Paul Martino

Thursday, 29 September 2005 06:37

Enrollment season

It isn’t surprising that some employers look upon the enrollment season with a bit of dread. The last several years have delivered ever-increasing benefits costs, which many companies have been compelled to share with employees through higher premiums or changing benefits. In addition, a new generation of health plans has expanded the role that employees play in managing their health-care decisions. These trends, among others, have made open enrollment more important, more complex and more emotionally charged than ever.

Yet despite these realities —or perhaps because of them — many smart employers have seized on the open-enrollment process as a means to strengthen employees’ understanding of their benefits and the overall function of rewards in the context of the business.

Advance planning and timely communications with employees can make a huge difference. Here are a few ideas to help you prepare.

Define your goals. As you approach open enrollment, establish your organization’s goals. Do you want everyone signed up by a certain date so ID cards arrive by the new year? Are you hoping that half of your employees will choose a consumer-directed health plan? Your carriers should be ready to work with you to help you establish the right blend of benefits features, employee contributions and marketing efforts to achieve your enrollment goals.

Plan your approach. Based on your goals, create a workable timeline so that employees and managers have the right information at the right time. For example, if you are working with your health insurance carrier to offer new online tools, make sure your IT team is at the table early. Similarly, you may want to include your front-line managers in early discussions of upcoming benefits changes. Make sure you give employees enough time to assemble, analyze and discuss plan information with family members before the enrollment deadline.

Get the messages right. In addition to anticipating targeted information needs within your company, take the time to create general messages that both explain plan changes and the context that surrounds them. For example, if co-payments are increasing, highlight the overall claim increase the company itself is absorbing. In talking about changes, make sure to explain what is not changing as well. This gives employees a more balanced picture and puts overlooked-but-valuable existing benefits into the spotlight.

Communicate through multiple media. Before the actual enrollment kit reaches your employees, you should share information in multiple, diverse ways. Your health insurance carrier should offer resource materials, such as newsletter articles, brochures or posters to get you started. Whenever possible, take advantage of existing communication channels, such as the company newsletter and staff meetings to get the message out and underscore the integration of benefits issues into your overall business success.

Note that, in many cases, plan changes will impact each employee differently. You should anticipate these issues and be prepared to help employees understand your company’s need to revise its benefit structure. Ask your health benefits carrier if they have information tools available to help your employees evaluate the plans offered based on their own health benefit consumption.

Gauge your success. After enrollment is over, compare your results to the initial goals you set. Too often, companies rely on anecdotal feedback. You need hard facts. Conduct a simple e-mail survey that asks: “Did you receive your ID cards when they were promised?” or “Were you given the right information to make an informed decision about your medical plan choices?” Your health insurance carrier may be able to help you link your survey to an online enrollment process, if your company uses one.

Based on the success of your open enrollment process, you may want to work with your health insurance carrier to get an early start in planning for next year. The more you communicate the power of your benefits programs throughout the seasons, the less daunting — and more enriching — this ritual of open enrollment will be for you and for your employees.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna’s middle market segment, which includes businesses with 51 to 3,000 employees. Reach him at (312) 928-3754 or

Monday, 23 May 2005 12:01

Health benefits literacy

Health benefits literacy -- the ability to understand and navigate health insurance options and benefits -- is essential to helping employees take the first step as savvy health care consumers.

Workers are progressively more responsible for managing their health care as consumer-directed health plans gain in popularity. At the same time, they are expanding their roles in seeking information, measuring and monitoring their health, and making decisions about insurance and options for care.

With 3.2 million Americans covered under some form of a consumer-directed plan, it is increasingly important that employers take rapid steps to educate employees about this new role. Employees need the tools, information and support to make well-informed decisions. At the heart of this effort are employee communication and education, both critical for a successful transition to consumer-directed health care.

Here are some suggestions to help get you started.

Pre-enrollment ­ a rationale for change

Managers play a significant role in shaping employee opinion. This is especially critical once the decision has been made to move to new plan designs.

