Bank Of Utah
HSAs Will Get a Closer Look in 2012
Ogden, Utah, January 25, 2012
By Scott H. Parkinson
Will a consumer-driven health plan really incent you to be healthier, or more conscientious about what you pay for health care? It could. But with the ever-spiraling premiums of prepaid healthcare, that question might not matter going forward.
Consumer-driven health care plans have gained traction in recent years, with health savings accounts in the lead. In January 2011, the number of people with HSA coverage hit 11.4 million—eleven times what it was in March 2005, according to America's Health Insurance Plans (AHIP).
The HSA enrollee pool has grown at a rate of roughly 20 percent each year for the last several years. No doubt this year will see another 20 percent climb. Or maybe more. A national Mercer report indicated that in five years, half of all employers will offer CDHPs, and many of them will phase out traditional low deductible plans altogether.
Uses and abuses of the health care and insurance system aside, economic challenges have thinned employers' pocketbooks. Offering traditional health care benefits is less feasible.
In Utah, a survey by the Employer Associations of America found that 23% of Utah companies plan to shift a larger percentage of healthcare costs to employees in 2012. It's either that or ax other benefits like raises and paid time off, or for some companies, do another round of layoffs, the surveyed companies said
The switch to consumer-managed health care hasn't been purely by employers' choice. In 2010, AHIP reports that 44 percent of employees in small businesses who had a choice between HSA/HDHPs and other types of coverage chose the HSA option.
Tax incentives and employer contributions make the HSA attractive. Nearly 70 percent of companies that sponsor HSAs provide an annual contribution, according to Kaiser Family Foundation.
The flexibility is also attractive. Unlike Cafeteria plans, the HSA is consumer-owned rather than employer-owned, and the money isn't 'use it or lose it'—it rolls forward every year. You can even use your HSA funds during a gap in health insurance coverage (you just can't contribute to the account until your high deductible plan is back in place).
There are perks to be had at the doctor's office, too. Many health care providers offer a discount to cash-paying patients, because it means they don't have to haggle with your insurance company. Some will also work with you on price or adjust the scope of service, simply if you ask.
Whether you're an employer or a consumer, HSAs and HDHPs could be a viable way to pay for health care in the New Year. If you stay healthy, you'll have a nice retirement supplement down the road.
In the meantime, you might have to give up the dental spa—or sharpen your negotiating skills.
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The HSA in a Nutshell
The HSA is a savings account for out-of-pocket medical expenses. Created in 2003 to incentivize self-managed health care, it is meant to be used in conjunction with a high deductible health plan (with a deductible of at least $1,200 for self-only coverage, or $2,400 for family coverage).
The HSA works like an IRA: contributions are tax-deductible, and the funds are tax-free when used for qualified medical expenses. At retirement age, the money in the account is yours for medical or non-medical expenses (when used for non-medical expenses, it's considered taxable income).
Most HSAs are interest bearing accounts, often with a better yield than standard savings accounts. Earned interest grows in the account tax-free.
HSA contributions can be made up to the annual IRS limit: $3,100 for individual plans and $6,250 for family plans in 2012. If you're over 55, you can make an additional catch-up contribution of $1,000 this year.