Monday, August 27, 2007

HSAs - Your FAQs

I received quite a bit of feedback from last week’s post about HSAs. I also had my first person post on my blog – In this post I have included a list of concerns by Craig Williams of Bartlesville, OK.

1) Who puts the money in the HSA? The employer more than likely if he is not providing traditional insurance and can now get a tax reduction for funding the HSA.

This is correct. Under my proposal HSA deposits would still be tax deductible so the employer would still have an incentive to fund them. Premiums would make up a much smaller amount of the costs so the employer does not need to control premiums costs as much by interfering. I still support an employer sponsored high deductible health care plans.

However, when you left that job you would be able to take all of your HSA funds with you. Let’s say you were able to save up $4,000 in your HSA during 8 years you worked for one firm, then they let you go. You could then buy a private $4,000 deductible plan, which should be fairly inexpensive, and you’ll be completely covered.

2) Who is affected the most by the one time funding? The catastrophic illness recipient. Their HSA money is quickly consumed and they are left with a huge deductible and co-pay.

I don't see the HSA as being a one time funding. I would support legislation that encourages monthly deposits (in place of monthly premiums).

This week, I e-mailed a gentleman who works as a Health Plan consultant for a national firm asking him to confirm some points of a presentation he gave while I worked at the same firm. If he ever e-mails me back then I will let you know if he confirmed what I recall from his presentation.

He said that he was working with a company that was considering dropping their HMO style insurance and asked for alternatives. What he was able to tell them was that the incentives under an HSA were so much better that the company could offer a health plan with a $1,000 deductible and deposit $1,000 in a corresponding HSA for no additional costs over their current HMO expenses. What that means is that the employee would not have any out of pocket medical expenses.

3) What happens to all the left over money? If they never use much of their HSA savings, who eventually gets that money? The government is the likely recipient as with the FSA left over funds today.

Let me first clarify first that left over FSA funds actually go to the employer, not to the government. Any money left over at the end of the year would roll over to the next. Younger people who don't spend much on health care would often be able to build up a significant account balance so that insurance becomes less and less necessary. I would also support allowing transfers into a retirement account once the balance reached a certain level (say $25,000). I would also support allowing people to make a full withdrawal at age 65.

4) A number of employers fully fund High Deductible insurance premiums already today. Many employees pay a premium to have the more traditional insurance above the portion their employer pays.

The existence of PPOs is not only a result of the tax incentives given to corporations. There is a market for PPOs outside of employer plans. If a person chooses to take on additional insurance, that is their choice. Let me be clear, I do not support banning HMOs and PPOs, only the tax incentives that encourage them.

5) High deductible insurance only helps the non-employer paid insurance workers by having cheaper premiums. They must still fund their own HSA out of pocket. They still run the risk of having a large debt if they have a catastrophic illness.

It is true that HSAs aren't the best plan for every person in every circumstance. I’ve read a good amount about the subject and brainstorm from time to time, but I haven’t figured out a perfect plan for every person. As soon as I figure out the perfect plan for health care please write your checks to “Friends of Brian Shelley for President”

6) Our Aetna PPO severely limits the price that a doctor, hospital, or lab can charge for services. Many times I have seen reductions of as much as 90%. Which means my employer as well as me saves money, because my company is self-insured and only uses Aetna to administer the policy.

I am not 100% familiar with how organizations administer group discounts, but I imagine that many doctors agree to them so that they get more patients. I don't see a logical reason why group discounts couldn't be coordinated through an employer after the switch to HSAs.

I probably haven’t answered every question or concern, so don’t shy away from putting in your two cents. Our health care system is very complex and coming up with a short and sweet answer is not very likely. I can see now why this why Bush had a hard time getting people excited about HSAs. The principles that I am trying to stick to are slowing the growth of health care costs and expanding individual control and freedom over personal health care protections.

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