Home Field Notes Operations Computers Regulation Expense Control Email Web Sites Phones Security Out Sourcing Sarbanes Oxley
Product Critical Illness Lapse Support Universal Life Burial Insurance Finite Insurance Leads Systems How To Stories Underwriting/ Claims   Using Consultants 
                    Last update March 28, 2005


Expense Control

This section deals with the control and reduction of the expenses incurred with outside suppliers and vendors. You can save money faster, and easier, by analyzing these expenses than in any other area. A vendor bill that is recurring usually gets into the system and nobody looks at it again. Even if there is a required approval, the manager responsible is used to seeing the same thing every month any question or challenge is unlikely. It is natural to assume that if was OK last month, it must be OK this month.

Periodically you just have to ask your vendor for a better price. A classic example in the phone company. The lowest price per minute for long distance drops all the time, and if you are paying more than 5 cents a minute, you haven't asked. Mobile phone deals are changing even faster. You have to ask every vendor for a lower price, including your insurance carriers, your auditors, and most particularly your lawyers. There is the standard rate and the rate for those that ask, particularly for associates. For many companies bank charges can be the most substantial saving. The cost of providing banking services has declined dramatically, but unless you sit down with your banker and your analysis, the savings aren't being passed along to you. And, as with most vendor cost reviews, it would be wise not to delegate that meeting to the person that has been dealing with the bank right along, and has developed a solid "relationship".

Your employee health plans are one of your greatest expenses, and the co-pays and deductibles have to increase every year just to keep the cost increase to the employer below 10%. Here there is no solution in sight, but the new HSA is discussed here, and compared with the prior fund options.



There is no substitute for personally scanning the check requests for every expense. I have never been able to find a useless or excessive expense by looking at reports from accounting. There is too much volume and not enough description.

Somewhere in the accounting department there is a spot where check requests land. With practice you can scan every check order or expense authorization before the payment is made. It will go slowly at first, as you are going to have lots of questions for the managers who have initialed these requests. After several months you will become inured to the repetitive items just like the managers, but you will have saved a lot of money by that point.

Half of the benefit of looking at check requests will come from the things you find. The other half comes from everyone knowing you are looking. You will normally find only one or two things each day that arouses your curiosity. Carry those to the source and ask.

Just because a recurring expense appears to be locked in by a contract or long term commitment doesn't mean you shouldn't question it now. The computer area is a prime suspect. Just because someone agreed to license fees that go on and on doesn't mean you can't stop using the software and put up a fight. On a lot of software the annual fee is technically for upgrades, and a lot of upgrades are never installed by the user. Occasionally it might be worth while to abandon an entire system, perhaps substituting something simpler, just to cut off the license fees. In my experience hardware and software vendors at first become deeply insulted if fees are challenged, but fold in the end.

It can be difficult to judge the validity of some expenditures, but some obvious ones will pop out if you go to the supply room (and your other storage facilities). That is where you keep your supply of last year's calendars, the dusty boxes of company logo tee shirts and caps, and the toner for the copiers you don't use any more. Most of that stuff will be in boxes stacked on the floor. You will have to look on the supply shelves to find the obsolete forms, the cross pen refills (and maybe even cross pens). Warning: when you find obsolete printed material, do not just throw it away. If you don't destroy the shelf label and the print master, your supply clerks will likely reorder.

It is usually in these storage areas where you see the rows of outmoded typewriters and calculators, all carefully labeled as to whether they work or not. Check to see if you still are paying service contracts on that type of equipment. The charges are usually buried in with other valid charges on a long bill, which is why nobody thought to cancel them.

What do you do about that huge supply of old calendars, tee shirts, pens, promotional items and expensive brochures with sales figures for 1996? If you just throw them out the excessive or improvident ordering will just continue. You really have to go find the source of the orders and set up some approval process similar to the way you review vendor checks.

You will probably find that most of the questionable or excessive stuff is purchased every year by the agency department. If possible, store all the "special items" ordered by agency in the agency department in full view. That will at least get the stuff shipped to the field, which will seem like progress . . . at least until you look in the storage in the field office. The agency folk love to order two types of junk; things with the company logo, from cup and jackets to pens and watches, which they think the field will buy, and gift items for the agents attending a convention. The left over convention stuff will be labeled with the year and location."Hawaii 2001", which sort of limits its usefulness. The stuff that was for sale to the field, but the dogs wouldn't eat, should be kept where the person who ordered it can see it every day.

