Someone explain to me what the problem is with health savings accts.

[lildreamer316]

like he's talking about...I am behind on this.

[SidDithers]

1. They only work if you have money to put into them?....

I dunno... :shrug:

Sid

[papau]

15. Indeed a tax deduction of a few dollars, tax savings of 25% of that -is OK

But do you call that a replacement for the $10,000 insurance premium for a family of 4 for one year's health insurance?

And the Tax Deduction is an extra hassle as your payment for medical care must be put through your "savings" account first, so as to get the tax deduction, before you take it out of medical savings to pay for the bill.

[Yollam]

25. And the working poor aren't paying income taxes anyway.

This is meaningless for people without extra disposable income.

[shraby]

2. In some of them, if you don't use the money in

that year you lose what you've put into it.

[calico1]

4. That is how it works in my company.

If you don't use it you lose it. So when in doubt, it is better to underestimate than to overestimate your needs.

[Yupster]

32. That's a 125 Plan

That's a different animal from an HSA which you do not lose if you don't use it.

I have both of them btw.

[calico1]

36. Oh, okay. n/t

[Cleita]

3. It's a stupid and unworkable idea. Is that clear enough?

Okay, let's say you are married a year, in your twenties and both of you work and you are expecting your first baby. When the baby comes, it has a defective heart that the doctors say they can fix, but it will take up to four years of delicate and expensive surgeries to make the baby normal.

In the meantime one of you has to quit your job because the baby needs around the clock care. So here you are with a mountain of medical bills ahead of you and half the income and your medical savings account barely covers the birth of the baby let alone all the new medical problems you have acquired. Now maybe you can get charity from various Children's Hospitals, but it's a risky chance as they may not think you are eligible for their programs.

Now, here is the second scenario. You are diagnosed with kidney failure and must go on dialysis waiting for a transplant. Now my husbands dialysis cost an average of $3,500 a month, much more than our retirement income. He never got a transplant so I don't know the cost of it, but I'm sure it's astronomical. Fortunately SS and Medicare picks up the tab for this because most health plans exclude it. But that isn't the end. There is a lifetime of anti-rejection medication to take and other medical expenses.

Any of these savings accounts are neo-con ideas. They want people to sign up so that they can eliminate Social Security and Medicare. Then you are on your own with no safety nets and dependent on charity for your needs. They know the average Joe Sixpack can't save enough for their needs over their lifetimes, but it absolves them of having to worry about it, because they can blame you, the victim, and your lack of ability to save money on you.

[lildreamer316]

5. Got it below; thanks!

sorry that I have been lax on this. Thanks.

[donco6]

42. You're missing the insurance layer, Cleita.

It's not just a cash savings account from which all medical payments are made. There is an insurance layer that kicks in after the first cash layer is used up. So your baby example isn't quite right - but that doesn't mean HSAs don't have problems.

Compare it to a high-deductible policy you may have now. If you're seeing doctors regularly (and until last year, I was on cancer post-therapy, so I saw a LOT of doctors), you're paying lots of fees up-front. High-deductible policies are charging upwards of $100 per visit, plus $1,000 for hospital check-in, $500 for emergency room, etc. Those are just FEES, not covering any costs. With a serious illness, you could easily broach $4,500 in a year.

With an HSA, you pay the first $X layer out of your own pocket (that supposedly you're not paying into premiums), then the insurance layer kicks in. If you don't use it, you get to keep it.

The question for me, and the way I think they'll really soak people, is in raising the premium over time for what is essentially a high deductible plan. I think they'll do a classic "bait-and-switch" and get people to sign on, then raise the premiums back to their previous levels. What will happen is the sick people (the ones who cost money) will get scraped off, while the non-sick people will stick around. It's a total win-win for insurance cos.

[wtbymark]

6. buying power

try and go find competitave insurance rates for you, individually, with no reference or help from your employer

[ScooterKen]

7. OK

In IRA-like fashion, investors can build tax-sheltered nest eggs to cover out-of-pocket medical costs. Called a Health Savings Account, it permits a taxpayer to shelter up to $4,500 annually.

But there's a catch. The new accounts are linked to high-deductible health insurance plans. The accounts are designed in part to help consumers pay for health expenses until insurance benefits kick in.

Just how popular the new accounts will become remains unclear. But their cost-saving features and likely promotion by big employers could make them huge.

"They have the potential to become the dominant kind of health care financing in the next five to 10 years," says Greg Scandlen, a health care expert at the Galen Institute, a Washington think tank.

