Q. Why are HSAs so popular?
A. Although HSAs have been around for many years they have become more popular in the last 2 years. HSAs were once known as Archer MSAs. The IRS allows a person to write off their deductible exposure on their taxes by setting up a savings account that is equals their deductible. This is optional and the member sets aside their own money. Since health insurance costs have been steadily increasing, the public is more receptive to purchasing high deductible health plans.
Q. Are there negatives with having an HSA?
A. Yes. It is important to consider 2 to 3 years of needing health care and pharmacy and using up one’s deductible entirely. A good plan should be economical enough to justify the deductible exposure in less than 18 months. Therefore looking at the premium savings alone can be unwise.
Here is an outline of two plans. One offers more complete coverage. The other is a traditional Health Savings Account plan. Both cover maternity.
Quoted plans are for a female age 35, San Diego County, July 1, 2008
Plan A PacifiCare 10-35/250 HMO
Office Visit: $20 Hospital at $250 per day after 4 days insurance company pays 100%. Pharmacy: $20 generic and $35 Brand name formulary. Plan also includes maternity. Premium: $ 378
Plan B Blue Shield HSA 2400
One well visit per year before deductible of $2400, Office visits 30% after deductible is met. X-rays, labs, services and hospital 30% after deductible is met. Once deductible is met, the member will be responsible for $800 more of coinsurance. After this has been paid, insurance company will pay 100% of covered services for in network providers. The pharmacy is subject to the deductible. Deductible and coinsurance maximum start over January 1. Maternity is covered. Premium: $ 158
Monthly savings $ 220 divide into $3,200 (the annual out of pocket maximum) = 14.5 months of savings equals exposure (deductible and coinsurance max)
This example gives you an idea of the ideal savings comparison.
Q. I want to include my spouse and children on my same plan but I have been told about an aggregate deductible and that the HSA plan I want has an aggregate deductible. What is the difference between aggregate and embedded deductible?
Embedded deductibles allow one person in a family unit to satisfy their deductible, coinsurance and stop pay. Even if the family’s deductible is double the individual, the one person who needed health care is not tied to the family deductible, therefore they can reach their individual out of pocket maximum. Most standard PPO plans offer embedded deductibles.
Aggregate deductibles consider the full family deductible. If only one person uses the plan they still need to meet the family deductible. Therefore when a family signs up for a 2400 deductible plan it is really a 4800 deductible and the coinsurance maximum is $6,400. This changes the calculations for a member’s exposure.
Solution: Parents each buy their own plan and put the children on a richer plan or a "no deductible plan."
Q. After I have set up my Health Savings Account with a bank, am I able to pay for my glasses, pharmacy and dental expenses?
Yes you are. That is the intent for the plan design. But remember to consider having enough money set aside for 2 years of deductible expenses. You do not need to spend your HSA funds to qualify for the tax savings.