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Health insurance innovation means lower premiums and taxes
(and retirement savings too!)

It seems like the news about the state of health care in America - and especially health insurance – is rarely good these days. Gloomy scenarios about the current state of things, and even gloomier scenarios of troubles to come, are staples in the media.

Steve Neeleman, a Tucson-based MD, shares some many of these not-too-optimistic diagnoses and prognoses. He has even been quoted as saying that, “Health care in America is on the rocks.”

Thankfully that assessment did not lead Neeleman to despair. Rather it caused him to act. “I investigated the health care system in my spare,” said Neeleman. As a result of his investigation, Neeleman came to conclude that there was an answer to our healthcare crisis, and that it lay just at our fingertips.

And it’s answer that in addition top addressing the issue most vital to most Americans, affordability, also provides some unexpected - and very attractive – benefits:

• a very wide range of covered treatment options
• savings on income tax
• the opportunity to save for retirement

Before we get to the specifics of Steve’s solution, let’s take a brief aside that might provide insight as to why Steve would choose to cogitate on the supremely dry topic of health insurance while his colleagues likely on the golf course.

Steve’s brother is David Neeleman, who is thought by some to the one man who can save air travel in America (if he hasn’t already). In an era when many of the “top” airlines in America are in, or are facing, bankruptcy, David Neeleman started Jet Blue Airline, a sensation with travelers and Wall Street alike. Using seemingly commonsense “innovations” like saving on maintenance costs by only operating one model of airplane, and providing a customer service and comfort environment (every seat in every Jet Blue plane has a free private satellite TV screen) that gives flyers something to be excited about, has made Jet Blue the darling of air travel in America. It has also earned David Neeleman more than a few business magazine covers.

So, perhaps inspired by his brother’s success in the air (or perhaps innovative thinking just runs in the blood – we’ll leave that for another issue) Steve took a hard look at another seemingly moribund industry and found a fairly commonsense solution that has consumers, care providers and insurance professionals, if not excited, at least pleased that an effective solution is at hand. (Does any of this sound familiar?)

Steve’s solution? The medical savings account. Not exactly a new idea, but one that – until now – hasn’t been very user friendly. “Setting up an MSA has been very difficult in the past, and there hasn’t been any impetus for insurance brokers or employers to get behind them,” says Neeleman. “If somebody could make establishing and maintaining MSAs easy and seamless, we could greatly improve our current system.”

As it turns out, that somebody is Steve Neeleman himself.

So how does Steve’s system work?

His company HealthEquity obtains for its members, a high-deductible health insurance policy. These policies typically cost 40 – 50% less than standard HMO or PPO plans.

To cover costs up to your high deductible, HE establishes a Health Equity Account. The HEA is a form of medical savings account that pays for medical services up the threshold of the patient’s deductible. The patient makes monthly deposits to this account.

IF in a in a year a patient “spends” more than is available in her HEA, but less than her deductible, HE tops up the difference by extending to her a line of credit – payable with her future tax-free deposits.

The result? Health insurance costs – with superior coverage – are reduced by 10 – 20 %

Unexpected benefit #1: An HE plan allows patients to obtain the broadest rage of services: medical care, dental care, vision care, and even alternative medical therapies. And unlike the case with HMO policies patients may use a healthcare provider of their choosing. (Though HealthEquity has also established a network of providers that offer additional savings. )

Unexpected benefit #2: The HEA is a tax free, FDIC-insured medical savings account. Deposits are not taxable. That means more money in patients’ pockets today, and huge tax-savings over the years.

Unexpected benefit #3: The HEA account allows you to save for retirement. If a patient retains a surplus in their account they keep the money (as if it were in a 401 K).

By taking the hassle out of the medical savings account Steve Neeleman and his team at HealthEquity have created an important option for Americans seeking a workable option in a time of rising health costs.

Do we dare hope that there is another Neeleman brother out there working on a better mousetrap?

HealthEquity is headquartered in Tucson and has begun selling in Tucson and Phoenix this summer. For more information medical savings plans visit the HealthEquity site at www.healthequitynow.com or talk to your insurance broker.