2007 Business Pulse©: Ceo Cure All For Healthcare?

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How Hot are HSAs? They’re VERY Hot in the Frozen Tundra!

CEO Cure all for Healthcare?

Health Savings Accounts are being touted as a long-term initiative to control rising healthcare cost. These plans are being embraced to expand consumerism in healthcare so employers and employees become more responsible for their personal care - and much more sensitive to the cost. HSAs are being sold as a significant tool to help business owners control their cost and ultimately, develop a healthier workforce of engaged, ‘incentivized, productive people.

Does your organization offer a HSA plan?

Yes, Offer HSAs: 30% Do NOT Offer HSAs: 70%

CEOs and business owners in NEWi continue to be substantially more likely to be using Health Savings Accounts than their counterparts nationally. Thirty percent of CEOs and business owners in NEWi say their organizations are currently offering HSAs. According to the

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Kaiser Family Foundation, just 7% of employers nationally offer a HSA. HSAs have been offered by organizations for varying periods of time since their introduction in 2003. Among those who currently do offer such plans, 34% have offered HSAs to employees for at least two years; 23% say HSA plans have been available to their employees for one year; 42% indicate their HSA plan has been available for less than a year. Seventy-three percent are contributing funds to the employees HSA. Among those not providing a HSA option, there is considerable interest in making them available in the future. Six-out-of-ten indicate that they are considering having HSAs as part of their future health care benefits package; 30% say they are not considering HSAs and 10% are not sure what their future benefits may bring.

Popular with employees, too Organizations offering HSAs experience substantial variations in employee participation. In some organizations, there is a high level of participation by employees, while in others the participation rate is relatively low. In NEWi, 42% of CEOs indicated that 75% or more of employees enrolled in their HSA plan; 21% have a participation rate of 50-74%; 25% have participation rates between 25-49%; just 4% have less.

Executive Summary: Data Gathered Jan/Feb 2007

A Special Report: Part TWO

“I’m not getting information; I'm not managing.” John Torinus, President & CEO — Serigraph, Inc

The high level of variation in participation may exist for a number of reasons. It may relate to the nature of the specific structure of the HSA Plan (e.g. is the company is contributing dollars to the employee’s health savings account - or only the employee is putting pre-tax money in directly from their paycheck). It could also vary according to the age distribution within the organization or, it could be due to the HSA product being so new, that employees want to see how they work for other employees first.

In a consumer-driven healthcare system, in which defined contribution plans, health savings accounts and health reimbursement accounts are prevalent, employees have much more responsibility in deciding when and how to purchase healthcare. But, will consumers make wise health care decisions in this new environment? CEOs aren’t sure. The Business Pulse indicates that CEOs and business owners are split on how confident they are that employees will make wise healthcare decisions with a HSA plan. Only 16% are very confident that employees will make wise decisions; 40% are moderately confident; 30% are only somewhat confident, 11% say they are not confident at all and 3% are not sure.

It is clear, however, that CEOs with HSAs are convinced that they are beneficial to CEOs: 85% have selected the HSA option for themselves.

40%

Only Somewhat Confident

30%

Not Confident 3%

0%

5%

10%

15%

• Allows rollovers from Flexible Spending Accounts (FSAs) or Health Reimbursement Accounts (HRAs) into HSAs; • Increases the annual HSA contribution to $2,850 for self-only coverage or $5,650 for those with family coverage;

• Provides for greater contributions for lower-paid employees.

11%

Not Sure

Some of the new provisions include:

• Allows a one-time transfer from IRAs to HSAs, the transferable amount is limited to the maximum HSA contribution for the year;

16%

Moderately Confident

In December, President Bush signed the Health Opportunity Patient Empowerment Act of 2006. This new law was part of the Tax Relief and Health Care Act of 2006 and provides several new options for organizations using HSAs.

• Provides for full annual HSA contribution regardless of the month the individual becomes eligible;

How confident are you that your employees will make wise healthcare decisions with their HSA plan? Very Confident

New legislation makes HSAs more attractive

20%

25%

30%

35%

40%

45%

While HSAs are relatively new, they appear to be a relatively simple tool for organizations to help manage their healthcare costs.

Sources/Resources Kaiser Family Foundation, Employer Health Benefits 2006. http://www.kff.org/insurance/7527/upload/7528.pdf President Bush signs the Health Opportunity Patient Empowerment Act of 2006. http://www.treasury.gov/press/releases/hp209.htm Treasury, IRS Issue Guidance Helping Employees Transition To HSAs. http://www.treas.gov/offices/public-affairs/hsa/pdf/jct_hsa_description.pdf

How the Survey is conducted The Nicolet Bank Business Pulse© is a Quarterly Study of CEOs in NE Wisconsin (Brown, Calumet, Door, Kewaunee, Manitowoc, Marinette, Oconto, Outagamie, Shawano, Winnebago Counties). Interviews were conducted with an online representative sample of CEOs and business owners between January 12 and February 7 2007. The study is designed and implemented by IntellectualMarketing, LLC. Participants include: 28% in manufacturing; 25% in services; 18% retail trade; 5% wholesale trade; 6% finance, real estate, insurance; 5% in transportation, communications, utilities; 6% in construction; 8% in other industries. 19% have fewer than 6 employees; 31% have 6-25; 16% have 26-50; 13% 51-100; 13% 101-250; 5% 251-500; 2% 501-1,000; 2% have 1,001 or more. Questions to Dr. David G. Wegge (920) 217-7738; [email protected]