Statement of the U.S. Chamber of Commerce

Transcription

1 Statement of the U.S. Chamber of Commerce ON: TO: HEALTH SAVINGS ACCOUNTS THE HOUSE COMMITTEE ON WAYS AND MEANS DATE: JUNE 28, 2006 The Chamber s mission is to advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity and responsibility. 1

2 The U.S. Chamber of Commerce is the world's largest business federation, representing more than three million businesses and organizations of every size, sector, and region. More than 96 percent of the Chamber's members are small businesses with 100 or fewer employees, 70 percent of which have 10 or fewer employees. Yet, virtually all of the nation's largest companies are also active members. We are particularly cognizant of the problems of smaller businesses, as well as issues facing the business community at large. Besides representing a cross-section of the American business community in terms of number of employees, the Chamber represents a wide management spectrum by type of business and location. Each major classification of American business -- manufacturing, retailing, services, construction, wholesaling, and finance is represented. Also, the Chamber has substantial membership in all 50 states. The Chamber's international reach is substantial as well. It believes that global interdependence provides an opportunity, not a threat. In addition to the U.S. Chamber of Commerce's 105 American Chambers of Commerce abroad, an increasing number of members are engaged in the export and import of both goods and services and have ongoing investment activities. The Chamber favors strengthened international competitiveness and opposes artificial U.S. and foreign barriers to international business. Positions on national issues are developed by a cross-section of Chamber members serving on committees, subcommittees, and task forces. More than 1,000 business people participate in this process. 2

3 Statement on Health Savings Accounts Hearing before the THE HOUSE COMMITTEE ON WAYS AND MEANS on behalf of the U.S. CHAMBER OF COMMERCE by Harold Jackson President & CEO Buffalo Supply Inc. June 28, 2006 Chairman Thomas and Ranking Member Rangel, members of the Committee, I am Harold Jackson, President and CEO of Buffalo Supply, Inc., a 20-employee, womenowned small business specializing in the sale and distribution of medical equipment and supplies located in Lafayette, Colorado. I am pleased to be able to submit the following testimony for the record. I am also here on behalf of the U.S. Chamber of Commerce. The U.S. Chamber of Commerce is the world s largest business federation, representing more than three million businesses and organizations of every size, sector and region. Over ninety-six percent of the Chamber members are small businesses with fewer than 100 employees. I commend the Committee for its interest in having this hearing on the benefits of Health Savings Accounts. Buffalo Supply, Inc. has been in the medical equipment and supply business since 1983 and we are currently the exclusive source for Stryker, Gaymar Industries and Baxa Corporation products. I joined the company in 1990 at which time company revenues were at $1.2 million. By building a strong reputation for service with my customers, I have been able to grow our revenues to the current level of $45 million in As President and CEO of Buffalo Supply, Inc., one of my most important duties is to attract and keep highly-qualified employees. It is the employees of Buffalo Supply that carry the banner of our company and maintain the level of customer service that allow us to effectively compete in the marketplace. I find health coverage is the most sought-after benefit that an employer can offer. In many cases, both present and potential employees judge the organization on the quality of the health plan that a company provides. In some cases, I have seen the level and quality of health care coverage to be the major factor on whether or not an employee accepts a job with an organization. 3

