What’s not to like with Health Savings Accounts??
March 19, 2007 | General
In my travels over the last week, I encountered a lady who had just opened a HSA. As we began to talk, she explained that she was a diabetic. I asked her how she did her research to see if HSAs made sense for here with a chronic condition. She explained that she was able to get a High-deductible health insurance policy which was a savings of $200 dollars in reduced premium and even thought her out of pocket expense for insulin and other supplies was over 80 dollars a month she would still save over a 100 dollars a month. This calculated into a $1200 dollars a year savings that she keeps in her Health Savings Account. She decided that she would prefer to kee the dollars than pay it in premium.
Many of the detractors of Health Savings Accounts warn that only young, healthy, financially stable people with good jobs benefit for HSAs because they are the only ones who can afford it. But in reality, the amount you invest in Health Savings Account can be deducted from your annual income tax calculations. In addition, once you deposit that money into a Health Savings Account it is left to grow tax fee. This is not a tax haven for the rich, but can benefit anyone for whom lower taxes mean more money in the bank. As well until you do the calculation, you really do not know if a Health Savings Account works for you and your family or not.
On top of this, you can use the money in your HSA for a wide range of medical expenses such as preventive care, dental checkup, and other medical appoints. Check the IRS web site for the entire qualified medical expenses allowable (http://www.treas.gov/offices/public-affairs/hsa/pdf/HSA-Tri-fold-english-07.pdf).
As the individual becomes more responsible for their healthcare, my expectations are that they will shop for healthcare better. From a more optimistic view point, individuals paying medical bills and seeing the real price of medical care will fuel healthy competition among healthcare providers, reduce cost and increase the quality of healthcare.
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Comment by Keith May 1, 2007
The woman in the example above is on the right track in her desire to keep her premium dollars. Risk is inherent with all insurance, healthcare notwithstanding. The key is to reduce your risk as best you can while staying financially responsible.
One thing to keep in mind is that in order for your HSA to work to your best advantage, you need to fund it to your maximum contribution. Whether that is entirely as an individual or through combined contributions between you and your employer.
In a November 2006 article in Employee Benefit News, benefit experts outline other creative ways for Employers to contribute to their HSAs, such as Cash bonuses paid out as HSA contributions. Not only will this benefit the employer by reducing the tax hit but it will also deliver the full bonus to the employee when used for a qualified medical expense.
Comment by Travis May 2, 2007
more support for HAS’s. http://www.suntimes.com/news/otherviews/362218,CST-EDT-REF28b.article
I’ll quote from that article.
“According to Golden Rule Insurance Co., as of the middle of last year, its health savings account customers had saved $165 million in their accounts, and that’s just since early 2004. In total, health savings account policyholders nationwide have accumulated more than $5 billion in the accounts at the close of 2006.
Every single dime in these accounts is protected from the tax collector, which allows a small business or a self-employed business to focus on growth and success instead of worrying about rising health-care costs. “
With cash numbers like this, I’m very taken aback that more companies/people are not moving to HSA’s.
Comment by Greg June 17, 2007
I have Golden Rule insurance with a HSA account. I’ve had to reduce the amount I can contribute to the HSA just to be able to pay for the insurance. HSA’s are a joke. I am paying $8000 a year with a deductible of $5500. My out of pocket expenses for a year could be at least $13500. The only ones who benefit from HSA’s are the insurance companies who are deathly afraid Congress will get some guts and give the American people affordable health coverage.
Comment by G June 21, 2007
Hey General, nice blog.
After dealing directly with managed care, I’m deathly afraid of it. After seeing what some doctors recommend, being forced into seeing only certain ones or only getting certain procedures (likely ones they make more money off of) is frightening. Thank god for freedom of choice, some internet research, and good old-fashioned capitalism. If our government wants to help out people who cannot afford healthcare, I hope they do it in a way that does not make the costs transparent.
By the way, here is a congressman running for president you might like:
http://www.lewrockwell.com/paul/paul345.html
Comment by Keith July 11, 2007
I am sympathetic to your situation Greg but to say HSA’s are a joke and that insurance companies are the only beneficiaries may be a little short-sighted and premature.
It is no secret that insurance companies are out to make a profit, any business is. While their risk is substantially reduced with a HDHP, so too is their intake of premium dollars.
The fact of the matter is that HSA’s can be and are beneficial to consumers. I can’t comment on your situation specifically without knowing all of the details of your HDHP but I would encourage you to research some of the HSA calculators available on the web to see if in fact an HSA is the right choice for you.
Comment by J July 16, 2007
Why have health insurance at all?
Comment by Kat August 22, 2007
I have to agree with Greg. Keith, your assessment of the system works in theory, but we are generally talking about people who simply do not have the means to put away that kind of money. My HDHP deductible is $4000. That’s $333 a month. To me that adds up to an electric bill, a water bill, diapers, and groceries, or 1/3 of my mortgage, or my car payment. That’s a big chuck when you think about it.
Unfortunately the HDHP was the only feasible health insurance my company was able to offer this year, as the insurance company decided to triple the cost of the HMO plan. I’m stuck.
I can’t save anything because I’m still paying off last year’s deductible from having a child. I would’ve been better off financially getting a midwife and staying at the fanciest hotel in town!
Comment by Michael August 29, 2007
Kat-
Employers should note that moving to a High Deductible Health Plan coupled with a Health Savings Account is a long term savings approach.
My company currently pays for the employee premium portion and the employee pays for their dependents.
We will begin offering an HSA as an option along with a traditional PPO. The employees who elect to enroll in the HDHP will save around 30% of their current premium. Not only can they deposit all or a portion of their realized monthly savings into their HSA, but as an employer we will contribute 75% of our employee only premium savings into their respective accounts. Depending on usage each employee account could have 50% to 60% of their deductible within a year. Each year we (employer) can adjust the deductible amount, among other variables, which will affect the overall premium savings.
These adjustments allow us to increase the account contributions as the savings increases. However, there are many different scenarios based on the employer and the healthplan.
Your employer should look at offering an HSA as investing in their employees’ healthcare not just providing insurance.
Comment by storm March 19, 2008
Probably the best answer to health care is to do what our great grand parents did. Take preventive steps. Eat right and exercise. It sounds lame but the reality is doctors can be easily replaced. Before we had our current health care system we had holistic doctors who encouraged their patients to take care of themselves. They may have provided some temporary relief but never gave them any drugs that were a “life long” committment. Compared to how many patients they lost and how many our current health care system loses — my money is on holistic health care professionals. I’ve been seeing one for more than twenty years and can’t even see why anyone would want to go to a medical doctor.