BAC, Community Bank Launch Statewide Health Savings Plan Partnership.

Business Editors

REYNOLDSBURG, Ohio--(BUSINESS WIRE)--March 29, 2004

An Ohio benefits administration firm and a community bank announced they have formed a statewide partnership to offer greatly liberalized Health Savings Accounts to both employers and individual healthcare consumers.

BAC (Business Administrators & Consultants, Inc., www.bactpa.com), with regional offices in the Columbus and Cleveland areas, and Portage Community Bank, acting as statewide trustee, will offer the new, tax-favored Health Savings Accounts to employers of all sizes, effective immediately. Portage Community Bank is believed to be the first bank in Ohio to serve as statewide trustee for HSAs, which are designed to offer families, corporations and non-profits a solution to double-digit increases in insurance premiums.

Signed into law as part of sweeping Medicare legislation, Health Savings Accounts allow individuals with qualified, high medical deductibles to pay for a wide variety of services offered by physicians, dentists, outpatient clinics, hospitals, pharmacists, opticians and optometrists, audiologists, nursing homes and other providers using pre-tax income, invested tax-free, and sheltered from income tax when withdrawn to cover such expenses. HSAs also permit unused dollars to accumulate tax-free. Further, employees can move their account from job to job.

"In recent years, both our individual and business banking customers have expressed great concern over the escalating cost of healthcare," said Richard J. Coe, president and chief executive officer of Portage Community Bank, a $105 million community bank in Northeast Ohio. "There's not a single Ohioan who hasn't been touched by this issue -- factory worker, white collar professional, single-parent family or business owner. Each has expressed ongoing frustration over the soaring cost of staying healthy.

"By serving as statewide trustee, we'll be part of the solution to this chronic problem while remaining responsive to customers and expanding the scope of our services beyond traditional borders," Coe added. "We're pleased to be partnering with Business Administrators & Consultants, Inc. to make this happen."

According to BAC, self-funding of the new accounts holds the potential for significant savings for both employer and employee.

"For employers, the arrival of Health Savings Accounts means reducing the cost of doing business, improving cash flow, remaining competitive and being even more responsive to employees," remarked Richard A. Raup, CLU, president and chief executive officer of BAC, based in the Columbus suburb of Reynoldsburg.

"With their newfound ability to self-fund these accounts, employers can eliminate the insurer's profit margin, reduce administrative overhead, retain reserves that otherwise would be held by the insurer and enjoy savings on anticipated claims," Raup said. "All things considered, self-funding HSAs may very often prove more cost-effective than a fully insured plan."

Employers establishing self-funded HSAs do not have to engage in payroll and income tax withholding. Nor are they required to determine if distributions are used for healthcare expenses, freeing them from the task of monitoring their workers' accounts when using BAC's Group HSA Program.

Steps to qualify

To qualify for a Health Savings Account, consumers must be covered by a medical plan with a minimum $1,000 deductible or a $2,000 deductible for family coverage. In addition, total deductible and out-of-pocket expenses may not exceed $5,000 for an individual or $10,000 for families annually.

For 2004, the combined, tax-free employee/employer contribution may not exceed the lesser of the annual deductible or $2,600 ($3,100 this year for ages 55 or over). Families participating in HSAs may deposit $5,150 (or $5,650 over 55). Maximum contributions will increase each year to reflect cost-of-living adjustments.

According to Richard C. Sheldon, BAC's North Coast regional vice president based in Avon, lower premiums resulting from higher deductibles "most likely will mean net savings." When combined, lower premiums, pre-tax contributions, tax-sheltered investments and the deductibility of yearly contributions spell a significant improvement over prior medical savings plans, he said.

"Even after going on Medicare, you can pay for healthcare expenses tax-free, and individuals over 55 can make catch-up contributions that increase to $1,000 in 2009," Sheldon added.

"For both employers and individuals, Health Savings Accounts should go a long way in reducing the sticker shock of health coverage in Ohio," BAC's Raup said. "We expect the self-funding of these accounts to be equally popular with businesses, non-profit groups and families, and we anticipate making similar plans available in the other states we serve," Raup concluded.