4 Indeed, the decision to make changes to the health care coverage offering for me and my employees at Buffalo Supply is one of the most challenging I face since it can have a dramatic impact on the level of employee satisfaction. On the one hand, like most small business owners, I am faced with continued soaring annual increases and must seek ways to contain these costs in order to stay competitive. On the other hand, I must be very careful in my decisions to pass on these increases by raising deductibles, lowering coverage, or by implementing a new coverage product that might not have the same appeal. In the spring of last year I faced the difficult decision on how to address the heath care insurance needs for the employees of Buffalo Supply in light of a projected 21 percent increase in my current premium. At that time, we had in place a standard preferred provider option plan that had 80 percent reimbursement with 20 percent co-pay for the first $3,000 per employee or $6,000 per family in coverage. After that amount is used in any given year, major medical then picked up 100 percent. The annual premium for policy year ending 5/31/05 was $102, for the 13 employees that opted for coverage. If I had elected to renew the cost would have been $123, After reading about a recently passed federal provision known as Health Savings Accounts, I asked my insurance broker to look into a HSA conforming plan for Buffalo Supply. He came up with a high deductible conforming plan with United Healthcare called their Definity HSA plan which had a $2,000 per employee and $4,000 per family deductible. Once the deductible is met there is 80 percent reimbursement with 20 percent co-pay coverage with a maximum out of pocket of $4,000 per employee or $8,000 family. I was surprised that the premium was only $75, for the same 13 employees, an astounding 39% premium reduction from the projected costs for the PPO plan. With the cost savings in the insurance premium of the Definity HSA plan, I was able to have Buffalo Supply fund the savings account portion at $2,000 per employee and $3,000 per family which amounted to $35,000. This effectively reduced the out of pocket maximum when considering the company contributions to the HSA to $2,000 per employee or $5,000 per family, which was $1,000 less in each category over the conventional PPO. Buffalo Supply was able to realize a 10.8% savings over the projected costs of the conventional plan and provide better coverage to our employees. Early this spring, as we approached our anniversary date of the United Healthcare s Definity HSA plan at Buffalo Supply, I polled my employees on what they thought of the new plan. They all overwhelmingly considered the HSA plan a success and urged me to continue with this vehicle for coverage. We just started our second year with a $1,100 per employee deductible and a $2,200 per family deductible. After the deductible is satisfied the employee and family has 100% coverage.- no co-pays for prescriptions, doctor office visits or hospitalization. The employee picks up the full cost of the deductible and bears the burden to contribute to the savings plan should they desire. Every employee has opted to contribute the full 4

5 amount to the savings portion of the plan. This year the total annual premium is $115, , slightly more that last year s costs, but we are also insuring one additional person. My employees and I are delighted with the concept of Health Savings Accounts that allow us to benefit from our health care spending decisions with the use of pretax dollars. This type of health plan puts the consumer in charge of how he or she may elect to spend their health care dollars. The excess rolls over year after year, and employees can take it with them to a new job or if they retire. I understand that United Healthcare, the company that provides Buffalo Supply s plan and the nation s largest purveyor of HSA-compatible insurance, has over 54,000 HSA-style accounts out of nearly 1 million enrollees in Colorado where I am located. On behalf of Buffalo Supply and our employees, I would like to thank this committee for the work you have done on enacting this legislation into law. Having Health Savings Accounts as a viable health care option allowed Buffalo Supply to stem the increases in our health care premiums while enhancing the coverage for my employees. While my employees and my family are very satisfied with the HSA-compatible health plan, I would like to take this opportunity to thank members of this committee for working with the U.S. Chamber and the HSA Working Group to introduce legislation that will improve HSAs and to offer some suggestions to further strengthen the current law. This broad range of potential improvements to HSAs will make them more attractive to both consumers and employers. Increase the amounts individuals and employers may contribute to HSAs. The President s budget proposal includes an increase in HSA contribution limits to allow HSA participants to set aside more funds on a tax-free basis for their current and future health care needs. Under this proposal, HSA participants could contribute up to the out-of-pocket spending limits for their HSA-eligible high deductible health coverage limited by statute to no more than $5,250 for selfonly coverage and $10,500 for family coverage in Allow employees with HSAs to also participate in other tax-favored health care accounts such as health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs). Permit up to $500 in unspent funds in flexible spending arrangements to carry forward to the following year or to be rolled-over into an HSA. Permit employers to convert funds contributed to health reimbursement arrangements (HRAs) to employees participating in HSAs. Allow employers to contribute higher amounts to HSAs for their lower-paid employees. 5

6 Permit individuals over age 65 to continue to contribute to their HSAs. Allow early retirees to pay for their health insurance needs on a tax-free basis with funds from their HSAs. I appreciate the opportunity to comment on Health Savings Accounts in front of the Committee. I especially applaud the Committee s interest in having this hearing. Thank you again, Chairman, Ranking Member and members of the Committee. 6