While you are in the supply room, be sure to observe what items the company is furnishing the employees, along with the special order items, like those gold cross pen refills. Make sure you are not setting a bad example. If you are the culprit and must have to have those refills at company expense, it is better to buy them yourself and put it on your expense account.

Travel expenses are a major item, particularly air fare. Gone are the days when anyone traveled first class other than on a frequent flyer upgrade, but few companies are capturing the frequent flyer awards earned on company paid air travel. Generally employees who earn free tickets flying on the company tab are allowed to keep them for personal use. It is easy to see why. The people who do the most traveling are usually key people, and you will run into a buzz saw, all the way to the top, if you try to change the practice. So don't feel bad if you fail to get at this low hanging fruit. Check the politics first. If you are not the CEO, let the CEO throw the first stone.

I am kind of sorry to mention this. Maybe you should try all the other ideas first.

Every company needs a corporate travel manager. If you are small and don't do much traveling, it may be a part time job, but just getting the discounts available with hotels and cars will pay for the activity.

It makes less sense than it used to to use a travel agency. With less support from the airlines, an agency will now charge for its services. Offsetting this in some cases may be the ability of the travel agent to get change fees waived. Your manager is unlikely to have the volume and thus the swat. So if you pay an agency, make sure it is a big one that sends lots of business to the airlines.

Web sites now give your manager has the same access to information and prices. The web will train and support your manager. The air lines and the major travel vendors all cater to the corporate travel manager. The travel news sites are full of information. Put "corporate travel manager" into Google and you will see.

Employees really like company credit cards. It is not like spending money. It is different than charging it to your own credit card and then requesting reimbursement on your expense account.

Here politics may get in the way again, and if you can't eliminate the cards, the second best thing is to see that accounting rigorously matches the credit card bills with the "charged to company" column on the expense accounts. Generally, if you have company cards, the employees are not listing the charges in the "charged to company" column. It sort of spoils the fun. It also proves the point.

Company credit cards are great if you don't have to list the charges on your expense account. I once had one which was very handy when entertaining company agents. Ever had one of those magnums of Dom Perignon ? 1970 was a dandy year. Even though I was with two of our leading agents and their wives, I know I would never have ordered that second bottle if that dinner was going to show on my expense account.

Comment, Dave Pavletich, CEO of Colorado Bankers Life: I wholeheartedly share your opinion re: company credit cards. I've never had one and wouldn't allow one in any co. I ran. It's inviting expense account abuse.

Mobile phones provided by the company are just special purpose company credit cards. If the charges are billed directly to the company in a large list billing, the expense is invisible. The employee may not even see the bill, or have any incentive to chose the most efficient calling plan. In fact, the employee's incentive is just the opposite. The plan with the largest number of minutes management will allow will permit personal use with no concern, since it is now "free".

The best approach is not to provide company mobile phones to anybody. You will find that the people who need to be reached will, like most other people, provide a mobile for themselves. But if you do provide phones, presumably you intend them for business use, and not as a perk. If that is the case, the only controllable way to handle charges is to have the employee submit the bill on an expense account, calculating the percentage of business use. That percentage would be the percentage of the monthly charge reimbursed by the company. This approach is likely to lead to a conscious limiting of personal use, as well as the selection of the most appropriate calling plan, since the employee will be paying a share of it.

Postage is one of the largest costs in most companies. A first class letter can cost $.37, $.34, or $.30.9 depending on how it is prepared. If the company doesn't have the volume to justify someone keeping up with the rules and to prepare the mailings, use a mailing service. If you don't make this someone's responsibility, you will find that every outgoing letter has 37 cents on it.
Of course, the best way to save postage is email, always with agents, and with everyone else that will give you an address.

If you print 3 copies of a letter (you shouldn't, but that is another story), it is easy to fall into printing the 3 consecutively and the hand sorting them. The computer can of course print the letters in any number of different orders. For example, the copy going to the file can be by the clerical desk code, sub sorted into the order the letter was written, the copy for the agent can be in the order of the mail boxes in the mail room, and the copy to be mailed can be in whatever order gets you a discount from the USPS. Carry that one step further. To meet any volume discount requirements, the computer would be happy to hold all the letters from Monday and Tuesday and print them with Wednesday, merged in the required order with whatever else you have that is to be mailed.

