The Problem with HSAs

My wife and I owned an 148 unit apartment complex and we had 4 1/2 full time employees…The true definition of SMALL business. Although no one else in the area or industry was doing it we had company paid insurance and HSAs for each of our emploees.
Every month we would put $ 100 in the savings account towards their $ 1,800 deductible. Employees that stayed 18 months, without a medical claim, had enough in their account to pay their entire deductible.

We liked the HSA concept (thank you Pres Bush) and it allowed us to provide ins for employees that otherwise would not have coverage.

We also had profit sharing…Under the Obamby plan we'd be FORCED to provide ins and the higher cost would probably eliminate any profit sharing… You don't get something for nothing!!!

NorCal Hal

The reason health care costs have been driven up intentionally by the government is to force everyone into a rationed, substandard health care system just like Canada, England, Spain and many other countries have.

When you get it it will be substandard and you may not get it at all. Getting the government OUT of the health care industry is the ONLY way to fix the problem but I doubt that is going to happen.

The illegal aliens are loving it though since due to cost shifting we are all paying for their coverage and then there are the trial lawyers getting their cut and I'm sure there is more legislation on the way to give the trial lawyers even more ways to sue so we can pay for their yachts.

This is all being done intentionally. No one could possibly be stupid enough to destroy the best health care system in the world this way. Then we have the corrupt judges who let all these bogus lawsuits gon through and award millions.

Nothing will cost us as much as rationed, nationalized health care. i was a victim of it in the military. Believe me. You don't want it.

No where in all these comments do I see any discussion of maximum lifetime coverage. This leads me to assume that most of the respondents to this article have at least $1 million maximum lifetime coverage. The HSA/HDHP program provided by my employer offers only $150,000 maximum lifetime coverage. The family deductible is $5800 annually and monthly premiums are $191. My employer is a small business with annual revenues of about $20 million and is struggling just to avoid bankruptcy, so, naturally the owners are trying to keep costs, including medical insurance costs, as low as possible. My concern, assuming the company does not file for bankruptcy, is that any catastropic medical condition could cause me to max out my lifetime coverage very quickly. I am 56 years old and have the chronic disease of psoriatic arthritis for which my physician has prescribed Enbrel at a cost of about $1500 per month. To add injury to pain, my health plan limits biologic drug coverage, such as Enbrel, to a lifetime maximum coverage of $15,000. So, as can be seen from my comments, my family and I fall squarely in the category of underinsured. We're good for basic care but we're in deep kimsey as far as catastropic issues are concerned.

I would like to have an option to purchase more catastropic coverage but none is currently available through my employer, private insurance, or government program. As much as I hate to say it, universal healthcare is looking better to me all the time.

There are some very educated HSA clients here commenting. I Fed-Exed America's first tax free HSA (Formally MSAs) in 1996 so you can trust me. I talked to 2 HSAs from 1997 this week and both had maximised their annual contributions and have never taken any withdrawals yet. Their HSA balances are very large. The thought is – who would take $400 out of their money that's growing tax free even if you could. You wouldn't take $400 out of your 401K even if you could would you? These old clients have kept all of their medical, vision and dental expenses and they have the freedom to take out these expenses in the future, all tax free.

I suggest that you maximise your HSA deposit before your IRA. The HSA enjoys tax free deposits, growth and withdrawals – Amen. IRAs and 401Ks are old taxed accounts. Consumers with 20 or 30 years of HSA contributions are better prepared for 30 years of retirement health care expenses.

It's smart to save premium, eliminate taxes and build wealth.

Oh yea, portable individual health insurance is 1/3 the price of employer-based insurance.

It's TIME for your HSA http://www.save101.com

HSA another way to file bankruptcy for medical expenses. You cannot save enough to pay for a minor surgery, and please try to figure the amount an illness like RA would cost? You may be young and healthy now, but you are aging daily, and 1 car wreck away from real trouble. You can do an HSA with a very large group, but be sure to fire everyone over 40. It will be another reason to outsource more jobs.

