April 29, 2006

Taking the plunge on Health Savings Accounts

Our firm is offering a Health Savings Account for the first time, starting May 1. Of the 100 or so lawyers, paralegals, secretaries, and assorted minions eligible only two (including me) are opting for it, the rest either have chronic health conditions for which the HSA does not make sense or (more often) prefer to stick with the heavily 'cratic HMO or the less 'cratic PPO.

The HMO crowd professes loyalty because the plan "pays for everything." This fondness for the all-encompassing, smothering, inefficient system comes despite caterwauling over the exorbitant premiums and the procedural minefield that one must traverse to get care from anyone other than the all-knowing, all-powerful Primary Care Provider without whose Dispensation (i.e., advance written referral) the poor employee cannot see a specialist or be reimbursed for one. (Of course, the specialist must be in The Network as well.)

The PPO loyalists tout their ability to see anyone they want while bemoaning the exorbitant premiums and the deductibles that come as the price of seeing "anyone they want."

Both groups may use flexible spending account into which employees put aside a certain amount pre-tax every month for which they may then submit for reimbursement which gets rejected with some frequency for "insufficient documentation." Any funds leftover at the end of the plan year do not rollover to the next year leading people to spend money at the end of the plan for new glasses or whatnot that they really do not want or need on the "use it or lose it" rationale (a rationale often associated with government agency spending in the last month of any fiscal year).

The HSA is a high-deductible policy with a savings/investment account feature. The policy premium is $250 per month less than either the HMO or PPO and has a deductible of $5200 per year for family coverage. There is no limit on what may be contributed to the savings account which may be invested in the stock market or money market funds. Out-of pocket health care expenses may be paid from, or reimbused from the HSA. The flexible spending account is not available to HSA users but the HSA account balance rolls over every year unlike the flexible spending account. I opted to contribute $350 per month ($250 I was savings by moving from the PPO to HSA, plus $100 that I would have contributed to the flexible spending account).

The way I see it, the most I am putting at risk when all is said and done is about $1000, the difference between the total I will put in the HSA over the course of the plan year and the deductible on the policy. Wish me luck as I try my hand in the best free-market experiment to hit the health care industry in God-knows how long.

Posted by LMC at April 29, 2006 08:18 PM | TrackBack

HSAs are a step in the right direction toward a consumer-driven market, but even with the HSA we're still stymied by the current system. For example, I have an HSA and last year I needed a cardiology work-up. I tried calling around to several such offices to see who had a better price. Nearly every office I called, the staff didn't know how much different procedures or tests cost unless they transferred me to someone in Billing or Coordination of Benefits. Even here, the answer was they charge what the insurance companies allow as Usual, Customary and Reasonable (UCR); no one I called was interested in a differntiating their practice on a price-competitive basis, and frankly they won't until there's enough critical mass on the consumer side to drive comparison shopping.

Still, it was kind of fun to ask if they had any coupons or specials that week.

Posted by: Night Writer at May 1, 2006 01:15 PM

It sounds like a nice idea, but what happens if or when you become gravely ill? No insurance company will pick you up at that point. Treatment for serious conditions can run in the hundreds of thousands of dollars.

Posted by: Erika at May 3, 2006 04:25 PM