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ALEXANDRIA, Va.-The National Assn. of Professional Insurance Agents is giving its agency members a new health care plan option with the introduction this month of tax-favored medical savings accounts.
The PIA program takes advantage of a federal law that went into effect Jan. 1 allowing employers with 50 or fewer employees to provide MSAs linked to high-deductible medical plans.
The PIA, which currently offers its agent members a traditional indemnity plan and a preferred provider organization, is one of the first major trade associations to offer MSAs to its members since Congress enacted legislation last year giving MSAs their tax-favored status.
"MSAs are a boon to employers looking to save money on insurance premiums," said Bruce Scholnick, division vp with the Alexandria, Va.-based PIA, which represents about 15,000 insurance agencies.
Indeed, some PIA members signing up for the MSA program say it will cut their group health costs substantially. For example, James Probus, the self-employed owner of the Probus Insurance Agency in Louisville, Ky., says moving to the MSA from a Blue Cross & Blue Shield plan he now has will reduce his monthly premium for individual coverage to $167 from $224.
The MSA has a higher deductible than Mr. Probus' BC/BS plan but a lower limit on total out-of-pocket costs.
"This is a win-win program," Mr. Probus said.
The PIA program follows the parameters laid down by the federal law. Members can purchase a high-deductible medical plan written by John Hancock Mutual Life Insurance Co.
The program offers $1,500 and $2,000 deductibles for individual coverage and deductibles of $3,000 and $4,000 for family coverage.
Members then establish medical savings accounts, which are accounts used to pay health care-related expenses that are not covered under the high-deductible medical plans.
Contributions to the MSAs, which can come from savings gained by moving to a high-deductible plan, are tax-deductible. Annual MSA contributions cannot exceed 65% of the deductible for individual coverage and 75% of the family plan deductible.
Contributions to the MSAs earn tax-deferred interest. The current interest rate paid on the PIA program's account balances is just under 5%.
Funds can be withdrawn tax-free to pay for uncovered health care expenses. Under federal law, though, income taxes and a 10% excise tax are levied on MSA withdrawals to pay for non-health care-related expenses.
In the PIA program, the MSAs are administered by Crestar Bank of Richmond, Va. PIA members have 24-hour access to their accounts to check balances and make withdrawals through a toll-free number.