One of the principals of group medical underwritting is that, a small percentage (10%) of employees use (90%) of the resources of a group plan. A high deductible program is a "fairer" system since the people that consumer the most healthcare resources shoulder more of the costs (isn't that the american way). The only way to solve the issue of spiraling costs is to address the costs associated w/ the sickest users. We employ a unique strategy w/ our clients and most are seeing drastic savings 20-30%.

The Economics of Sickness and Fear

Wouldn't Ted Kennedy make a wonderfully strong statement by seeking his own medical care in Canada or England? But he won't. Medical costs are sticky because demand is inflexible. You can't put it off. You need help, and this is an area where quality is also inflexible. It's your life and you demand the best.

But until there is truth and transparency in Hospital billing.

Until hospitals stop gouging the sick with markups of up to 7000%.

Until the public can look at a menu and ask, "Can I afford that, or do I need to buy insurance?"

-Americans MUST continue to fear (phony inflated) medical costs.

That fear will cause us to buy "insurance," (or, more accurately, pre-paid, negotiated discounts from hospitals)

America's politicians will use this fear to force us to buy a terrible product (insurance) and leverage government control over the supply of medical care.

We already have a single payer system. It's the VA. Visit one for a peek into the future.

Look at how little doctors earn per visit. Less than a plumber, less than a mechanic, less than a hair dresser.

To enter a field with such high demands and so little reward one would have to be a fool. So we will need to loosen up medical schools so that fools can get in, and we should also allow less-qualified people to do medical work.

What? We are already doing those things? …Oh.

The only problem with HSA's in general is that they expect you to be a psychic as far as what you are going to need to pay for health care costs over the next year. If you have chronic illness and you have maintence meds, that is pretty easy, but other costs are not so easy. The other problem is that if you don;t use it, you lose it. What is up with that? I had an FSA for child care that I was paying into and we ended up not using it. I lost approximate 1900 in that deal. I would like to know where that money goes and why it makes sense to have it so that I can't get it back. I also don't get the savings they are talking about here as compared to insurance premiums. The only savings that occur is that you are not taxed on this money. I don't get the comparison between an HMO premium and the HSA premium. These accounts, since they are capped off at 5800 per year don't allow you to take oput what you really need. WHen I was with an employer that offered me insurance, my drug costs alone were 200/month…and that is with co-pays. It's up to 1000/month now that I no longer have insurance and I am paying full retail price for my meds. I don;t know how much doctor visits are going to cost. The office staff said their payment schedule says about 100 per visit and my doc said he would discount that, but I don't know how much of a discount that will entail, so I can't even begin to guess how much it will cost. FSA's are not the answer in thier current state. There is too much uncertainty and risk involved with them from them to be a tool to really help.

Sounds like a lot of insurance professionals got involved here. The HSA is a GREAT idea if you are young and healthy. It is also a great idea if you are the kind of person who takes poor care of himself and figures five grand is a fair amount to gamble on needing major health benefits, rather than paying an HMO a higher rate and getting your maintenance covered for nearly free.

Since most Americans have been taught that it is the medical industry (providers especially) to blame for high medical costs (this is a DIRECT result of the insurance lobby being well funded to craft messages for the public to believe anything they throw enough money at), most Americans think that getting good, consistent primary care is somehow a waste of money. Further, we Americans believe that taking care of ourselves is "a personal choice"; which although true, is probably the GREATEST contributor to higher medical costs. Think about it people, if we all took care of our bodies a little better, there would be dramatically decreased need for medical care. Also, since the VAST majority of healthcare costs for hospitalization are MEDICARE funded, this entire blog is nothing more than a bunch of rants on a topic that should really be a secondary reference after getting past the methods that would facilitate the purchase of health coverage for PRIMARY care for ALL Americans, primary care that doesn't involve going to a hospital emergency room for a sore throat (at $250 on the taxpayer's dime, versus $50 at a clinic on the taxpayer's dime). So, thank you, insurance professionals, for yet AGAIN clouding the minds of the American consumer with your "common sense" which is window dressing for KEEPING YOURSELVES WELL OFF and PRETENDING THAT'S WHAT'S GOOD FOR ALL AMERICANS. Eventually, after we're all broke, your misinformation will become apparent, but sadly, not until then, while you still have all those very very well crafted print/radio/television messages for the masses.

Beg your pardon for pointing this out, but the author and at least one commenter misspelled the name for a healthcare provider specializing in the eye. It's spelled ophthalmologist.

The health care debate is entirely misdirected. There will be no improvement until the medical industry is forced to be internally competitive. At present, they can charge whatever they please because they are, in effect, a monopoly on an essential service. Tinkering with payment mechanisms will do nothing. The actual cost of delivering medical care itself must be reduced. The only way to do that is by competition. Just throwing more money at a fixed medical establishment will create more price inflation. Some suggestions: 1) Require by law that fee schedules of all providers are posted on the internet. 2) Require emergency services to adhere to the prices on that schedule. 3)End the anti-competitive Certificates of Need (which requires permission from the state to build or expand a medical facility-it's scandalous. 4) Train more doctors, nurses and technicians. Every hospital is a potential medical training facility. 5)Allow lower level nurses and technicians to practice independently in limited areas of their expertise (why have a doctoral level person supervising band aid work?) 6)Shorten patent lifetimes on drugs. 7) Pass medical tort reform.
No doubt there are many other things that could be done-but you never hear about it in the political world. Try to guess why.

My employer started a HDHP with an HSA. If one has the cash, why not fully fund the HSA, pay expenses out of pocket, then claim a tax break for qualified medical expenses in work's cafe plan?

The biggest advantage to the HSA, it converts medical coverage from a maintenance plan (we charge low co-pays on routine stuff, but wallop you if you need to be hospitalized and have high out of pocket), into an actual insurance plan (you pay maintenance, but insurance covers the big stuff).

I have had an HSA account from the beginning. I'm young and relatively healthy, so I saved money in my HSA. A fluke infection led me to be hospitalized for a week and a half… and guess what, the cost of health care was NEVER my concern. I knew exactly what I would be on the hook for, and I knew that I had cash in my HSA to cover it…

OTOH, I had the bad luck to get sick in December, so my followups were all in January and after the deductible. That's the one weakness in them.

HMOs are stupid. You insure your car for accidents while you pay maintenance… somehow we worry about maintenance costs for ourselves and just figure in the big case, we'll just go bankrupt. Cheaper premiums also make it easier to make Cobra payments if getting sick prevents you from working.

Here are the advantages, and there are many:
1. This amounts to an additional tax deferred savings method – complementing IRA's, SEP's and 401K's. If you have maxed them out, you have another choice. Everyone generally has come health care expenses.
2. My health savings account has multiple investment options too – although I use the FDIC insured choice since the market is tanking. Mine allows making daily changes – no trading restrictions – unlike many Fidelity Funds.
3. This represents another way of saving. If you need the money, you turn in a health expense to get the cash out. If you don't need the money right now, don't turn in the expense.
4. Once you turn 65, the money can be taken out for any reason although you will pay taxes if it is for a non-health care purpose.
5. The amount is large – for a family in 2009 the limit is $5950 and if you are over 50, you can add another $1000.

My plan is tied into Blue-Cross. Everything is clear about what the benefits are.

Health Savings Accounts are mainly for healthy families that are looking to cover the cost of MAJOR surgical/operational procedures. Let's face it… if your child has to have multiple hip surgeries like mine did at the age of 18 months… a $5,800 deductible is more cost effective, even with the HSA fees than having to pay a 20% coinsurance for the operations and hospital stays. As a side note… try keeping a 18 month old happy in traction for 2 weeks prior to their operation.

