In Part 1, we outlined the basics of what is a Health Savings Account/HSA along with the changing landscape of increasing insurance premiums that has led to almost 30% HSAs in 2018.
In Part 2, we will outline the at-risk issues that HSAs can present. Employer-sponsored plans are creating HSA options to reduce monthly premiums but they require a high deductible and other potential out-of-pocket expenses.
Concerns with Health Savings Accounts
To be eligible, you must be enrolled in a high deductible health plan/HDHP. High yearly deductibles are over $1,300 for an individual and $2,600 for a family. (They often are higher with each employer determining the individual HSA plan they will purchase through an insurance carrier.) The employer-sponsored plan historically raises the deductible to prevent higher monthly premium costs which the employer pays an average of 50% of the premium.
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The employer can deposit funds toward the new, higher deductible HSA. The average amount an employer deposited into their employee’s HSA for 2018 was $900; however, each employer may decide to contribute any amount of the higher deductible or no amount. If the deductible went from $1,500 a year to $3,000 a year, the out-of-pocket cost to the family more than doubled. Deductibles must be met before any insurance payment will be made.
Usual co-insurance for physician office visits are a flat fee, regardless of the actual charges.
Under some HSA plans, the coinsurance is “not applicable” and, therefore, the patient will pay allowed charges which are directly related to the level of care provided. (Example: Co-insurance for level 4 office visit. It is usually the same amount, regardless of the actual intensity of the visit and $40-$60 is average. If, however, the co-insurance is no longer in effect, the charge will be based on the actual charges which is much higher than the co-insurance, flat rate.) It may not be advantageous to enroll in an HSA if there are known medical conditions due to the higher out-of-pocket expenses.
If the employee has disposable income to invest in their HSA account, HSA is a good tax-exempt option. These funds can be used for payment of healthcare expenses. With the higher deductible, the employee will pay much more out of pocket prior to any insurance payment. But the premiums will be less as a trade-off for the higher out-of-pocket expense when healthcare services are used. Carefully evaluate current a) premium increase, b) HSA option with a higher deductible and less monthly premiums and c) health status of the family with potential for usage of healthcare services.