Beyond presenting advantages and features of the plan during this transition period, employee communications should demonstrate the need for change and highlight the support available to employees. Consider using communication avenues such as announcement letters, newsletter articles, pre-enrollment posters and independent, third-party viewpoint articles to address policy changes and answer employee concerns.

Enrollment -- cultivating an informed consumer

The enrollment phase focuses on helping employees fully understand the consumer-directed plan offerings and assists them in making their health plan election through tutorials and interactive tools.

Decisions workers make now can impact their future. Cultivate an informed consumer by providing access to interactive decision-support tools

* Plan selection and cost estimator tools. These interactive decision-support tools assist employees in making their health plan election during open enrollment. Members input basic information about their utilization of health care services to estimate their out-of-pocket health care costs. The tool then compares available plan offerings and allows employees to see estimated costs associated with various health care scenarios.

* Health savings account (HSA) savings calculators. These tools demonstrate the potential savings and tax advantages associated with an HSA. Members provide basic information about their age, annual HSA contribution, expected interest rate from the HSA administrator and marginal tax rate.

The calculator provides the potential HSA balance over time, a comparison of HSA savings to other after-tax, interest-bearing savings vehicles and the potential tax savings for HSA contributions. The tax savings illustration is helpful in understanding the differences between using the HSA for current medical expenses versus growing the HSA over time.

* HSA/health reimbursement account (HRA) online tutorials. These are designed to help members better understand these products and aid understanding about how the rise in health care costs has led to the increase in health care consumerism; the benefits available through HRAs and HSAs; the basic structure of the benefits plans; and the tools and resources that support these new offerings.

Post-enrollment -- supporting consumer responsibility

It is important to continue to support consumer responsibility during the post-enrollment period. Making the change to a consumer-directed health plan is not a one-time event, it is a strategy carried out over several years.

During post-enrollment, the focus is on reinforcing employee involvement in the decisions made about their health care, updating them on new tools and services available, and reminding them of the existing tools. Ongoing communications throughout the plan year also provide additional opportunities to strengthen employees' abilities to get more involved in their health care decisions.

Increasing health benefits literacy provides a pivotal opportunity for employers wanting to increase the adoption rate of consumer-directed health plans. Working in partnership, health benefits providers and employers should provide educational materials in easy-to-understand formats, along with credible health information and tools that support informed decision making.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employees. Reach him at (312) 928-3754 or

Friday, 16 July 2004 09:25

Bitter pill

Not long ago, most employers looked upon their prescription drug plans as simple and benign benefits, less likely to cause unrest than their annual company picnics. Today, however, drug coverage is demanding 15 percent or more of an employer's health care dollars, and the cost of it is rising faster than that of any other benefit.

We all know the reasons. Impressive new drugs reach the market each year, treating a wide range of ailments. Massive ad campaigns support these drugs, driving consumer demand as patients ask doctors for specific prescriptions. Drug utilization on the whole also is increasing, due in part to the growing population of older adults, who use three times as many drugs as younger people.

The result? A nation that, according to the Alliance for Health Reform, went from spending $12 billion on drugs in 1980 to spending nearly $122 billion by 2000. And experts project that spending on prescription drugs will continue to increase an average of 11 percent annually through 2008.

In response to these challenges, many employers are taking advantage of an increasingly broad and sophisticated set of tools to manage their pharmacy benefits programs. To get the most value from your plan, and to help promote the health and safety of your employees, you might consider taking advantage of some or all of these programs.

Identifying diseases early
It's vital for individuals and their physicians to manage treatment for conditions like asthma or heart failure very carefully. Patients who make positive lifestyle changes, use medications correctly and stay alert for symptoms have a better chance of staying well longer and avoiding hospital visits.

By analyzing pharmacy and medical data, a health insurer can help physicians identify plan members with certain chronic health conditions who could benefit from disease management programs. In essence, these programs help employees get the right medications and counseling to avoid potentially serious -- and costly -- conditions in the future.

Reducing drug-related health risks
By mapping employee pharmacy and medical data against medical histories, a health plan's computer system can help physicians and pharmacists minimize harmful interactions between certain medications and conditions, helping your employee avoid a dangerous and costly medical issue.

When a potentially dangerous interaction is found, many insurers proactively send a message to the pharmacist, who then uses professional judgment or contacts the employee's physician to discuss the situation. Similarly, these systems help health care providers protect your employees from many kinds of prescribing errors by flagging recently covered prescriptions that could cause severe adverse interactions with other drugs they may be taking.

Investigating step therapy
The newest drug on the market may not always be the most appropriate treatment for a given person's condition, but it often is the most expensive. "Step Therapy" programs encourage physicians and patients to explore effective and efficient medication options that may be available before trying therapeutically equivalent, more costly alternatives.

Leveraging mail-order pharmacies
For many short-term prescriptions, it makes sense to run to the local pharmacy. But mail-order pharmacy programs are great for employees who take certain medications on an ongoing basis.

Prescriptions can generally be ordered via phone, mail or Web, and are delivered right to the home. Depending on the benefit plan, the mail order program can save money for the employee and the company.

Educating employees about generics
Your health insurance company should be able to provide information about ways you and your employees can maximize the value of your benefit plan. For example, on average, generics cost 50 percent to 75 percent less than brand-name drugs. Accordingly, encouraging appropriate generic drug use can significantly reduce your plan costs.

While you may not be able to take advantage of every one of these programs, each offers a unique opportunity to leverage your pharmacy plan to promote improved employee health and keep a lid on escalating costs. Your insurer or broker should be able to provide more information and ideas about making your drug plan an easier pill to swallow.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or

Friday, 31 October 2003 07:22

In the know

As employees become increasingly aware of the costs of health care and are being asked to pay more of their share, they are becoming smarter consumers.

With benefit enrollment sessions underway at many companies, employers are looking to provide useful tools and credible information to help employees navigate successfully through health care options and benefits choices.

Savvy employers turn to carriers that can help educate employees by providing tools that offer health and benefit management information online at any time. More and more, employees are accessing health information through the Internet to become better-informed decision-makers.

Approximately 109 million U.S. Web users have sought health care information online in the past year, up from 97 million in 2001, according to a Harris Interactive survey.

What to look for in a carrier

Cutting-edge benefits companies support the movement toward consumerism and are providing online information and personalized tools to guide employees through the complex maze of health information and employee benefits.

As a result, they are raising awareness among employees about the true costs of health care and turning high-demand consumers into more prudent and discerning purchasers.

Employers should look for several features when choosing a carrier that will help employees understand their options while engaging them in the selection, purchase and use of their benefits. Some things to look for:

* Employee self-service Web sites allow employees to review benefits online, enroll or make changes throughout the year, and run "what if" scenarios to view the impact of benefit and coverage changes to their paychecks.

* Interactive wellness programs provide information to users on disease prevention, condition education, behavior modifications and health promotion.

* Hospital comparison tools provide online access to evidence-based outcomes information such as mortality rates and length of inpatient stays on local hospitals for certain procedures and diagnoses.

* Drug comparison tools enable members to obtain cost information on prescription drugs and determine the availability of a less costly generic alternative.

* Medical procedure tools let members compare physicians' fees for common procedures such as physical examinations, and highlight the value of accessing in-network care compared to out-of-network doctors.

* Health information hotlines provide users with access to registered nurses who can offer information on health issues, medical procedures and treatment options 24 hours a day.

Smart benefits shoppers are armed with information and are looking for an easy approach to managing their personalized benefits plan. About 31 percent of Americans say they will turn to the Internet the next time they need health information, according to the Pew Internet and American Life Project; 93 percent of health information seekers have gone online to look for information about a particular illness or condition, while 55 percent gathered information before visiting a doctor.

