Corporate Carnivores

Weigh Benefits of Health Savings Accounts Over Insurance Coverage

By Dave Arnold

When it comes to health insurance companies, I often feel like the lamb that asks the wolf what he'd like for dinner. Insurance companies are fair weather friends at best. And money pits at worst.

Most people put more into them than they will ever realize in return. But what can you do?

We can't afford to be without health insurance in this era of astronomical health care costs. If you aren't covered by insurance after falling off a ladder, you could lose your home trying to pay medical bills.

Maximixe Health Care Coverage

Most Education Support Professionals (ESP) are covered by school- or Association-related health plans. This is a good thing on the surface. It's nice to know that if one of us is in an accident at home or on the job, we qualify for immediate and long-term medical care.

Underneath the surface is another story. Group health insurance companies rely on making a 53 percent profit off of you and your Association group. To get the most for my money, I decided to join my school district's insurance committee. I wanted to be in on the research and decision making that goes on in these committees.

Recently, Association committee members hired an independent consultant to review our needs. He advised us of our options, and then recommended something much different from our present plan. He suggested we implement Health Savings Accounts (HSAs) as a cost saving measure. It made good sense to us.

Health Savings Accounts

The biggest cost for health care insurance is the co-pay options, drug cards, and low deductibles. In order to lower insurance premiums, a person might be wise to consider the benefits of HSAs.

HSAs, established in 2004 as a way to reduce health care costs, are tax-free savings accounts that are established for you through your local bank or a bank that is recommended by the insurance provider. However, the bank must charge a service fee to establish your account, which in our case was a one-time fee of $35.

You will pay into your HSA account each month through payroll deductions at a rate that you determine for yourself. The account accrues interest and is to be used solely for health care expenses. The unused amounts will rollover each year and continue to build interest.

HSAs are different from Medical Savings Accounts (MSAs), which had to be used each year or would be lost. A person can allow a HSA to continually build without being used, then use it to supplement Medicare expenses upon retirement.

How HSAs Work

• You can set up an HSA with the purchase of a low-cost, high-deductible insurance policy to cover major medical expenses.
• Money from the HSA can be withdrawn tax-free when used to pay routine medical bills, like doctor visits or medicine.
• Money from the HSA can be used to pay medical bills below the insurance policy's deductible.
• HSA funds can be used to pay for expenses that insurance does not cover, like contact lenses, over-the-counter medicine, or braces for your children.

Who Uses HSAs?

• The majority of HSA purchasers (52 percent) were 40 years of age or older.
• Nearly half of HSA purchasers (49 percent) included families with children.
• Two-fifths of HSA purchasers (41 percent) had incomes of $50,000 or less.
• Three of 10 HSA purchasers (30 percent) had previously been uninsured.

Research Your Record

HSAs may not be the best choice for everyone. Before making a choice, check your history with your insurance company, which is obligated to provide that information to you. Learn how much you have paid out for your drug card, co-pay, and whether you met your deductible or not. That data will help you to compare the costs of your present policy with that of a HSA.

There's more information at HSA Insider and  HSA Bank.  

More Dave's columns.
 
(Dave Arnold, a member of the Illinois Education Association, is head custodian at Brownstown Elementary School in Southern Illinois. He can be contacted at dparnold@csuol.com.)

The views expressed in this column are those of the author and do not necessarily reflect the views of the NEA or its affiliates.