But they aren't for everyone, says Scandlen, an advocate of the new accounts. Families with young children probably will benefit more from traditional managed-care options such as preferred provider organizations. And, he says, HSAs demand more planning than many people are willing to give.

But the new accounts could become the preferred route for families with few health care spending needs, as well as those who spend $4,000 or more a year, he says.

The self-employed and others who buy individual health policies can plunge in as early as next month. Workers insured through employers could see them during their next open enrollment period, when they're allowed to adjust workplace benefits.

Insurers Golden Rule of Lawrenceville, Ill., and Fortis Health of Milwaukee, plan to begin selling HSAs on the first business day of 2004. Others say they need time. "We're not poised to jump in, but we're assessing the legislation," says Mutual of Omaha spokesman Jim Nolan.

How the new accounts work:

The health care angle
High-deductible health insurance policies are now the rage. By leaving more costs for a patient to cover out-of-pocket, rapidly rising insurance premiums will moderate, the theory goes.

President Bush and Republicans in Congress favor investment accounts to help more Americans cover expenses until a high-deductible policy kicks in. As defined in the new Medicare legislation, which Bush is expected to sign, a high-deductible policy is $1,000 for individual coverage, $2,000 for a family.

The accounts have the potential to accumulate huge balances over years of contributions and investment gains. In theory, that puts consumers in a better position to pay for their own health care as they grow old, when costs typically peak. The new law imposes two requirements for opening an HSA:

• It must be done in conjunction with high-deductible health coverage.

•A taxpayermust be under 65 — the age of Medicare eligibility — when opening an account.

The tax angle
Few Americans — particularly among the young — are likely to max out annual contributions just so they can pay drug and nursing home bills in old age. But the tax incentives are powerful for those who do, or for anyone who wants to build a modest account to cover routine health expenses.

The accounts will join about a half dozen other major provisions in the federal law that provide a tax advantage for health care spending. But nothing now in the law combines the broad eligibility and generous tax benefits of HSAs. "This is far and above superior to all the other ones that are out there," says Jay Nawrocki, legislative analyst at tax publisher CCH.

Contributions, investment growth and withdrawals for health-related expenses are all free from taxation. That makes tax benefits superior even to IRAs. With IRAs, the money is taxed either before it goes into the investment account, or as it is taken out. Of course, money from an IRA, when taken after age 591/2, can be spent without restriction.

Health savings accounts carry generous annual contribution limits. The law allows an annual tax write-off equal to the deductible amount of the accompanying health care plan. But the tax write-off can't exceed $2,250 for an individual plan, $4,500 for a family plan. Limits bump higher in years ahead.

For taxpayers 55 and older, the new law permits an additional $500 contribution in 2004. And, like IRAs, contributions may be made for the previous year through April 15.

CCH's Nawrocki says health-savings accounts are likely to diminish the popularity of flexible-spending accounts.

Flex-spending accounts permit workers to make pretax contributions by payroll deduction to meet health care costs.

But they have two big drawbacks: Money in the accounts earns no interest; and unspent funds must be forfeited at the end of each year.

Flex accounts won't be rendered obsolete, though, because they allow pretax purchase of routine health care items not now covered by HSAs.

In general, tax-free expenditures for HSAs mimic those the IRS now allows as deductions to taxpayers who have been smacked by unusually high medical bills.

An HSA holder who uses the money for a non-health expenditure pays tax on it, plus a 10% penalty. After age 65, a withdrawal used for a non-health purpose will be taxed, but not penalized.


The investment angle
The new law imposes few restrictions on how money might be invested. Health insurers will be first out of the box to offer the new accounts, but banks, brokerages and mutual fund companies are free to jump in, says Scandlen of the Galen Institute.

HSAs now have a first cousin in tax law, Archer Medical Savings Accounts. In seven years of existence, Archer MSAs haven't gotten much use, partly because of strict eligibility requirements. HSAs replace them.

Brian McManus, vice president at Golden Rule, says the company's first HSA will direct all investment money to an interest-bearing savings account. Fortis Health Vice President Scott Krienke says his company will offer HSA investors a choice of a savings account or an array of mutual funds.

As with IRAs, Scandlen says, HSA investors are allowed to hold multiple accounts, but they'll be subject to a single annual contribution limit.

[hfojvt]

13. well thank goodness they are finally

simplifying the tax code. :crazy:

My bottom line on this plan is that it looks to me like another Republican plan that confers 99.44% of its benefits on those in the top 20%. It will cause a loss of tax revenue which will be made up by cutting food stamps, head start, etc.

