so by the time you return to the ED, your appendix has burst. So,now you need to be in the hospital for a week with an IV in your arm. This happened to a young friend of mine. What is 10% of $200,000? (That’s a low estimate.) After your $1,500 dollars, tax free, you owe $20,000. Do you have that in the bank? Not if you’re paying a mortgage. What if your spouse loses his/her job? I think it is a sad day when an employer invites its poorly paid employees to risk financial ruin based on a way to save money on a health plan.

    • brian on 11.15.2011 at 3:33 pm

      This is not the only plan offered. You have a choice.

    • dan on 11.15.2011 at 5:09 pm

      The maximum annual out-of-pocket cost is $3,000 for an individual plan (though in fairness the article doesn’t discuss this). The employee in your example would pay no more than $3,000 per year for all out-of-pocket medical expenses rather than 10% of the $20,000 hospital bill. This assumes that the care is received in-network, which includes most hospitals in Massachusetts. The out-of-pocket maximum is $6,000 for out-of-network care.

      • Jane on 11.16.2011 at 10:14 am

        I asked that very question to an HR representative at the very first information session and she told me that after the $1,500 out-of-pocket cost, the insured would be charged at 10% of the medical costs. The HR online information does not include a cap of $3,000 or $6,000 for out-of-pocket expenses; therefore, not knowing who you are or what your expertise is, I think HR would do well to clarify the matter in its own official announcement. Even if there is a cap, do you think it is legitimate to suggest that this is a good way to invest one’s money?

        • dan on 11.16.2011 at 3:19 pm

          After meeting the $1,500 deductible, the employee pays 10% of charges up to the $3,000 annual maximum for in-network care for an individual coverage. Look at the chart on the page that describes the BU Health Savings Plan; check the row for annual out-of-pocket limit.

          It would be good if HR would chime in to confirm and better still if they had vetted the article before it was published.

  • Mark Krone on 11.15.2011 at 10:30 am

    The HSA premiums are only $40 less than the cheapest full-coverage plan. This saves the employee $480 per year. Add the $500 seed money from Fidelity and you get $980. This means you still have a deductible of $520. Here’s hoping you stay healthy.

    Given that staff raises do not always cover the rising cost of living (and benefits), the HSA plan looks like a bad deal and a very unwelcome development in employer-funded benefits.

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