Delving Deeper into Health Savings AccountsLauren Young
Earlier this week, I wrote a story about health savings accounts as part of a special report on health insurance for BusinessWeek.com. Many thanks to the readers who commented on this piece already. It is clear that consumer-driven healthcare has its fans, as well as its foes.
I want to share some feedback I received from two careful readers, who offer a few excellent points of elaboration.
Carla Adams, a producer at the Consumers Insurance Agency in Texas wrote me to say that it is best to refer the insurance product that makes you eligible for an HSA is a “High-Deductible Health Plan.” Within the insurance industry, that’s the preferred terminology, she says.
Alexander Domaszewicz, the Mercer consultant I quote in the story, also offers some important distinctions between high-deductible plans that feature HSAs and Flexible Spending Accounts, or FSA, which let you save pretax money for health-care services. “Actually, there’s not much ‘saving’ going on with FSAs, they are mostly about spending, which the name implies, since you can only use the money in the current year and can’t roll it over or ‘save’ it for the future like HSAs or HRAs,” he says.
In addition, Domaszewicz disgrees with the notion that high-deductible plans shift more costs to employees: “I would argue that while it is possible to shift cost to employees with HSAs, it is much easier using traditional plans like PPOs - just raise the deductible, copays and out of pocket maximums - or with payroll contributions.”
Coverage really depends on what the consumer buys with an individual policy, or what the employer decides to offer in a group plan. “Many individual plans have 100% coverage after the deductible as you’ve outlined,” Domaszewicz notes. “However, the majority of group plans I’ve seen do not pay 100% of all medical expenses once the deductible has been reached.” Coinsurance payments can amount to 10% or 20% of the cost of care up to an overall out-of-pocket maximum after the deductible has been met.
Preventive care is often (best practice) covered fully or at least more robustly, but not always. And while there are often no co-payments (and certainly none below the deductible), there can be copays after the deductible up to the out of pocket maximum.
Finally, my article really struck a cord with Adams who really wants to stress that the majority of her customers do not put their HSA funds into risky investments. “I sell these consumer-driven plans more than any other type of coverage, and I can tell you out of my hundreds of policyholders, I do not have a single person who has their funds in any type of risky investment,” Adams says.
More often than not, her customers are utilizing a traditional Health Savings Account that has the security of any other basic bank savings account. “The return is low, but your money is relatively safe,” Adams notes. “The average person does not have their HSA funds going into mutual funds or those other types of accounts, which are an option, but not the norm.”
Her clients include a few construction companies that offer these plans as the only option for employees. “I can assure you most of them will never consider moving their funds from the bank Health Savings Account into any type of mutual fund or other investment vehicle that is allowed,” Adams says.
As you can see, there’s a lot of nuances to these kinds of plans. No wonder consumers remain confused.
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