Benefits companies that provide strong technological capabilities to meet the growing demand for better and more information will keep employees satisfied over the long term and confident that they are making intelligent and responsible health care decisions for their own well-being and that of their families. Paul Martino is vice president of Sales and Service covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Martino is based in Chicago. For more information, contact him at or (312) 928-3754.

Tuesday, 23 November 2004 08:57

Retiree relief

It's a challenge many employers face -- providing your employees with affordable health care coverage today while also helping them prepare for their longer-term medical financing needs. This second task is increasingly important as health care costs continue to rise and the average lifespan -- and time spent in retirement -- gradually lengthens.

Without a doubt, workers need to start preparing now for their future medical needs. According to a recent Watson-Wyatt study, future retirees will shoulder substantially more of the cost of their health care in retirement. Under plans that were common in the 1980s, retirees paid 39 percent of their total lifetime medical cost, with employers picking up the rest.

But under new plans put in place by employers, it is predicted that future retirees will have to pay between 61 percent and 92 percent of their total lifetime medical costs -- that is, if an employer offers a retiree health plan at all.

Many find it difficult to sustain retiree medical coverage due to current costs and, worse, the open-endedness of future liabilities. Fortunately, a new employee benefit option has emerged in the marketplace that lets you provide employees with resources for health expenses -- but with associated costs that are flexible and predictable.

Solid solution

Retiree Reimbursement Accounts, or RRAs, are an outgrowth of the health-related arrangements that were enacted as part of Medicare reform legislation signed into law in 2003 to provide better tools for managing health care costs. The most prevalent of these tools is the Health Reimbursement Arrangement.

This employer-funded account reimburses employees for qualified medical expenses. An RRA works essentially the same way, except the program is designed to reimburse medical costs only after a worker retires.

Here's how it works. When you set up an RRA, employees who are actively working for you are able to receive an account. You (and only you) "credit" this account at a certain level. It's important to note that RRAs are notional accounts, which means that you do not actually have to deposit funds until the point when the retired employee requires reimbursement.

You retain control over the plan design. This means, for example, that you may determine a schedule for vesting of the credits.

If you choose to, you also may extend your RRA contributions into an employee's retirement years. There are no age limits regarding contributions to RRAs, and funds are rolled over from year to year.

Growth of the account

The RRA approach allows employees to build their RRA value year after year. Upon retirement, employees may access the funds to cover eligible medical expenses that adhere to IRS guidelines as an itemized health care deduction.

In addition to expenses for medical services, retirees also can use the funds to pay for insurance premiums, such as those for Medicare or Medigap coverage.

Should the employee die before reaching retirement, the employer may close the account or extend the benefit to the surviving spouse or dependents. In the latter case, the dependent must still use the account credits only for qualified medical expenses. They cannot be redeemed for cash.

Setting up

If you think an RRA might help you better manage your retiree benefits challenges, you should investigate your options with your insurance broker or consultant and your company's financial advisers. As you search for a plan administrator, keep the following factors in mind.

* Administration. Find a company that can handle the complex behind-the-scenes account management process. This is important now, but becomes crucial once retiree claims start flowing in. Be sure the company has the skills and resources to handle things expertly.

* Information. Because RRAs are a benefit that involves future liabilities for your company, you'll want to keep a handle on what's happening within the plan. Look for a service provider that can deliver regular, comprehensive reports so that you may track contributions, balances and reimbursement activity.

With the right plan administrator, a good plan design and proactive employee communications, a Retiree Reimbursement Account can be a valuable tool for managing your retiree benefit costs -- and helping your workers prepare for the challenge of their longer-term medical financing needs.

PAUL MARTINO is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or

Monday, 24 January 2005 08:45

Help employees manage benefits wisely

Recent trends in health care hold two important lessons for employers: First, that one of the most promising ways to control rising health plan costs is to expand employees' roles in making cost-effective health care decisions; and second, that such an approach works best when employees are equipped with the right information and tools to make sound choices.

