by Eric Bricker
Health Savings Accounts, also known as HSAs, are used in conjunction with High Deductible Health Plans (HDHPs) to form health coverage that is intended to reduce the overall cost of healthcare for the insured (the individual buying health insurance).
The HSA / HDHP setup has been in place since 2003, when the Federal Government began allowing designated health savings accounts to be funded and grow on a tax-free basis, much like a traditional IRA. The idea is that by replacing a typical lower-deductible, full-coverage health insurance plan with a higher-deductable, savings type plan, patients would save money on premiums (they are significantly less for an HDHP) and be more responsible on health expenditures since it is coming out of their personal accounts.
Additionally, unlike the more common Flexible Spending Account (FSA) that many are familiar with as a benefit option, HSAs do not have the annual "use it or lose it" requirement. You can roll the balance forward for years, essentially building a nest-egg devoted to your health care.
HSAs are heavily regulated, as is any health insurance plan. In order to open one, you need to meet several criteria, and the HSA needs to be set up with an accredited trustee or custodian (usually either a bank or a health plan). Additionally, much like an IRA, there are contribution limits as to how much a patient can fund the HSA on an annual basis. If you are obtaining an HSA through your employer, the odds are that your Human Resources or Benefits department has already done the research regarding criteria, trustees, and contribution limits.
Health Savings Accounts are gaining in popularity as employers find that patients are attracted to the lower premiums associated with HDHPs, and the self-employed or uninsured are finding the HDHP / HSA combination to be the most affordable health coverage option out there.
For families, are HSAs a good idea? In general, HSAs are best for people who are relatively healthy. You basically trade lower premiums for higher deductibles. If you are likely to burn through that deductible and then some each year, you may find it is not worth it for you. On the other hand, for families whose members are healthy and who do a good job with preventative care and finding lower cost treatments such as walk-in clinics, it could become a big money-saver over time. Run the numbers for your unique situation before making a final decision.
The average pediatrician charges just over $100 for a single visit for which the pediatrician is paid $70 by the typical insurance company. Here are the tricks that tend to make the most difference in cost: