Calls to Golden Rule Insurance Co.'s toll-free hotline rose 800% after Congress passed the Health Insurance Portability and Accountability Act of 1996.
The surge in volume was prompted by a provision in the law creating a federal demonstration of medical savings accounts. MSAs, like individual retirement accounts, give employees a tax-free place to park funds that can be used to pay out-of-pocket medical expenses, and funds remaining in the account earn interest. The MSA also is portable, allowing the employee to change jobs without losing the account.
Here's how it works: Under the federal demonstration, which began Jan. 1, self-employed individuals and employees of small businesses who are covered by "high-deductible" health insurance plans may set up a tax-advantaged MSA. An employee or employer may contribute to an MSA. But if an employer makes a contribution in a given year, the individual account holder is barred from funding the account that year. Those contributions are deductible from gross income for federal tax purposes.
Money in the MSA may be used several ways. If an employee or covered family member gets sick, the funds may be used to pay for doctor visits, hospital care or services not covered by the health plan, like prescription drugs. Money left unspent accumulates tax-free interest. The funds may be used for nonmedical expenses, subject to income taxes and a 15% penalty.
Five months into the four-year federal demonstration, a Golden Rule spokeswoman said the company's hotline remains 500% to 600% busier than usual. The Indianapolis-based company already has insured about 22,000 people under the MSA demonstration.
As a longtime provider of MSAs-it offered its first product in 1993-and a strong proponent of the federal demonstration, Golden Rule's experience is considered exceptional. Many of the 40-or-so insurers who have leapt into the MSA business are still in the early stages of developing and marketing their plans.
If nothing else, call volume does signal the public's interest in learning more about MSAs.
"We have been absolutely inundated with those types of calls," says Kelly McCarthy, manager of public affairs for the Alexandria, Va.-based Council for Affordable Health Insurance, a trade association representing 50 small to mid-sized insurance companies, actuaries, physicians and physician groups. She says the calls have come from small businesses and self-employed people in all 50 states, and at least half the callers are uninsured.
The council, which lobbied heavily for MSAs, acknowledges the program is a slow starter. "I think it's taking off," McCarthy observes, "but I don't think . . . many people are rushing to purchase them."
Among the self-employed, there is a "wait-and-see attitude" about the programs, adds Jami Deise, a spokeswoman for the National Association for the Self-Employed, a Washington-based organization representing 325,000 sole proprietors and home-based businesses.
According to Deise and McCarthy, there is a steep learning curve on the part of consumers and providers of MSAs. Many people don't know which companies offer healthcare policies linked to MSAs. And once they find out, they may discover they have to change insurance carriers to take advantage of such a program.
Insurers, too, are getting up to speed on the MSA business. "It's a slow process to actually cycle this into the marketplace," says Jon Drayna, a public relations manager with Humana. Educating Humana's field staffers who then educate insurance agents about the product takes time, and not everyone's insurance policy renews on Jan. 1, Drayna says.
In January, the Louisville, Ky.-based provider of managed-care and insurance products began offering an MSA program through its wholly owned subsidiary, Employers Health Insurance Co. "The initial interest has been pretty strong," Drayna says, adding that more than 1,000 independent insurance agents have called Humana's hotline for information on MSAs. Humana is relying on those agents to market the company's MSA program.
"I think it's safe to say we've not sold 1,000 groups, though," Drayna concedes.
So why do it? Although insurers declined to reveal specific sales projections, they clearly hope the demand for an MSA product will translate into increased premium income.
"We make our money as underwriters of risk," explains Julie Alberico, executive vice president of NYLCare Health Plans, the health benefits subsidiary of New York Life Insurance Co. NYLCare recently announced it will begin offering an MSA program to small groups beginning May 1.
"Our goal is to expand the pie," not to replace existing insurance policies, says Humana's Drayna. The job, he says, is to understand what customers want and expand the continuum of options-from indemnity policies with MSAs on one end of the spectrum to capitated HMOs on the other.
"But you will not hear anyone say that the future of healthcare finance lies in vast numbers of Americans using MSAs," he says.
Critics contend that MSAs do nothing more than provide the healthy rich with another tax benefit.
"The policies will make the most sense for people who are low-risk purchasers who want to protect against a catastrophic event," says Kenneth E. Thorpe, a health systems management professor and director of the Institute for Health Services Research at Tulane University in New Orleans. For low-risk purchasers, "it's really an outstanding deal," he says.
Some law firms and other types of partnerships, for instance, are considering MSA policies, says Donald Segal, a senior vice president and actuary with Segal Co., a New York-based benefits consulting firm. These are not the types of independent workers who typically lack insurance. But since they are technically considered self-employed workers, each partner is eligible to set up his or her own MSA, he says.
Thorpe's biggest concern is the lack of baseline data to compare health insurance coverage before and after MSAs. Not much is known about the health insurance purchasing patterns of the people buying these policies, but he suspects they'll do little to shrink the nation's swelling uninsured population.
Health benefit and tax experts agree it's too soon to proclaim the MSA demonstration a success. The federal project requires the General Accounting Office to contract with experts in health economics, insurance markets and actuarial science to study the effects of MSAs. But those studies aren't due until Jan. 1, 1999.
At this point, it's unclear whether MSA sales will approach the federally established limit of 750,000. Insurers are required to report to the Internal Revenue Service the number of MSAs established as of May 1.
"The reporting is still coming in, and the deadline is June," according to an IRS spokeswoman.
"The general impression is that some companies are doing very well, and some companies are not doing that well at all," says Merrill Matthews Jr., vice president of domestic policy at the Dallas-based National Center for Policy Analysis, a proponent of MSAs.