The move to shared responsibility is part of a broader trend of consumerism in health plans. This approach is at the core of a new breed of consumer-directed health plans, which bring together high-deductible insurance with a fund or account controlled by the employee. But increasingly, employers want to infuse elements of employee decision-making into other types of plans, including HMOs and PPOs. According to a recent Mercer study, nearly half of all large employers say that promoting consumerism is part of their health care strategy.

Through consumerism, employees are asked to make better health care choices, such as pursuing healthier lifestyles or working with their doctors to explore using generic drugs that are equivalent to the more expensive name brands. In addition to reducing health claim costs, this can improve productivity by reducing absenteeism, chronic illness and disability.


Rapid advances in information technology are making this new employee-at-the-wheel approach possible. Technology is transforming health insurance and the medical field in general, just as it has helped consumerism thrive in other parts of society. Think about the way we buy cars today -- consumers use the Internet to access unbiased reports, peruse detailed pricing lists and pose questions in online chat rooms, all before they venture into a dealer's showroom.

Employees are relying on their company's health plan provider for the tools and information they need to take charge of their health care decisions. And increasingly, providers are coming through with a host of online tools and resources geared to the employee's level of knowledge, not a doctor's.

If you are reviewing your health plan with an eye toward introducing consumerism, take a hard look at the information tools offered by your provider. Ideally, they should provide resources in three key areas.

* Control. Generic plan documents and pricing lists are helpful, but employees want personalized health information and interactive tools. These should include online access to their health-related accounts, recent claim activity, actual drug and treatment costs and other details. Some companies also let employees view typical costs for a variety of drugs or medical procedures.

* Knowledge. As employees assess their health care choices, they need to know more about the medical issues they may face and steps they can take to reduce the severity or prevent them from occurring. Health plan providers should be able to provide access to a useful database of common conditions, medications, treatments and wellness activities. Such information allows, for example, someone at risk of diabetes to find out more about the disease, explore treatment options and link to diet and exercise ideas for diabetes prevention. Make sure that the source of the information is reliable. A well-informed consumer is able to communicate with his or her treating physician more effectively.

* Planning. As they move through their careers, employees may encounter life events that can complicate how they finance their health care. Starting a job, getting married, having kids or losing a job or a spouse can have a dramatic impact on the employee's overall financial integrity. Some health plan providers offer access to financial-planning information that guides employees through such decisions as choosing the right plan for their needs and planning ahead for life events and their financial implications. Again, check to ensure that the information comes from a reputable source.

With so many health plan options -- not to mention the employee health management tools highlighted -- it may be wise to work with your insurance broker or consultant to analyze your choices. He or she will help you find a health plan provider that offers the right amount of decision-making authority for your employees, and the tools and information they need to become careful stewards of their own health care dollars.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or

Wednesday, 20 October 2004 17:49

Sound advice

As benefits costs continue to escalate, companies are faced with difficult trade-offs when they seek to provide quality employee programs. In their search for solutions, many have discovered and adopted the Employee Assistance Program (EAP). It's popular and inexpensive, and can deliver as much as a 1,000 percent return on investment.

Yes, you read that ROI correctly. Depending upon which government or private study you read, a $1 investment in EAP services can yield between $4 and $10 (and in some cases more) in increased productivity. This beneficial result derives from reduced medical costs, turnover, sick time, accidents, grievances and substance abuse. The employer also sends a clear message that the company cares about the employee - not just the work the employee does.

An EAP is ideal for helping employees grapple with short-term stress or anxiety, marital discord, substance abuse or other issues likely to affect home life or workplace performance. While the EAP can address a multitude of issues, the focus is on work, family and wellness. For an EAP to be most effective, employees should use the program to help manage work and life issues before they become unmanageable.

Ready to hunt for an EAP of your own? Here are some considerations to keep in mind.


