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Blue Cross and Blue Shield of North Carolina Starts Health Savings Accounts

Posted on: Friday, 30 September 2005, 00:00 CDT

By Jean P. Fisher, The News & Observer, Raleigh, N.C.

Sep. 30--Blue Cross and Blue Shield of North Carolina is starting a new product that will allow people who buy their own health insurance easier access to one of the most attractive tax shelters available: health savings accounts.

James Maynard Jr. of Pinehurst read about the accounts, known as HSAs, a couple of years ago and was intrigued. With an HSA, he could set aside money to pay for current or future health care expenses. Money wouldn't be taxed going into the account or when Maynard took it out. Uncle Sam wouldn't even take a bite out of any investment income or interest the account would yield.

"As someone who is not covered by a retirement medical plan and who is not eligible for Medicare, I need every advantage I can get," said Maynard, 62, a retired mortgage executive who buys private health insurance through Blue Cross.

But nearly two years after the federal tax code was amended to allow HSAs, Maynard still doesn't have an HSA -- largely because few insurers market them to people who buy their own health insurance. Several carriers selling individual health insurance in North Carolina offer coverage that can be paired with an HSA, but consumers must set up their own accounts.

Maynard said he checked with three major financial institutions and none could open an HSA for him.

Now Blue Cross, the dominant provider of individual health insurance, is expanding its HSA offerings, which should make the accounts easier for some to access. Since January, it has offered HSAs to group clients. Starting Nov. 7, Blue Cross will begin selling individuals and families health insurance that comes linked to their own health savings account. Coverage would take effect Jan. 1.

To open an HSA, a consumer must be enrolled in a specific type of high-deductible health insurance. Blue Cross's new "Blue Options HSA" product will meet all federal requirements.

To be eligible for HSAs, a plan must have an annual deductible of at least $1,000 for individuals ($2,000 for families) and not allow co-payments except for preventive care. That means consumers will be required to pay for most expenses, including prescription drugs and doctor visits, out of pocket.

Individuals enrolled in eligible coverage may contribute up to $2,650 a year ($5,250 for families) to their health savings accounts. It's like an IRA for health care. Money not used for health care expenses in a given year rolls over for use in the future and may accrue interest or investment income. People between ages 55 and 64 may make "catch-up" contributions -- up to $500 over the maximum in 2005, for example.

Switching to an HSA-eligible plan may help consumers come up with money to put in their accounts. That's because the premiums for high-deductible plans are typically less than for richer types of coverage. John Roos, Blue Cross's senior vice president for sales and marketing, said people now enrolled in the company's most popular individual coverage plan, Blue Advantage, would cut their premiums by up to 50 percent by switching to the HSA.

However, consumers who already have high-deductible health insurance may not see dramatic premium savings. And not everyone will qualify for coverage under the Blue Cross HSA plan.

The company will screen applicants, and people with medical problems can be declined. Gayle Tuttle, a Blue Cross spokeswoman, said 90 percent of the 310,000 people who now have Blue Advantage will qualify.

"For some people, this is the right option," said Dianne Lawton, an insurance agent with John Sipp & Associates in Chapel Hill who specializes in individual health insurance. "It's great for upper-middle class people who are healthy."

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Source: The News & Observer

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