You should profit by checking your various vendor charges. You have an established set of vendors for everything you buy, from copiers to paper to office supplies. The list includes vending machines in the break room, water coolers, and catering. And don't forget the vendors that provide the materials and equipment for the most expensive areas, the print shop and the computer operations. If you have been using the same vendors for some time and don't have someone comparing prices, you have undoubtedly become a "good" customer, one who consistently pays the full list price.

It is common for your supply people to get comfortable with a single vendor, particularly the ones who come by to get and deliver orders, and bring donuts. (There is your tip off, look for the donuts.) Your supply manager will insist that the prices are just as low as Office Depot, but they aren't.

I am not sure whether you need a purchasing agent or a purchasing auditor, but you need one or the other. In most companies whoever manages supply does the purchasing for what supply stocks, the printer of print supplies, the computer operator for their stuff, and so on. There is great opportunity for theft and kickbacks and favors, although you probably lose more from habit, sloth, and lack of imagination. I would probably opt for an auditor as less likely than a purchasing agent to get sucked into the system. The internet makes it a lot easier to hunt for better prices, so a systematic review of purchase detail after the fact might show where the weaknesses are.

If you compare the costs job by job, you will be convinced that you save a lot of money with an internal print shop. The problem is that with your own shop the costs become largely fixed, and invisible. It is easy to ignore the costs of printing mailing inserts, overcomplicated print orders, and items for the field such as business cards, stationery, and so on. You end up printing a lot of stuff you would never print if you had to "pay" for it. You would almost certainly get rid of a bunch of multi-part forms, stuff printed on fancy heavy paper, and four-color jobs, if you could see what it actually cost.

If you consider all the costs of having an internal print shop, is it really less than you would have to pay a local commercial printer, particularly if you got bids for most major print jobs? Everyone is a lot more cost conscious when the outside vendor price is known, and that could be the difference.

And then there is the "backorder". If your print shop consistently runs X days behind, it is just like any other department in that condition. If there is too much work it logically has to be falling further behind day by day. Not enough, and it has to catch up. If, against all odds, the work is just magically enough to stay behind a certain number of days, the staff is varying the work speed to maintain that standard. With outside printers, you work with the ones that deliver when you need it.

You have options for shipping with UPS, Fed Ex, and the USPS. Do you have their best rate? Probably not. UPS and Fed Ex rate deals vary by expected volume. Their reps have the authority to give you a lower rate than your past volume would warrant, if you expect to ship more in the future. If you can get the lower rate, you can usually keep expecting, and avoiding an increase, even if your volume never quite justifies it. It is like the phone company. The rate you pay depends on what you ask for.

Both UPS and Fed Ex will give you a PC at no charge that will calc your rates and make your shipping label, but you may have to ask for one, particularly with Fed Ex.

Rate is only part of the picture. Second day UPS is dramatically cheaper than Fed Ex overnight, but you will find that some people, and some whole departments, send everything Fed Ex, even when there is no justification for overnight delivery. I found one company that did not even have a UPS contract and was shipping everything Fed Ex. You get control of this by looking at the contents of the outgoing Fed Ex packages and giving feedback to the sender. You will need the envelopes to arrive at the collection point unsealed, which will be resisted on several grounds, such as "privacy" and "things falling out".

The carriers specialties matter also. Regardless of what they tell you, in most places UPS Next Day Air is not a substitute for Fed Ex overnight, nor is Fed Ex Ground and 2day for UPS.


Bank charges are like the telephone charges. There is a degree of flexibility, but if you haven't requested reductions from your bank recently, you are almost certainly paying more than you could be. The computer age has brought greater efficiencies to the bank, just as it has for you, but these savings don't get passed along to you automatically. A meeting with your banker to go over the charges should get some significant reductions. Even better, if you can let several banks bid on your accounts, the prices will be lower yet. I have seen cases where a bidding bank came in at half the cost of the current bank.

Look at your monthly analysis from the bank. If a stop pay is costing $10 or more, or a cleared check $.10, you have some reductions coming. Even if you choose not to do your own ACH directly with the Fed, you know it now costs the bank less than a penny per item, so why are they charging you 5 or 6 cents? The local officers in many of the large national banks, such as Bank of America, may have no authority over bank charges, but will call in the regional expert for a meeting. That person has broad authority to set charges. Ask for help item by item. The banker is of course much better at this than you are, but knows she has to give you something on maybe half the items. You will both have a profitable meeting, you because you will get substantially reduced charges, the banker because of what you left on the table.