* Flexibility and marketing. No two companies are the same, so select an EAP provider that offers an approach suited to the unique culture of your organization. Employees must understand how the program works and be comfortable that their confidentiality will be maintained.

A good EAP will have proven promotional and educational approaches that can be tailored to your work force to ensure that your employees understand the ins and outs of their EAP benefit.


* Soup-to-nuts services. Pick a provider that can offer you the full suite of EAP services and so-called work/life services, such as counseling sessions, management consultation, critical incident support and child and elder care referrals. You may even look for counseling for legal and financial problems, which also invisibly sap productivity from your organization.


* First-rate providers. An EAP network is only as good as the people in it. Look for an EAP provider that has both a track record of providing excellent service as well as a high degree of professional accomplishment among its staff.

For example, some EAP networks contract strictly with practitioners who have a master's degree or Ph.D. A quality network also may feature providers who have achieved Certified Employee Assistance Program (CEAP) status.


* Always-open support. Problems and family emergencies don't stick to a schedule. Make sure your EAP offers 24/7 telephone access and referrals, as well as Web-based information and resources.


* Data-fueled innovation. Employees reach out to an EAP for a broad variety of reasons, and your provider should be able to capture and analyze nonpersonally identifiable data to detect patterns that can help you refine your overall benefits programs. For example, if aggregate data show that many employees are struggling with caring for elderly parents, you may decide to sponsor lunchtime workshops on this topic. Without data, such opportunities could be missed.


There are many quality EAP service providers available, so you should consult with an insurance broker to select one that can deliver the programs and results you want. If you choose well, you will find - as many companies already have -- that your EAP program is a powerful ally in promoting the "complete health" of your employees.

They'll thank you for it.

PAUL MARTINO is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or

Wednesday, 23 March 2005 05:44

Part-time benefits

Most business leaders have read about the growing problem of the uninsured in America but probably didn't think they could help resolve it -- let alone realized they have a stake in resolving it.

But every business is bearing the burden of uninsured Americans and can help ease the problem by taking some simple, practical steps.

According to the U.S. Census Bureau, there were about 45 million uninsured Americans in 2003, a number that continues to grow. Uninsured individuals commonly forego necessary medical care; nearly 40 percent postpone care due to the cost, according to the Kaiser Family Foundation. In addition, according to The Institute of Medicine, uninsured people receive fewer preventive services and less care for chronic conditions than their insured counterparts.

As a result, the uninsured tend to get sick more often and for longer periods, adding significantly to the spiraling medical costs that show up in every business's annual health care costs.

Hard working and uninsured

Businesses have an even deeper connection to the uninsured problem -- most of the uninsured are, in fact, employed. Six out of 10 have full-time jobs and another 15 percent work part time or part of the year. Some work two part-time jobs without coverage through either employer.

Those without health insurance are working in virtually every American business, uninsured because they are ineligible for benefits or because the cost of premiums or deductibles is too high.

As a result, the working uninsured are prone to missing preventive care and suffering more serious conditions later, resulting in a threefold problem for businesses:

* Short-term presenteeism (being at work but preoccupied with personal matters to the detriment of productivity) as workers struggle through personal and family health issues without seeking appropriate care.

* Longer-term productivity losses as workers leave your employ to seek jobs that provide benefits, wind up in emergency rooms or are lost to disability

* Continuing increases in health plan costs as local care providers pass on the nonreimbursed expense of treating uninsured patients.

According to a May 2004 statement released by the Health Care Policy Roundtable, a cross-industry collaboration of human resources leaders, the economic impact of the lack of health insurance on productivity, absenteeism, turnover and increased health care costs could be as high as $152 billion per year, or about $1,000 for every American worker in 2004.

Plans reduce turnover

Many businesses are taking advantage of a new breed of "limited benefit" plans. In essence, employees gain access to preferred-provider networks, service discounts and other benefits, typically subject to annual benefits caps. In addition, an employer can choose any level of premium subsidy -- including none at all.

