Part 2: Health Savings Accounts: To HSA or Not To HSA?

As I mentioned in <a href="part-1-health-savings-accounts-what-the-heck-are-they" title="Part 1">Part 1</a> of this article, I am going to use myself as a guinea pig to show people how they might go about deciding if an HSA is right for them.  Since I do not SELL health insurance, this is purely from a consumer standpoint and meant to be educational.  In 2008, I paid $305 per month in premiums, $40 per month in prescriptions, and I paid another $390 in lab fees, coinsurance, etc. So at the initial calculation, my total outlay this year is $4,530. I looked up HSA-eligible plans on esurance.com and found Regence has one of the highest rated plans with a $1,500 deductible (not as high as it could be!) and a $180 monthly premium for my age (none of your business).   I could have picked a plan with a much lower premium, which would have meant my deductible would be significantly higher.  However, I am relatively conservative with my insurance risk aversion. I went back and figured all of the costs of all of the services I had, and came up with about $1,500 (purely a coincidence that this is the same amount as the deductible I chose for the HSA plan).  Adding this to my HSA-eligible plan premium of $180/$2,160 annually, I get a total outlay of $3,660; an $870 difference in favor of the HSA.  There is also additional savings because I get to deduct my contributions up to $2,900 from my income (that deduction bumped up to $3,000 in 2009) and I get to pay for my expenses with pre-tax dollars. This doesn't mean my actual cost may be lower in the future, it just means it would have been lower this year.  After the deductible is met, I would still need to pay 20% coinsurance on all additional costs incurred.  If I pretend that the additional $870 that I paid in 2008 by not having an HSA plan is the total amount of 20% coinsurance that I might have paid after the $1,500 deductible is met, I could have had an additional $4,350 in medical costs. Yikes, I could have had a nose job . . . And yet . . . I still have a bias toward traditional medical plans.  It's familiar, and familiarity provides peace of mind . . . and I guess that means peace of mind is worth a certain dollar amount more than it's worth saving a buck.  As you may or may not know, I broke my ankle in three places at the start of December (which is a pretty funny story), and am just now starting to get information on what that cost and what I will need to pay-so the medical costs are over and above what I calculated previously.  With an emergency room visit and surgery, so far I only need to pay about $400.  Something else I noticed . . . my health insurance plan reviews the costs that the doctors and hospitals submit.  Then they say (or I imagine them saying) "Hey, your cost for that care was a LOT more than the typical cost, so we are going to DISALLOW X number of dollars, so that your payment is based on a cost that more accurately reflects the norm."  Since an HSA plan allows you to pay costs directly prior to meeting the deductible, I imagine that since there would have been no intermediary insurance process to protect me prior to payment, I would have ended up paying the total cost, more than other people would be paying for the same thing.  I asked a friend about this "disallow" thing, and she confirmed that in all of the private practices she has worked in, the revenue projections always include a write-off amount they know will be disallowed.  Roughly 30% . . . so, with an HSA plan I might be paying upwards of 30 percent more than the person with a tradition health plan.  This is pure theory and speculation on my part.  I'm sure an HSA rep can set us straight! So, as a consumer and soloprenuer, what's a girl to do?  For now, since I am still gimping around from my ankle fiasco, I intend to defer this decision until healthier times.  Hopefully, some of the information I provided can help you decide if an HSA is right for you. 2009-01-26T22:25:35Z

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part-2-health-savings-accounts-to-hsa-or-not-to-hsa

2009-02-01T00:29:00Z

In my last article, I covered HSA basics. Now, using myself as a guinea pig, I'll see how one might stack up for my situation.