[Hidden-tech] Health insurance - HSA experience?

[Bhavin Patel]

I've done some research from my standpoint of being a sole proprietor 
with no employees and family that needs coverage.

I've found no insurance agent in MA who's processing HSA policies. 
Evidently, the insurance companies that provide HSA's do not have the 
product ready yet. I believe Tufts is the only company who has publicly 
offering one, but its premiums are not much different than a standard 
HMO. Some agents say that the HSA products may be ready by Q2, but they 
didn't sound hopeful. I've done some analysis on how an HSA might work 
from a cash stand point, and I must say that the rhetoric in either 
direction (for or against) doesn't quite match the reality of the 
program.

Basically, it may be a usable financial device as long as you know how 
to use it. Some say that you might actually see an overall savings, but 
I'm not convinced of that for a variety of reasons. I don't want to 
take up everyone's time here, but for those who might like to know:

Generally, it works much like a traditional medical benefits account, 
except that the balance in the account rolls over into the next year - 
hence the "savings" account term. The money in the account does get tax 
benefits, and that's a good thing. Note however that you are expected 
to put into the account the difference you would see from reduced 
premiums (that high deductible folks keep talking about), so no net 
change in cash flow - bad for us who can't afford the premiums in the 
first place. But say you're lucky, and you don't spend (via that 
account on "government/plan approved" expenditures only) much of the 
amount you put into the "savings" account, then you don't have to add 
much back into the account the next year. So next year, you might get 
some serious benefit - perhaps $3000 to $5000 for a family. BUT if you 
need the money and use up your account for that high deductible, you 
won't see much if any "savings". Your account may then be back at zero, 
and you'll need to fill it up again. One way to balance the cash flow 
issues, especially when establishing or replenishing the account, is to 
add the deductible amount slowly into the account. It's risky, given 
that you might get sick, and then may have some huge bills, but it 
might be better for some folks who can't afford to plop down $3000 of 
deductible cash (for a family policy) into the account on day one. And 
also, even if you had the funds, you can't just stash money into the 
account - there is a cap. (so much for "savings"). Throughout all of 
this, people should keep in mind that the HSA plans will not cover 
anything until the deductible amount has been met. I've been on a 
high-deductible plan, and it is actually quite difficult to go over the 
$3000 (again for a family) in one year, unless something very 
noteworthy happens (baby, surgery, etc.) I've hit $2999 too often, if 
you ask me. ;) And with that, the current tax breaks for your higher 
premium payments is reduced. Remember, that out-of-pocket expenditures 
for health care have a 7% of income criteria for your taxes - hard to 
hit, even with the high deductible plan. So again, the tax benefit of 
the plan may be a less than advertised unless tax laws change to help 
out those with an HSA. Also worth noting: the plan is supposed to 
"empower" people to WANT to manage their own health care expenditures. 
That is, shop for services, compare prices, spend in a frugal manner. 
This theory comes from the idea that you'll spend your own money better 
if it's not hidden from you via an automatic and opaque "premium" 
payment. Without putting prejudice on table, and again for a variety of 
reasons, I'm not convinced that any or all of that will come to pass 
for the majority of those who might join an HSA.

Perhaps an accountant who's reading this might be able to figure out if 
the plan would or would not be a net cash benefit from a tax 
standpoint, I believe it might - barely.
But from my day-to-day standpoint, it won't help much if at all with 
cash flow. And it turns the idea of throwing money into (some might say 
"wasting on") premiums into a gamble with the notion that you might 
"save" money if you don't get sick. And it clearly does not reduce the 
COST of healthcare. And that is the real problem, isn't it?
If anyone has different info, please let me and the list know.
Sorry to ramble on. :)
Thanks,
Bhavin
-------------------------------
Bhavin Patel
3D Design & Animation

On Feb 28, 2005, at 5:38 PM, Christian Lagier wrote:

> Somebody told me that the new HSA (Health Savings Accounts) could be 
> the answer, possibly for you, but specifically good for the 
> self-employed. Does anybody have any experince with HSAs in 
> Massachusetts? Who provides them?
>
> Thanks,
>
> Christian
>
> Jonathan Dill wrote:
>> Hello people,
>> I changed jobs and my new job has a 90-day waiting period for health 
>> insurance and COBRA for my old job is $1300 a month!  I heard there's 
>> such a thing as temporary health insurance that would just cover 
>> emergencies that might be cheaper--we could always go to the 24-hour 
>> clinic and pay out of pocket if someone just gets sick, it's only for 
>> a few months.  I need coverage for me, my wife, and my daughter (who 
>> is 5 yrs old, just qualifying since insurance seems to handle it 
>> differently if the child is over 18).  Also, I should mention that I 
>> live in Maryland, so local MA things won't work for me, but info 
>> about national plans and general advice will be appreciated.
>> Thanks,
>> Jonathan
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