Offering benefits to employees who are typically ineligible for company-sponsored benefits can provide businesses with two advantages beyond chipping away at the problem of spiraling health care costs.

First, it helps to stabilize your work force. Offering easy-to-access health care can increase productivity because employees will be more likely to get the treatment they need and thus stay healthy.

Second, high turnover is a major issue in many industries as benefits-exempt employees float from company to company seeking a slightly higher wage. Businesses then spend excessive amounts of money and time recruiting and training replacements. These same employees, equipped with a meaningful differentiator -- access to health care benefits -- will be less likely to slip away to a competitor.

The benefit types and dollar maximums offered under these plans are flexible and may include medical, dental, vision, term life and short-term disability coverage, as well as in-hospital cash benefits. In addition, plan designs could include out-patient expenses for office visits, lab, diagnostic tests, X-rays, surgery, anesthesiology and prescription drug coverage.

If you don't offer access to health benefits for all of your employees, look at these new plans. Your insurance broker or consultant and your company's financial advisers can help you find a plan that fits your budget -- and helps you maintain a more stable and healthy part-time work force.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or

Tuesday, 16 March 2004 19:00

Shifting power

Tucked inside last year's Medicare reform law providing drug coverage to seniors was a little-noticed but important provision which gives employers the opportunity to offer employees greater health coverage and financial security.

The law authorized a new funding arrangement known as Health Savings Accounts, which, when paired with a high deductible health insurance plan, let employees set aside dollars for medical expenses on a tax-favored basis.

Although the ink on the law is barely dry, insurers are already rolling out new HSA products in response to employer demand for cost-efficient solutions that provide employees with greater choice and tools to help them better manage their health care dollars. HSAs may be particularly attractive to smaller employers because they can cost less than other managed care plans.

Employees under the age of 65 who are covered by a "qualified high-deductible health plan" are eligible to participate in HSAs. Contributions to the account can be made by the employer or employee, with employee contributions coming through payroll deductions.

To encourage widespread participation among both plan sponsors and employees, Congress built several tax advantages into HSAs. For example, employee contributions are tax-deductible, and employer contributions are not considered taxable income for employment tax purposes.

Similar to Individual Retirement Account (IRA) contributions, HSA contributions and any earnings on those contributions grow tax-free. But unlike an IRA, HSA withdrawals are also tax-free if the money is spent for "qualified medical expenses" incurred by the employee or his or her spouse or dependents, such as doctor visits, prescription drugs, hospital costs, and vision and dental exams.

Tax-free withdrawals are also allowed for long-term care insurance premiums, COBRA premiums and other purposes specified in the law.

Over time, employees have the potential to accumulate significant amounts in their HSAs that can be used to pay for medical expenses in retirement. The account funds can be invested in interest-bearing assets, including mutual funds or stocks, where they can grow on a tax-free basis.

Additionally, any unused account balance can be carried over from one year to the next and from employer to employer, as long as a high deductible plan accompanies the HSA in the new plan offering.

Of course, like any group benefit regulated in part by the tax code, HSAs come with several qualifications. For instance, the health insurance policy must have a minimum annual deductible of $1,000 for an individual and $2,000 for a family. Contributions are limited to the amount of the policy's annual deductible, subject to a cap of $2,600 for individuals and $5,150 for families.

These limits are indexed for inflation in future years. HSAs can also be used to pay for nonqualified health expenses or withdrawn in cash, but will become taxable income and subject to an additional 10 percent tax penalty.

HSAs compare favorably in some respects to flexible spending arrangements (FSAs) and other health spending mechanisms. For example, there is no "use it or lose it" provision (common with FSAs), so funds can be rolled over from year to year. Additionally, since HSAs are owned by the employee, not the employer, they go with the employee who changes or loses his or her job.

Although they have just been hatched, HSAs offer a promising option in today's consumer-driven health care marketplace.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. For more information, contact him at or (312) 928-3754.