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I Th eK.prnger Letter illFORECASTS FOR MANAGEMENT DECISIONMAKING 1729 H St. NW, Washington, DC 20006-3938 • KiplingerForecasts.com • Vol. 82, No. 45 I I Dear Client: Washington, Nov. 11 , 2005 Can your firm save by offering HSAs. . . CURRENT FORECASTS tax-free Health Savings Accounts for employees? I _' 'Medicare, Medicaid cuts HEALTH Growing evidence suggests it can. ��;Action likely by Christmas CARE Employers are flocking to the programs and to HRAs, Health Reimbursement Accounts, If Immigration reform IIa cousin that operates in much the same way. Pressure building,but consensus yet Next year, about 25% of firms will offer HSAs, up from just 4% in 2004 and only 8% this year. ICA code overhaul They are part of a broader trend iZl'A lot of talk,but no action IItoward consumer-driven health care programs, ` �until'07 at the earliest which give employees a bigger financial stakeEstate tax changes m in when, how and where they receive health care (.1r. by Katrina this year I to encourage more-cost-effective choices. `'"`' !Probably in'06 ., ;Tax break extensions Employees are quick to sign up. t-} R&D tax credit, others I And it's not just the young and fit who enroll. will pass this fall Workers like that contributions are tax free, ti10il windfall profits tax as are payouts when used to cover health costs. ;,Won't make it past hearings Employees keep HSA money if they change jobs, Telecommunications 1011 and any amounts left at death can go to heirs. INo changes soon Employers like the lower premiums � 'Overhauling the'96 law will for the high-deductible plans paired with HSAs. take two to three years I Though for those that offer HSAs as an option, any savings are often offset by contributions to workers' accounts. So. . . IIThe payoff for most firms is likely to come in the long term. It will take time for employees to become smarter health care consumers. To encourage enrollment, consider matching employee contributions Ito HSAs or hike payins to HRAs, which are funded solely by employers . For example, to lure participants, medical device manufacturer Medtronic puts $1000 for singles and $2000 for families into HRAs. Health costs for the firm rose 8% last year, compared with the 12% national average I for big companies. 24% of Medtronic workers chose HRAs this year. The average company contribution to HSAs: $550 a year per worker. I But smalls often put in nothing. The advantage of HSAs for them: They can offer workers an affordable health care program. For example, Da Vinci Restaurant in Ohio was about to end health care benefits for its workers because of soaring costs. Instead, the firm opted IIto set up HSAs, which is helping them retain valuable employees. Communication is key to making programs work. Educate staff lip on the options, and provide the data they need to shop among providers. And couple HSAs with health management programs. Offer incentives to promote fitness and healthier lifestyles and help employees II with chronic illnesses manage their conditions to avoid complications. The Keplinger Leber(ISSN 1526 7130)is published weekly for$117/one year,$199/two years,$263/three years Subscription inquiries 800 544 0155 or sub services@kipbegercom by The Kipltnger Washington Edbors 1729 H St NW Washington,DC 20006 3938 Editorial information Tel,202 887-6462,Fax,202 778 8976, I Periodicals postage para at Washington DC POSTMASTER Send address changes to The Keplinger Letter P 0 Box 3295,Harlan,IA 51593 F mad,letters@kiplinger corn,or Web site KiplingerForecasfs com