There are many different types of insurance plans in existence today. Most employers are more familiar with a POS, a PPO, an HMO and HRA. HSAs however, are increasing in popularity as we move towards a culture of consumer driven health care. The type of plan with the most growth since inception and still the most confusing to use is the HSA plan.
What is an HSA?
Health Savings Accounts (HSAs) were created in 2003 so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses.1 HSAs are personal savings accounts, in which the money in them is used to pay for health care expenses. The unique benefit is you own and control the money in your health savings account and how you want to use it for your medical care. The money you put away each year is yours and will not be taken away in the event you leave your employer.
Each year the IRS sets limits on the amount you can save as well as the limit of the deductible. For 2014 the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,300. For calendar year 2014, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,550. Also for 2014 the deductible limit is $1,250 for self-only coverage or $2,500 for family coverage and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) cannot exceed $6,350 for self-only coverage or $12,700 for family coverage.2
Why chose this type of plan over the others available? Some of the advantages to HSAs are:
- Costs less than more traditional co-pay plans (this is because of the high-deductible).
- Saved money can be used to meet your deductible dollars.
- NEVER taxed when used for qualified medical expenses.
- Rolls over year after year — no “use it or lose it”.
- Portable, goes with you wherever you go.
- HSAs work with physician and provider networks as they provide discounts on health care. The discounts apply to all care — even prior to meeting the health insurance deductible.
- Preventive or wellness procedures such as annual physicals and mammograms are not subject to the deductible and are covered right away.
Among large private insurers — United Healthcare, WellPoint, Aetna, and Cigna — all said internal studies have persuasively shown that people with their high-deductible HSA plans actually take better care of themselves than people with traditional health insurance coverage. “People do not skimp on the care that they need,” says Will Giaconia, vice president in charge of consumerism products at Cigna. “In fact, they get more engaged in their health”.2
What’s the catch?
There is none! The reality is that when people have their own money on the line, they become more informed health care consumers. They use the preventive services because they are not paying for them. They use generic drugs more than people with traditional coverage. Since generics are cheaper than branded drugs, people with HSAs demonstrate better records of taking their drugs as prescribed because they can afford them. What has been seen over time is a decrease in premiums for employer covered plans.
Hopefully this article has cleared up some of your confusion on the benefits of using HSA. For specific plan details, we recommend that you review your summary plan descriptions (SPDs) from your specific health care providers.
1U.S. Department of the Treasury — Health Savings Accounts
2Internal Revenue Service — Part III Administrative, Procedural, and Miscellaneous. 26 CFR 601.602: Tax forms and instructions. Rev. Proc. 2013-25.
3US News and World Report: Why You Should Get a Health Savings Account. Moeller, Philip. May 26, 2010.