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Health Savings Accounts

HEALTH SAVINGS ACCOUNTS NOW AVAILABLE IN NC

Although Health Savings Accounts (HSAs) were authorized by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, HSAs presently only apply to the under 65 population. The Act of 2003 requires the pairing of a high deductible insurance policy (more than 13 companies now offer them in NC) with an HSA (a health saving and spending account that is owned and managed by the individual, not the employer).

Physicians, this is good news for you and your patients. Any insurance mechanism that puts more control in the hands of patients and their doctors is a move in the right direction. HSAs will pay for preventive care as well as routine care up to a higher deductible than most patients have been dealing with. Your patients will be empowered to make cost effective healthcare decisions, including acting on your preventive recommendations. Your patients can look forward to improved efficiency in your office with less hassle for them and for you.

HSAs are the latest innovation in consumer directed healthcare. First there were Medical Savings Accounts (MSAs), followed by Healthcare Reimbursement Accounts (HRAs). HRAs are run by the employer and therefore not portable when an employee moves, but still introduce the concept of higher deductible insurance policies and employees spending their own money. A complete comparison of HSAs, HRAs, and MSAs is available at http://www.etdbw.com/fh/fortishealth/SG-22945.pdf.

Proponents of HSAs believe in their potential:

  • Ability to restrain healthcare over-utilization

  • Ability to cut the ranks of the uninsured

  • Ability to fund healthcare insurance premiums of the newly unemployed

  • Ability to reduce "job-lock" based on health insurance needs

  • Ability to bring the patient and physician closer through their open and frank discussions of the cost-benefit analysis of proposed diagnostic tests and therapies

Critics say HSAs:

  • Are preferentially for the healthy and wealthy and the young

  • Will destabilize the health insurance market and increase the uninsured

  • Could lead to people avoiding preventive services

  • Will cause people to avoid early cost effective therapies for primary problems or for asymptomatic diseases, such as hypertension

Here's how HSAs work:

  • Individuals under the age of 65 (employed or not) enroll in a high deductible insurance plan. There are now more than 13 insurance companies in NC offering HSA-compatible policies.

  • Next, they open a tax-free savings/ spending account (an HSA) to cover current and future medical expenses; the individuals own and control their accounts.

  • The money deposited, as well as any interest earned, is not taxed.

  • The money withdrawn for medical expenses is not taxed; the unused balance rolls over from year to year.

  • Employers or their employees or a combination of both can fund the individuals' HSAs with pre-tax dollars. The yearly contributions receiving tax free treatment may not exceed the amount of the insurance policy's annual deductible (a cap of $2,600 for individuals and $5,150 for families).

Early returns on HSAs, HRAs, and MSAs show:

  • Over 30% of those getting either HSAs or MSAs in the past two years did not previously have health insurance

  • There is a relatively normal distribution of people with good representation from families, those 40-64 years old, and workers of all income levels

  • They lower costs for employers and increase incentives for employees to get preventive services

  • More than 60% of large employers are likely to offer their employees HSAs in the future

  • Usual rates of compliance for secondary preventive treatment


How to get more information on HSAs

Go to http://www.hsainsider.com/ for a list of the insurance companies in North Carolina with HSA-qualified high deductible plans and their websites.

Another source of information is www.galen.org.

Download an informational fyler on HSAs for your patient waiting areas. (PDF file)