Posted by
voice_of_reason on Wednesday, October 03, 2007 1:02:54 PM
Two years ago, I offered the employees at my company a choice in Health Insurance plans:
* traditional (70/50 PPO)
-OR-
* 100/70 High Deductible Health Plan (HDHP, with Health Savings Account (HSA), and a $50/mo employer contribution).
For those who are unfamiliar with HSAs, here are some interesting features:
* contrary to popular belief: HSAs do NOT have an annual use-it-or-lose it policy, unlike the FSAs of old!
* HSAs are owned by the individual, so they are completely
portable - not tied to the employer or to the insurance provider.
* In our case, each individual gets a debit card (M/c or Visa) that can be swiped while buying prescriptions, eyeglasses, or even vitamins at a grocery store. Remember, these are tax-exempt dollars that are being used!
* Visits to doctors' offices can be paid for via a checkbook that draws on the individual's account. Once again, these are tax-exempt dollars that are being used to pay for visits to doctors' offices!
From an employer's perspective: The total expenditure per employee is roughly the same for my company irrespective of the choices made by employees. However, as an employer, I prefer HSAs because the premium costs for PPOs rise much faster than those for HSAs. And, I'd rather put $50/mo in my employees' accounts than pay it to the insurance company.
Initially, there was a 'fear of the unknown'. In the first year, about 50% of the employees opted for the HSA. As an employee/owner I opted for the HSA for myself (and family).
Now in the second year, 66% of the employees opted for the HSA. Mainly this occured because more employees realized that it left more money in their pocket. The 'fear of the unknown' also subsided when employees figured out that their colleagues with HSAs didn't appear to be dying horrible deaths - in fact, most seemed quite happy with their choice.
Some think of it as a 401(k) for healthcare! And that is not a bad analogy. The Govt permits Employees to contribute pretax dollars on a voluntary basis (up to the annual deductible).
It would be nicer if the annual limit was higher - it could actually become a tax sheltered investment vehicle for more people. Having more investment choices would also make it more attractive.
Critics charge that those with serious health problems wouldn't benefit from HSAs. The reality is that HSAs benefit those with either:
* infrequent usage (folks who are generally healthy) - because they get to accumulate dollars in their accounts
* high usage (folks who routinely hit their annual deductibles) - because many HDHPs offer 100% coverage, once the deductible is reached.
However, HSAs (in their current form) result in more out-of-pocket expense than traditional PPOs for those who are on regular, expensive medication. But that would change if
more people opted for HSAs.
Conclusion: HSAs work! While the rules can (and should) be improved (e.g. increase the voluntary, pretax contribution limit to be similar to that of a 401(k)), they are a step in the right direction.
Suggested links:
A 10 year plan to fix Healthcarehttp://www.treas.gov/offices/public-affairs/hsa/pdf/all-about-HSAs_051807.pdfhttp://www.treas.gov/offices/public-affairs/hsa/