You can request from the health ins. company a list of ordinary fees that they pay on the list of providers. Kaiser will provide the list to their customers. Other companies will as well. The trick is to make sure that you deposit the difference into your health savings account and once you have the maxuim out of pocket expense stated in your policy(enough for 2 years)you can stop funding that account. I recommend that you continue funding the account anyway if you can.

Most studies of HSAs that focus on tax issues miss the point entirely. Solve these two very key issues and the consumer market will adopt HSAs:

First, consumers must trust that they can get complete coverage at a reasonable rate. No legal shenanigans, no tricky exceptions. And you don't need to add the kitchen sink to the list of benefits. This is a trust issue and it is a deal breaker. At their best insurance companies are deceitful. To deal with them as an individual consumer is frightening.

Second, consumers WILL become very good stewards of health expenses when the insurance companies give them tools instead of throwing up roadblocks. Insurance companies have price schedules for services, but won't share them. Providers, as sellers, naturally throw up obstacles to understanding the price for their services. The consumer has NO tools, and these third party web sites are a joke. As a wonderful example, with your next prescription in hand, try calling three pharmacies and ask them how much it will cost.

Everything else in the HSA debate is a distraction. Employers would push employees to individual policies, with subsidies or such, as soon as those policies are viable. Solve those two issues and the market will thrive.

I don't know where you got your information, but I pay less than $5,000 per year for a high deductible health plan (premium only) for a family of 4. We get Blue Cross contracted rates for all services received and have been very happy with our "HSA". If employers are spending over $9,000 per year that must include premiums and a contribution to the savings account.

I wish when articles are written on a very complicated topic such as HSA's, that more care and detail went into such efforts.

$400 for exam, lenses and frame? Where in gods name do you shop for glasses at that price tag?

$9,100 for a yearly family premium on an HSA? That's $750/month. I live in Maryland and my family of 5 gets my HSA for around $275/month with a $3400 family deductible.

You are the perfect example of why such policies should be the norm and not the exception. You pay $400, even supposedly with contracted rates, for something you can easily get for less than 1/2 that price. Why not start with being a better consumer

The title of this article is misleading. I didnt see any real evidence of HSA plans being a problem. More of a gripe about general health care. Let me help you understand the think tanks reasoning. Many people have no clue as to what health care costs because all they pay is their copay. In most HSA plans there is no copay system, just the negotiated rate the insurance company has with the doctor. If people had to pay more upfront they would want to know more about pricing of services and drugs. Hence the educated consumer has a better ability to request or seek out reasonable pricing. Its NO magic bullet but it is a step in the right direction.
On a personal note, my HSA has worked out great for me. I've tax deducted over 8k in contributions since opening it with the growth of the bond fund that some of the funds are invested in my balance is north of 10k. I'm getting close to my goal of having enough in the account to where the growth will pay my deductible (2k) for a large part of my life…..and I used tax deductible dollars to do it! Now that strategy might be of some interest to your readers.

The problem I have with this article is that my biggest expenditure for my family health insurance last year was my premiums…coming in at $7500 (I am self employed). I did not in any stretch of the imagination use $7500 worth of health care last year. BC/BS basically took my money and said a big Thank You. HSA's could help me keep my money in my account..not in the health insurance's account. I would love to only be complaining about $400 for glasses and an exam.

I can't even begin with where this article goes wrong.

First, HSA's are the accounts themselves. HDHP's (high-deductible health plans) are the health plans themselves, which are where premium costs are found.

Second, annual deductibles are capped, but annual contributions are also capped – at limits lower than annual maximum deductible limits.

Third, while you can use money in your HSA for eye exams (as stated by the writer), this won't count towards your annual deductible (in most cases).

It's obvious as an employee benefits consultant that your employer (and the broker they use) are doing minimal education in the area of HSA/HDHP effectiveness and management. These are the major problems in why HDHP's are not being adopted quickly enough.

