HSA-compatible high deductible health plan advantages

by Ray Carlson

With so many health insurance consumers familiar with standard “PPO” or Preferred Provider Organization health plans that feature lower annual deductibles, the HSA-compatible health plan might be getting overlooked.

These same consumers who – because of the downturn in the economy and subsequent job loss – are now shopping for, or considering shopping for, a new individual or family health plan might gravitate towards a PPO that features the lower deductibles they are both familiar and comfortable with from past experience as a member of a group health plan.

The natural instinct of a health insurance consumer – a person who might never have researched health insurance in their life – is to ‘stick with what they think they know’. The natural instinct of a health insurance agent might be to make a potential client happy by finding the best option amongst many that speaks to that agent’s perception of their clients’ preferences. Unfortunately that might mean overlooking one of the health insurance industry’s best practical options for health insurance consumers of all ages: the HSA-compatible high deductible health plan. HSA (Health Savings Account) compatible plans provide three great consumer advantages:

* High deductible health plans typically feature lower, more affordable, monthly premiums.
* Contributions to a HSA are tax deductible, while funds within a HSA accrue tax-free.
* Owning a HSA empowers the health care consumer. There is no ‘use it or lose it’ feature. The HSA owner spends the money (or doesn’t) on the qualified medical expenses they want to spend money on. The consumer selects the HSA trustee and HSA investment vehicle they want.

HSA funds are amazingly versatile: They can be spent on a range of qualified medical expenses per IRS Publication 502. In short, the HSA and its compatible health plan – as a health insurance product – offer an amazing range of positives as opposed to the negatives we’ve all heard about the health insurance scene these days. The HSA’s biggest problem? It’s stuck with a bad name: The moniker ‘high deductible health plan’ doesn’t do this product any favors. Consumers who hear the words high deductible head in the other direction – to the comfort of other PPO plans with their lower annual deductibles and $30 office visit co-pays (But also their higher co-insurance and higher monthly premiums…).

It might be surprising but consider this: the HSA-compatible health plan is unique in that it appeals to a pretty broad spectrum of health insurance shoppers. If you’re 27 and healthy, you can own a HSA-compatible health plan, not fund the HSA, and use the health plan component as a catastrophic health plan strategy – there for a major medical emergency – all the while enjoying the savings benefits of lower monthly premiums. On the other hand, if you’re 57, an empty nester with the ability and willingness to seek out tax advantaged investment vehicles like a HSA and use them to their fullest benefit; you are reaping real savings in your health plan’s monthly premiums while accumulating tax-free savings in a HSA that you can use to pay for health care post-retirement.

Go a bit further and read up on the HSA and don’t let the high deductible part of high deductible health plan scare you off of this very useful health insurance strategy.

Ray Carlson is a California health insurance agent who blogs at the Vitality California Health Insurance Blog.

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  • Max

    It won’t survive. Obama and his cronies are making sure of that. They are capping the amount you can put in there. I wonder why? It’s our money yet he says you can’t do it.

  • Doc99

    Please correct me if I’m wrong, but I’m not sure the High Deductible Plans will survive HCR’s Exchanges.

    • http://www.vitalityhealthinsurance.com Ray Carlson

      Hello Doc99 –
      For the benefit of readers I believe you are referring to the actuarial value of HSA-compatible HDHPs that might theoretically be available on the exchanges in 2014 and whether they would meet the standards set forth by the recently passed legislation. Frankly I think it is too early to tell just what impact health care reform will have on these plans – the refinements that need to be put in place by subsequent regulations just aren’t there so it’s all speculation but I think that holds true for so much including what the exchanges themselves will look like. For now the HSA-compatible high deductible health plan is in place and helping to give people options in their quest for low(er) monthly premiums – and that’s a good thing. Happy Memorial Day everyone!

  • SarahW

    O-care needs to be repealed insofar as it has any negative effects on HSA’s. It’s what most people should have – and begin building up in young adulthood.
    Freedom and personal stake in cost control are, however, contrary to the progressive of socializing medicine.

  • KP Internist

    HSA has been a very rapidly growing part of our NCAL membership. Patients seem generally happy with it. The patients that don’t do well on it, predictably, are the ones who need services the most.
    I think that you have to be careful with who you choose as a provider, however. If you show up in a University and mostly fee-for-service clinic, you will get the workup for every zebra known for common complaints and be treated with the latest “me too” drug. Then, you end up spending way more than you would have with a traditional HMO product. You also get more if you get the option to get care outside the tradition office visit. Unfortunately in many settings, most calls to the office for questions and for a discussion will result in an office visit and your costs will go up.

  • jsmith

    Lousy idea if the goal of HC is better health. Complicated plans, high deductables mostly benefit the insurance industry. I see pts all the time who don’t get needed medical care because their deductible is too high. We should go the opposite direction, as have all other high-income countries, most of which have better population health than the USA. Eradicate private health insurance.

  • SarahW

    jsmith, High deductibles are one thing. Even ordinary plans, especially individual ones, may have them.

    The complaints here is almost comical. HSA’s mean patients get too much care. HSA’s mean patients don’t get enough care. Here’s what – patients get more stake in payouts and less hassle from insurers. Win/ Win.

  • ninguem

    They’ve been out five years now. The data supports them. They save money, and patients in fact DO get their preventive health care.

  • Not Savvy

    I have seen data that patients with high deductibles delay care, treat themselves with OTC and herbal medicines. They don’t eliminate the overhead needed to deal with insurance companies. Of course, these types of plans shifts the cost away from the healthy to the sick.

    Perhaps for a healthy person, an HSA with a nurse practitioner makes sense.

  • stargirl65

    1. HSA’s are hard to manage. Even with an MBA it is hard to move the money around. The programs need to be simplified.

    2. The HSA’s usually go with a HDHP. If the HSA is NOT funded by the employer, the patient often does not have the money to fund it. Then the patient is generally paying for their health care out of pocket. This makes them delay treatment or get treatment and then NOT pay the doctor.

    3. The insurers are also bad at tracking things. My HDHP plan shows me paying more than my deductible, but I keep getting bills from providers. The insurer is still pushing them towards the deductible even though it has been met. Also they won’t refund the overpayment back to me.

    4. I have not saved up any money on the HSA since each year we spend that amount and more.

    5. My health insurance via my business goes up 30% per year. This is with increasing the deductible amount even.

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