Health NW: Health Savings Accounts
Published 5:00 pm Tuesday, October 18, 2005
Last week’s column was about many of the problems with America’s health care system. Forty-five million Americans have no health insurance, and even those who do are vulnerable to financial ruin if they suffer a serious illness or injury.
One of the Bush administration’s solutions to the health care problem is the Health Savings Account (HSA). The philosophy behind HSAs is that if people are in control of their own health care dollars, they will make prudent decisions about when and where to seek care, so health care costs will be held down.
To set up an HSA you must be covered by a “High Deductible Health Plan” (HDHP), meaning health insurance with a minimum $1,000 deductible for an individual or $2,000 deductible for a family. HDHPs are also known as “catastrophic insurance,” designed to cover large, unexpected health care costs. Monthly premiums for HDHPs are lower than for standard health insurance, which have lower deductibles.
Some employers may help employees set up an HSA. Also, credit unions, banks and insurance companies can help you establish an account.
Once an HSA is established, an individual can contribute an amount between $1,000 and $2,650 each year, as long as the amount does not exceed your HDHP deductible. This contribution allows you to reduce your taxable income.
The money in your HSA is yours to use as you like to spend on expenses “primarily for the prevention or alleviation of a physical or mental defect or illness.” This includes over-the-counter medications, but does not include things like cosmetic surgery. You are responsible for keeping receipts in case you are audited.
You do not need to use the money in your HSA the same year you contribute it; your funds roll over so you can use them any time in the future. Once you turn 65, you can use HSA funds to pay your Medicare premiums and other Medicare costs.
If you lose or change your HDHP coverage, you can still use your HSA funds, but you cannot contribute more to your HSA.
You control the money in your HSA, and can invest HSA money in mutual funds, stocks, bonds and certificates of deposit.
The task of deciding whether or not an HSA is right for you is a daunting one. In my research for this column, I read through the Department of the Treasury’s Web site of information on the topic. I printed more than 10 pages of “HSA Frequently Asked Questions” and had to read every word of the small print twice before I really understood how HSAs work.
How then, I wonder, does the government expect residents without a college education, without a background in health care and without a knowledgeable financial adviser to be able to calculate the costs and benefits of an HSA? How are people without resources supposed to navigate the complexities involved in setting up and managing an HSA?
Granted, HSAs may be a terrific way for people who are already financially well off to manage their money and reduce their taxable income. They are also helpful for young, healthy people who have low health care costs each year, since they can invest their HSA money and watch it grow.
However, for those who are financially struggling – especially those with high health care expenses – HSAs are not helpful.
The original point of health insurance was to spread risk across a broad group of people, so individuals who are seriously ill or injured do not have to bear a huge financial burden.
HSAs do nothing to help vulnerable Americans reduce their risk of suffering if a health tragedy should occur, and do little to help America’s health care crisis.
For details on HSAs, the U.S. Treasury Department Web site has all the FAQs: (www.treas.gov/offices/public-affairs/hsa/faq1.shtm).
Kathryn B. Brown is a family nurse practitioner with a master’s degree in nursing from OHSU. Is there a health topic you would like to read about? Send ideas to kbbrown@eastoregonian.com.