Health Savings Accounts for Families with Children

by Eric Bricker

doctor visitHealth 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.

Saving on Pediatrician Costs

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:

  1. Select a pediatrician who performs labs and x-rays in office. Those who don't often send patients to an independent lab or hospital for these tests which typically receive much higher payments from the insurance company. Also, many benefit plans will simply apply in office labs and x-rays to your office visit co-pay costing you much, much less.
  2. Find a pediatrician group with a 24-hour nurse hotline. Our pediatrician has one that costs $12 per call. Each time my wife is concerned about our daughter and uses the hotline, we frequently are told what to do and save the $70 pediatrician visit.
  3. It is okay to question your pediatrician. Ask yourself how many times you have heard a pediatrician say, "Well, I am pretty sure your daughter just has a cold but let's run a strep test just in case." It is OK to ask your pediatrician if a strep test is really necessary. Strep tests can cost you up to $50 and if the physician feels strongly that the test is needed, then he or she will says so and will not be at you for speaking up. Much of medicine is practiced out of habit -- habits that cost you money, but do not necessarily contribute to high quality care.
  4. Ask your pediatrician to prescribe you generic medications. Almost all major generics are available now for $4 a month.
  5. Practice asking your pediatrician "How much will this cost me" every time a new treatment is recommended. While the pediatrician will likely not know the exact answer, the question will alert the pediatrician to the fact that cost is important to you and will often trigger a conversation about lower cost alternatives.

At the end of the day, having a pediatrician is one of the single most important steps you can take to protect your child and save you money as a pediatrician's cost is one fifth the cost of a low level emergency room visit. If you cannot afford health insurance for your child, be sure to check out your state's childcare program as new legislation helps many more children qualify for coverage.

Eric Bricker, MD wrote this article for Healthharbor is a consumer health website whose mission is to help people become smarter consumers of healthcare and health insurance. Dr. Bricker is a founder of the healthcare firm Compass PHS.