You report your average bank balances in your annual statement. Most companies have too much money in too many banks and too many accounts. Within your main bank, checks may be drawn on different accounts for convenience in accounting, but all but the main account should show zero balances. All banks have systems for sweeping accounts daily to a main account, or to an investment account, but you have to ask for it. The bank prefers that you leave balances in a bunch of accounts. Further, if your main sweep account is not overdrawn several times a month you are keeping too much money in it.

The bank may encourage you to keep enough money in the account to offset your bank charges, and the crediting rate on your Account Analysis may appear to be as much as you can earn on short term investments. However, the bank reduces the calculated average balance by the amount of the reserves it has to keep on the balance, so it will always pay to keep the accounts as close to zero as possible and invest the cash elsewhere. The optimal balances are low enough to cause overdrafts on the heaviest days, 3 or 4 times a month. The bank will agree to charge simple daily interest on overdrafts (if asked).

It may be hard to convince your treasurer that periodic overdrafts are evidence of precision cash management and not carelessness. Overdrafts are to be avoided in personal accounts, so this logic can infect the handling of your business accounts. Likewise the instinct to "be conservative" in setting the level of the balance. As in other areas, that expression should be a red flag, as it means your balances are excessive. You will probably need to get a report of overdrafts each month for a while and make it clear to the accountant that you expect to see some.

Sometimes you will find that your bank is not the reason you are paying to much and muffing your cash management. It may be that your controller or treasurer doesn't want to take the time or trouble to follow the banks advice. All of the big banks have cash management specialists whose job it is to help you handle your funds efficiently, even if it causes the bank to make less on your accounts. Ask to see the last set of recommendations from your main bank. If none can be found, ask when the last request for one was made by your people.

Your bank will recommend certain fundamental things (which you should already be doing). Two basics are zero balance accounts and sweep accounts. ZBAs just allow you to have multiple accounts without having money lie around in them. Every day each account other than the main one are adjusted to zero by moving money to or from the main account. Once the money is in one place, it is easier to sweep it into your short term money vehicle. The bank offers a sweep account that should offer a few advantages, even if it pays a few basis points less than your short term vehicle. The money never leaves the bank, it is instantly available at the end of the day to cover any negative balances. You may be surprised to learn that the bank doesn't do anything different with the sweep funds than it does with the regular funds, except pay more interest. Why? It may have something to do with required reserves, or it may just be pretend, the banks don't like to say. Nonetheless, since it costs you nothing and is just as good as an account balance, you don't look too sharp if you don't use it.

There is a long list of the various bank charges, and how do you know what is a fair charge? You could of course hire a consultant who knows about such things, but that isn't very friendly and you may be able to do just as well yourself. You need to get some monthly analysis statements from several banks to get some comparisons. Call a friend in another insurance company about your size. Or, a great way to pull the covers back is to get a different bank to come in and bid on your business.

Obviously you are going to look first at the high volume items. You do a ton of ACH debits and deposit a lot of policyholder checks from direct bill. But be sure you get the whole picture. The bank may charge 3 cents for an ACH debit, and then want $1.25 for a returned item and $1 for an automatic redeposit. There is no cost justification for that. The bank just hopes you won't notice. The returned item comes back electronically just like the debit goes out, and the redeposit is just another debit. Usually every bounced draft gets an automatic redeposit before becoming a returned item, so those unjustified charges could be the biggest item on the sheet.



The bank may try to charge you the same for an ACH debit as they used to charge for a paper bank draft. Many charge extra for sending your ACH file on to the fed the same day they receive it from you, instead of sitting on it for a day. The bank will say that since it is more "convenient" for you to not have your file get a day older before it hits the fed (policyholders change things), you should pay more. Or they may say "you get your money sooner" which is not true, of course. You have to hit your policyholder's account on the agreed day, so if you eliminate the artificial delay at the bank, you will create the file internally a day later.

Whether or not your bank is delaying your ACH file, it is a good bet that your own people have added a day. A file created at night should go to the bank the next morning, before the bank cut off time. Usually I find that the staff likes to sit on it all day and send it at the end of the day or the next morning.

How do you explain that? Well, it is busy in the morning and the clerks like to get around to it later in the day. Watch out for the claim that the day is needed to remove entries for policies that are cancelled that day.

Cash management and the banking relationship is generally the province of the company Treasurer. Is your Treasurer competent and effective? The review of the way cash is handled will tell you a lot. In many companies the position is underrated in importance, and the title may just be tacked onto the accounting officer, or assigned to a junior person unlikely to have the authority or confidence to carry out the responsibilities. This is a mistake.

"Conspiracy of Fools," the Enron book by New York Times reporter Kurt Eichenwald, describes a meeting of newly promoted top management at the height of the breaking disaster, where the young Treasurer was unable to produce either a cash flow report or a schedule of required debt payments, neither of which was regularly maintained.

While these are assumed to be less critical to the day to day operation of a life insurance company, it is impossible to know the amounts that should be moved from bank accounts to the short term investment vehicle, or from that vehicle to long term investments, without those schedules.

Check the fees you are paying your outside investment manager. For new accounts of about $500 million you should be able to get full management for about 8 basis points, give or take 1. The investment accounting service should cost 1 additional basis point. There are companies that are paying 15 or 20 basis points. You have to ask.

The size of the portfolio matters, but investment management fees are a negotiable item. Like the phone company and the bank, if you ask you will get a rate reduction. If you don't, you won't. The investment managers will tell you 15 bp is the minimum, but actually that is the "standard rate", which means it is the maximum they hope to get in the absence of competition.

Audit fees can usually be cut in half by putting the audit out for bid and changing auditors. It is probably a good idea to change auditors every few years anyway, so you might as well use the change to cut the fee. If you are not a public company you probably don't have to use one of the big four and should get an even lower fee. You will end up changing auditors each time you put it out for bid. Your current auditor will always be the highest bidder, as it would be embarrassing to come off the current price that far.

This actually works about every 3 or 4 years, since the initial bid tends to be lowball, and the new firm will work the fee back up over the next few years. During the bidding process you need to make sure things like basic tax advice and the outside actuary are included, or they will become an extra expense to be added to the low fee. Note: if you had previously included services that will be eliminated due to Sarbanes- Oxley, you need a fee reduction.

Remember, the auditors are more experienced at this than you are. You will need a check list of the service elements you are getting for the price, or it will be like buying a car and subsequently being offered the wheels as an extra.

You might be amazed at how many contracts you have that automatically renew unless you give notice of termination well before the expiration date. You miss the magic date, and you are stuck (or so the vendor claims) for another 3 years. When you realize you have the service you no longer want, it is seldom the right time to cancel.

Generally you don't think about whether you want to renew until it actually comes up, by which time it is too late. The sole purpose of the advance cutoff is so you will slip up. The court will recognize the sleazy aspect of such a provision, so most companies just terminate anyway. The vendor doesn't want to test his provision if it is successfully overreaching the more timid customers.

A good example is Muzak. You probably have it and don't notice it. If you take advantage of some of the things they can do with motivation and mood, it may be worth the cost, but you probably just do elevator music. First, consider whether music everywhere is doing any good, and if so, how else you can provide it. If you have not noticed the music, it may be that most of the ubiquitous speakers have been turned off by folks that don't like the choice of music someone selected 20 years ago.

Another way to get stuck is by letting a department manager signs the renewal. They will do this without questioning, under the "if it was OK before, it must be OK now" rule. The only way to get control is to inventory all contracts and decide which are renewable. And then it is a good idea to give notice immediately on the ones you want to terminate, even if the end of the contract is a long way off. It is hard for the vendor to claim that you gave notice too early.

Employee benefits plans should be provided on a tax efficient basis. Section 125 cafeteria plans allow employees to pay contributions to the plan on a pretax basis. The plan may include flexible spending accounts, which allow employees to pay medical expenses not covered by the plan with pretax dollars. The IRS has announced that qualified expenses can now include non prescription drugs.

Over the last few years the cost of health insurance has become so burdensome that employers have been forced to increase the required employee contributions to cover a significant portion of the cost. Enabling the employee to pay this cost with pre tax dollars, and to do the same with an FSA, can make a real difference in how these new employee costs are accepted. Pre-tax includes not only income tax, but also Social Security and Medicare taxes. There was a time when it was difficult to justify the extra administrative expense of cafeteria plan, but now the savings to the employer alone make these plans for all practical purposes mandatory. The paper shuffling can be significantly reduced by the use of health care debit cards which draw money directly from the flex account.


