Offered since 2004, health savings accounts are still relatively new to the health care marketplace, leaving room for education and opportunity for misconceptions. Dennis Triplett, CEO of UMB Healthcare Services, addresses the common myths surrounding HSAs:
MYTH 1: HSAs are only for the wealthy
Given the fact that HSAs are paired with high-deductible health plans, it's a common misconception that HSAs are best-suited for people with high incomes who can more easily afford to pay for a high deductible than a person with an average income. In reality, HSAs are a powerful vehicle to save and pay for health care expenses, regardless of income level. According to a March 2011 study by Employee Benefits Research Institute, a little more than half of HSA plans are enrolled in by families with incomes of less than $100,000.
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HSAs partnered with a qualified high-deductible plan can be cost effective through monthly premium reductions that allow for contributions to an HSA to prepare for future health-related expenses. Research also shows that the annual premium costs for families decreases by an average of $2,350 for an HSA-eligible plan compared to a traditional plan, and that the premium savings covers nearly 60 percent of the average HSA-eligible plan's deductible.
MYTH 2: They're for the young and healthy
Regardless of a person's age or health, HSAs are useful. In fact, HSA enrollment is nearly equal across age groups. Forty-nine percent of all HSA/high-deductible health plan enrollees in the individual market, including dependents covered under family plans, were age 40 or older, according to a January 2011 report from America's Health Insurance Plans.
HSAs can be a long-term investment opportunity, but that's not the only opportunity for these accounts. They can also be an effective tool for those who are nearing retirement age and looking for a virtually tax-free account to save for health care expenses during their pre-retirement years. People aged 55 and older have the opportunity to make catch-up contributions each year that is over and above the allowable limit for the individual year. The catch-up contribution for 2011 is $1,000, and one is able to make contributions until he or she becomes Medicare active.
MYTH 3: They provide limited coverage
Qualified high-deductible plans coupled with HSAs actually provide comprehensive health care coverage. Most HSA-qualified plans cover prescription drugs, doctor's office visits and preventative care without a deductible. This typically includes: prescription drugs, doctor's visits, emergency room visits, hospitalization and lab and X-ray services.
One key difference with coverage and costs is consumer-directed plans emphasize individual decision-making. Participants have an incentive to avoid paying for unnecessary services because they keep the money they don't spend. In the end, this demonstrably improves health care costs, efficiency and wellness.
MYTH 4: HSAs simply shift costs to individuals
Employers aren't the sole benefactors when implementing consumer-directed plans. Establishing HSAs isn't just about helping employees create a medical savings account. Rather, it's about creating equity, building value and helping employees better manage their dollars and health. In conjunction with a high-deductible health plan, HSAs encourage employees to share the responsibility—and the rewards—for more closely monitoring their health and the cost of their care. Because they are invested in their own care, employees become better health care consumers, and better consumers make better choices.
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