|
 |
|
|
|
Health Savings Accounts: A New Approach |
|
|
|
Written On: March/April 2005 |
|
|
|
Written By: by Paul Schlienz |
|
|
|
Most Americans are not familiar with health savings accounts. HSAs, however, are spreading rapidly with significant implications for the health care industry.
So, what’s an HSA?
HSAs consist of two parts — a qualified high-deductible health plan and a tax-exempt account with a financial institution where you may accumulate savings for medical expenses. Contributions and income earned on funds in these accounts are 100 percent tax free. Your HSA allows you to benefit from tax reductions while still paying affordable premiums, thus decreasing your out-of-pocket costs without putting your insurance protection at risk.
HSA funds may be used to pay COBRA or other medical insurance premiums when you’re unemployed or temporarily laid off. Your contributions remain in your HSA until you use them. Much like an individual retirement account, when you reach age 65, you’re allowed to withdraw unused funds for non-medical reasons without penalty, although income tax will be charged.
HSAs allow employees to retain contributions made on their behalf if they change employment. In addition, if HSA assets are not used within a one-year period, they may be rolled over to the next year.
HSAs are a recent innovation that grew out of the federal Medicare Reform Act of 2003. HSAs were created in response to rising health care costs and the large number of families without health insurance.
Congress crafted the HSA legislation to provide a financial incentive for employers and individuals to provide health insurance and allow consumers to make their own health care decisions.
With HSAs’ high deductibles, consumers are more likely to carefully choose what services they use than they would be with a traditional, low-deductible health insurance policy.
“I truly believe HSAs will be one of the things that prevent overuse of health care services, which drive health insurance costs and the costs we pay for medical malpractice insurance,” said Rep. Barbara Bailey, R-Oak Harbor, ranking minority member of the House Health Care Committee and a strong advocate for consumer-driven health care. “With HSAs, the consumers will start to be the ones who make the decisions, not just passing the costs on to another party. They will take greater ownership of what they’re doing and how they’re spending their own money.”
Although HSAs were authorized by the U.S. Congress, some government employees, including those who work for the State of Washington, do not have the option to open these accounts.
Rep. Carey Condotta, R- East Wenatchee, whose own small business was one of the first to convert to an HSA plan, has introduced legislation to remove this restriction, which ironically prevents him from opening an HSA since he’s a state employee.
“My employees love the HSA concept,” Condotta commented last month at AWB’s Board of Directors Meeting. “For a number of people, it works. It does save costs, and I think it could have a good impact on the state budget if we’d allow the folks who want it to have it.”
Although HSAs are proving to have wide appeal, they are not for everyone. Those individuals or families who anticipate major medical expenses may want to think twice before enrolling in a high-deductible plan. Nevertheless, HSA’s lower premiums and tax-free savings accounts are winning many new fans.
“I often talk with people who are at first skeptical about HSAs, but once the light goes on and they understand the concept, they embrace it and become very excited,” Steve Roberts, president of Orca Bay Benefits on Mercer Island, observed.
AWB HealthChoice now offers three HSA plans for its members. For more information, contact Debra Brown at DebraB@awb.org.
|
|
|
|
