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Health Savings Accounts: A Healthcare Solution if Someone Could Explain Them

People need to understand that they won't be worse off with an HSA.

Paula Bolyard


September 27, 2013 - 3:00 pm
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The other day I tweeted something about Sen. Cruz’s strategy to defund Obamacare and a friend tweeted back, saying that Republicans need to do more than oppose Obamacare — they need to propose alternatives. Of course, this is true, though it’s not a completely fair criticism. It’s not that Republicans haven’t proposed any solutions, rather, they have communicated their ideas poorly. Instead of succinctly communicating the benefits of free-market, consumer driven solutions to the individual and the family, Republicans often focus more on how their ideas will reduce costs or make the market more competitive — as if they are more concerned with helping the market or the national debt than the individual.

One example is the concept of Health Savings Accounts (HSA), which are tax-advantaged savings plans available to individuals enrolled in low-premium, high-deductible health insurance plans. Employers love them because they help to rein in costs and many families find that they cost less than traditional insurance plans.

But they’re hard to explain.

Sometime during the long night of Sen. Ted Cruz’s speechibuster®, Sen. Rand Paul made some remarks (in the form of a question, as required by the Senate rules) about HSAs:

Why are the health savings accounts important? Because you can save money tax-free, you can carry it over from year to year, and then you can buy higher deductibles. So contrary to what people think, it may be counter-intuitive to some people, the way to fix health insurance is to have higher deductibles, because what does that mean? Cheaper insurance. You want cheaper and cheaper insurance. As you have higher deductibles, you have cheaper insurance. When you have cheaper insurance, you have all this extra money that you can use to pay for day-to-day health care. When you do that, what happens? You drive the price of health care down. I know that is exactly right. As you increase deductibles, as you get the consumer involved in health care, your prices go down.

May I suggest that when you’re trying to promote an idea or market a policy, you generally want the reaction to be something along the lines of, “It sounds good on paper, but what’s the catch?” or “That sounds too good to be true!”

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All Comments   (5)
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I have enjoyed my Blue Cross/Blue Shield of Alabama (BC/BS) HSA plan for over 3 years. My family policy requires that I pay 2 $2,500 deductibles first each year. After two deductibles have been met, the plan pays 90% of covered expenses with a maximum out-of-pocket (including the $5,000 of deductible) of $10,000 a year. My family has been pretty healthy, and we have been able to pay our medical costs out of pocket. Our Health Savings Account has accumulated over $15,000 towards future medical expenses.

Your excellent article did not mention a few other benefits. My out-of-pocket costs have been kept down because providers bill BC/BS first. They apply their fee schedule, and then I pay that amount, not the amount originally charged. So a $55 lipid panel (lab work for cholesterol) costs me $9. A $3,500 colonoscopy costs about $1,250. A $3,500 MRI is $720. A $73 eye exam is $58.

Also your HSA surplus can be used to pay for medical expenses not usually covered by insurance such as dental care and eyeglasses. I did get reimbursed $3,500 two years ago to pay for 2 dental implants.

I also did not use the Mellon Bank HSA suggested by BC/BS. I elected to use an independent HSA provider that allows you to invest your account in Vanguard mutual funds (which have very low expense ratios).

So to get these benefits you need a qualifying high deductible health insurance policy, and choose a custodian for your separate HSA account, like an IRA. I did not get the debit card, as I planned to take withdrawals only for really major expenses. To get reimbursed I only have to download and print out a form and send it in.

Overall, counting my contributions to the HSA I pay about $16,000 a year for my family coverage. Traditional insurance from the same company is about $15,200 a year. But after 4 years I will have almost $20,000 in my HSA which I wouldn't have if I had stuck with the former policy.

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1 year ago
1 year ago Link To Comment
"A Health Savings Plan acts a lot like your regular insurance. You have a higher deductible, but you and your employer pay money into an account that can be used to cover that deductible every year. In exchange you get a much lower monthly cost, and on average the cost is the same.

What's more, is that with a higher deductible, you're in charge of most of your medical care each year. You get more freedom to choose your treatment options. It's /your/ money. You get to look at prices of drugs and doctor visits and decide. And what you don't spend, you get to keep.

The idea is to make people smarter about their healthcare - and with smarter, less wasteful use, overall medical costs will be driven down. We've tried to let the hospitals and insurance companies be smarter about it, but that's just left us with ballooning administration costs, and fewer choices. It's time for the patients to be smart about it, and this will give you the opportunity to do just that."

As short as I can think to make it. Explaining it clearly really is a pain.

On the name, maybe just call it a "Personal Health Account"?
1 year ago
1 year ago Link To Comment
They should change the name (since people are scared of the "S" word in HSA) to some snappy acronym. Here to get the discussion going is one:
Personal HEalth Liberty Account, or PHELA.
Post your suggestion!
1 year ago
1 year ago Link To Comment
As long as "savings" is a scary word it doesn't matter how we package any plan, we're boned.
1 year ago
1 year ago Link To Comment
From something I heard on the radio the other day, most Obamacare policies will have the same sky-high deductibles as HSA's, that is EXACTLY how they are "keeping the price down".

Which is highly ironic because as I understand it all the existing HSA's are illegal under Obamacare except for those of us grandfathered in - although even the continuing HSA's have to honor parts of Obamacare and thus will get far more expensive, mine already has.

But I'm sure that if you're Joe Welfare then somehow someone will pay your deductible for you, too.
1 year ago
1 year ago Link To Comment
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