Oh, and if we're going to discuss the rising cost of healthcare, it's only fair to mention what no politician has the guts to:

The U.S. is filled with mostly unhealthy individuals who are unwilling to make the sacrifices that are necessary to reduce the risks of serious health problems. The general population would prefer to eat a cheeseburger or two (while smoking) and hope for a magic pill that will relieve them of their symptoms, rather than get on a treadmill for 45 minutes daily and eat a salad or baked chicken with some veggies.

But no politician who values his elected position is going to go out of his way to let people know that they are dooming themselves.

Maybe personal responsibility will make a comeback in the U.S. sometime in the next few years, before we get beyond the point of no return.

I assist in adminstering benefits for a U.S. company. The issue is not with the HSA's themselves, it is with the lack of understanding of how best to utilize them. The idea of the savings account was to save money. Pretax contributions collecting in an account that would give you the chance to grow the money as opposed to a flexible spending account which is strictly "use it or lose it". The problem is that people use these as spending accounts. The pretax contributions go in, and come out instantly for health care expenses not having had any chance to see the real benefits of a savings account. Like everything else with the U.S. healthcare system, there are not enough educated consumers, and so they find themselves locked into plans and accounts which have no real benefit to them because they did not fully understand its purpose.

Unfortunately, most of us who have coverage from our employer have not had any incentive to understand or manage the real cost of health care. That $15, or whatever, co pay for a doctor's visit or a prescription was all we needed.

Having been self employed not long ago, I had my own HSA plan with a $2600 deductible. I contributed the full amount each year to an HSA account. Since I had to pay for services, I became acutely aware of what I was paying. I started calling various providers (MRI, labs, etc.) and was amazed at the difference in prices. Never considered that before. A perfect example: I was taking some daily medication and found out that the pharmacy I was using for years when I had employer coverage (heck it was only $15/mo) was about to charge me over $100 for the same medication. After calling several pharmacies, I was amazed that I could purchase the same medication for not much more than my previous co pay. Imagine what would happen to the price for the medication from the first pharmacy if everyone stopped using them. Real competition with real price discovery. Consumer driven. Interesting concept.

What's my point? For far too long we've been spoiled, and probably had a sense of entitlement, by our employer coverage. Never accountable for the medical benefits we received. At least for me, the HSA plan got me focused on cost, after all it was my money and I became a much better consumer of health care services.

I'm probably fortunate that I didn't need to use the medical system very much and only used a small portion of my account at the time. As I'm writing this, I've been covered by an employer now for several years and only this week completely used up the account. If my current employer would consider changing plans to an HAS and contribute to the deductible, I would welcome it. I would also expect that all of us would become much better consumers and significantly impact the cost of health care in the long run. Nothing like spending your own cash.

Your analysis assumes you sign up for an employer sponsered HSA plan. If you get an individual plan, they are 1/3 the price. In most cases your HSA premiums plus your deductable is still alot cheaper that the total cost of an employer sponsered HMO plus you get the tax advantage of the HSA.

Opthamologists do not dispense lenses, frames, or contacts. That would be the job of an optometrist. There is a difference.

While it is information obtained after the fact, the EOB's ( explanation of benefits ) many consumers receive after a medical visit do show what the original charge was, and what the insurance company agreed upon charge was. You can see what your doctor might potentially have charged you if you had not had the insurance.

Before you ever sign up for an HSA and corresponding high deductible plan you have to make sure you get your insurer's negotiated rates even before you get to the deductible (this is normally the case). I found in researching this for myself that if I did the HDHP and saved the difference in my share of the premiums over a traditional PPO. My out of pocket if I max out is within a hundred dollars of what I would spend in a year if I used the traditional PPO.

So if I don't max out I save money, if I do max out I break even and my employer saves either way due to the reduced premium.

The key is you have to put the premium difference into your HSA and not into lattes. Everyone's situation is different of course and you should look at the difference in your share of the premium (I have to pay 1/3 and my employer picks up 2/3) and how that stacks up against the higher deductible. Since insurance is based on actuarial science, I bet you will find the real costs once you account for everything to be very close between the various options.