Health Savings Accounts (HSA’s) are not really new; they’re an evolution of the MSA’s that (sort of) took off in the 1990’s. Briefly, the premise behind HSA’s is that most people, in most years, pay far more in health insurance premiums than they get back in benefits. The other major complaint I get (aside from premiums) is that people resent “bean counter medicine,” where whether or not a given procedure will be covered by insurance is determined by an anonymous voice on the phone, not the physician (or hospital, etc).
With HSA’s, one purchases a high deductible health plan (HDHP), which is generally less expensive than the typical, generic co-pay plan, and then puts the savings into a tax-deductible account. Money in the account is available to pay for medical expenses not covered by the insurance (e.g. expenses below the deductible, braces for the kids, bifocals for Dad, etc). Whatever money is left in the account at the end of the year is credited to my personal checking account.
No, sorry, scratch that last. Whatever money is left in the account at the end of the year simply rolls over to the next year, as the pool of available funds continues to grow. Nice.
One type of coverage which is generally and typically available on co-pay plans, but which I usually omit from HSA plans, is a prescription drug card. My philosophy on this is that it’s more cost-effective to pay for meds from the savings account. But according to online insurance source eHealthInsurance, in 2004 “(p)lans purchased included coverage for prescription drugs 99.4 percent of the time and coverage for doctor visits and other important benefits 85.4 percent of the time.”
According to this report, of the folks who purchased HSA plans:
· Nearly half are at least 40 years old;
· More than one-third are families with children;
· 40 percent have incomes under $50,000 a year;
· One-third were previously uninsured
I find that list item to be very interesting, and very important. As a dedicated proponent of the free market, I’ve always felt that the private sector would, could and should do a better job of making medical insurance available to the uninsured. So I was heartened by this validation.