The new Health Savings Account. contributions are tax deductible, and the major drawback to the Flexible Spending Account is eliminated. Instead of forfeiting unspent balances at the end of the year, the HSA accumulates tax free year after year. Better than an IRA, a taxpayer can shelter up to $4500 a year.

The question is whether companies will make the jump from their current approach, which often includes both an FSA and a HRA. A Health Reimbursement Account balance rolls forward year to year, like the HSA, but it can receive only employer contributions, and is used in conjunction with an FSA, which can receive employee money. The new HSA can receive both employer and employee contributions, and has the additional advantage to the employee that it is portable, so it goes with him when he changes companies.

Here is an excellent summary and comparison of the FSA, HRA, and HSA.



The Republicans say they hope the HSA will reduce the future demands on Medicare, while the Democrats say it is just another attempt to shift health care costs to the individual and the private marketplace. They are both right of course. The spin may be different, but the meaning is the same. Since the funds stay in the HSA until spent, and represent a savings for retirement health costs that anyone can understand, it will be the closest thing practical to the person spending their own money for health care, with all that means for cost control.

If you are currently providing the standard low deductible health plan for employees, here is the opportunity to raise that deductible, saving money for both the company and the employee, and using the HSA to fill the gap. Note that you must raise the deductible to at least $1000 individual and $2000 family to make the employee eligible for the HSA.

The HSA requires that a high deductible medical insurance policy come with it. This looks like a marketing opportunity. If you already market medical insurance, this is a no brainer. But the HSA doesn't have to be the same provider as that for the medical insurance, and the funds can be invested in a variety of vehicles.

The one drawback to an HSA, if you want to call it that, is the requirement that it must be established in conjunction with a high deductible health plan. This means a minimum deductible of $1,000 individual, $2,000 family, and a maximum out of pocket of $5,000 individual, $10,000 family. Another drawback, and a significant one, is that the HSA subjects Rx to the HDHP limits. Most HRA plans provide a separate first dollar Rx co pay benefit. That disappears with the HSA.

An HSA is a trust or custodial account that must be established at a bank or life insurance company. That limits the competition for this business, and a life insurance company claims department clearly has a big edge on a bank in terms of the clerical tasks involved. You would expect that companies that currently offer health insurance and can quickly come to market with a qualifying HDHP should be able to capture the market for HSAs. If those carriers are slow, or poor at setting up individual administration systems on publicly assessable web sites, there may be opportunities for life companies who can affiliate or partner with health carriers and provide the HSA portion of the package.

It is possible to structure and HRA and FSA so that the FSA money (forfeitable) is spent first, before the HRA (rollover). The idea is to make it easier for the employee to estimate expenses and eliminate the fear of forfeiture. However, in practice it is difficult to make this "stacking" work. Without stacking, the provider would normally bill the health plan directly, being paid first from the HRA. Apparently, with stacking, the employee would need to pay the provider directly and apply for reimbursement from the FSA, then the HRA. I am not clear on why this is so, so ask your insurer.

Can the new HSA work with an HRA or FSA, or both? The answer is sort of, but not really. An HRA or FSA is permitted, but the HDHP deductible must be satisfied before any payout from the later occurs. Rev. Rul. 2004-45 (released May 11, 2004) makes the exceptions clear. Certain permitted benefits, such as vision, dental, or preventive care are not subject to the deductible. The other mostly irrelevant exceptions are payments deferred until retirement or suspended while the HSA is in effect. It is unlikely that an employer would bother with or contribute to either for so limited a purpose.

So what have we said here? Given that an employer can make the deductible on an existing plan higher without straining all the way to the HSA limits, and not give up the Rx co-pays, and keep the HRA-FSA combo for both employer and employee contributions, tax free like the HSA, what exactly is the compelling reason to switch? Portability is nice for the employee, but that is hardly a boon to the employer, who makes the decision. The FSA forfeiture goes to the employer, but the fear of it inhibits employee contributions. That may be a wash.

In my view the new HSA, which has been called a 401k for health care, is a great idea going nowhere in its present form. The core idea is to make the individual care about what he spends by making him spend his own money through the threshold deductible. Fair enough. But do we need to be so pure that we eliminate the Rx co-pay, of which a good chunk is the individual's own money, and the availability of the FSA, which is also his own money, in effect saved in advance to cover costs? Sure, the FSA is tax advantaged, while out of pocket for the deductible is not, in the usual amounts. But if these two elements prevent any significant adoption of the idea, what difference did it make?