[lildreamer316]

16. Thanks!

That helped a bit; but I am still seeing a contradiction. It says you will build up balances; then it says you forefit the amount at the end of each year. I'm blonde...

[ScooterKen]

23. No, thats Flex Spending Accounts, not HSA

Flex Spending accounts expire at the end of the year.
HSAs do not.

[Cleita]

17. Leave the neo-con corporatists to make something simple

into a complicated quagmire that no one benefits from except the middle men who are skimming the money that should be used for health care.

Oh, Canada! Why can't these silly Americans look to the north for the solution to their problems and I'm not talking about Santa Claus.

[Nay]

46. Exactly my thought. When "programs" like this are explained and

sound unbelieveably complicated and weird to intelligent people, you know it's meant to be complicated -- in order to bamboozle and cheat you.

[Yupster]

33. We just went onto an HSA

a few months ago.

Haven't needed it yet.

[Gman]

8. The only advantage is that

for immediate gratification of tax purposes. That is, you pay into an account, before withholding, SS and Medicare. Then you apply the withheld on your end of year taxes against your medical bills. The trick is to not overestimate your medical expenses because you end up not having your withholding covering the excess.

Of course, you gotta have a job and be able to itemize your deductions. This has no worth to the working poor.

[marbuc]

9. Health Savings Accounts would do nothing to curb skyrocketing costs

and would probably actually make things worse. These is social darwinism at its worst. Healthy, wealthy people would do just fine, not-so-wealthy people with health issues would be fucked.

[AllegroRondo]

10. Its nice but it doesnt fix the health care problems

basically, you can put aside money from your paychech into an account to pay for medical needs, like prescriptions or glasses or even over the counter meds. Its pre-tax, so there is some benefit for you.

But it only works if you have money to set aside in the first place. For the vast number of people who cant afford health insurance in the first place, and have little to no money left in their paycheck after necessities, it is no help at all.

And if you don't spend all the money you set aside by the end of the year, you lose it. So you see a lot of people stock up on prescriptions or hurry in to see the eye doctor at the end of the year, so they dont waste the money.

[wakeme2008]

11. First question to ask who is pushing this....

Big insurance companies for one... Why would they want this.

[Hong Kong Cavalier]

12. Our HSA was started last year...

Had four months of downtime where we couldn't access our funds (so we had to pay for everything out of pocket), and instead of a co-pay of $20 or so for doctor visits, we had a deductible of $1,250, and $2,500 for married couples.

So we pay full price for everything until we hit the deductible. Everyone I talked to here at our job hates it. But our health insurance company said they were going to raise our premiums anyways. (I'm not so sure they didn't just say that to get us to sign on to this "HSA" crap)

The only good thing is that I can take this HSA with me if I leave this job. But I've been paying full price for all my medicine for the past year, and in order to fill up my HSA (which can only be filled to the amount of my deductible. No more than that), I have to deduct from my paycheck in order to do it. This is on top of my health insurance premium, which increased last year. So I'm making less this year in take-home pay because of this HSA crap.

I just don't see how this is a good thing. I've spent much, much more in health costs this year than last year. And I've put off going to the doctor for a few things because I didn't have the money in my HSA at the time, nor did I have the space in my budget.

[Cleita]

20. So evidently that $1,200 is profit for the company that offers it.

Wouldn't it have been better if you put your money in a savings account that you could access yourself?

[patcox2]

14. Its like treating cancer with aspirin.

They don't treat the underlying problem. The problem is the unaffordability of health care and the resulting "class structure" in health care under which the wealthy do great and the poor can go pound sand. Only universal coverage will solve the problem. Putting forward health savings accounts as the answer to the problem is exactly like treating cancer with aspirin; its ineffective; it may very very slightly palliate the symptoms, but it gets nowhere near to the underlying problem.

[Cleita]

18. Thank you for putting it into simpler words.

Besides that. One axiom that I follow in life. If a solution to a problem is presented by a right wing think tank, you can be sure it benefits the few at the expense of the majoriity.

[lildreamer316]

21. I'm sure!

I just wanted to know a bit more about it before I poopooed it to someone else. THanks to everyone for the help!

[patcox2]

38. Now for the irony; they are good for some individuals.

If you have the money, and you have the need (because you have significant unreimbursed health care costs) then you should take advantage of it.

They are not bad, just as aspirin is not bad. They do not help society as a whole, but they can significantly beneifty someone who needs what they offer.

[Indykatie]

22. I do Healthcare Stuff for a Living Ask Me Anything

Hate to sound like a know it all but HSAs and FSAs are different animals. I see a few posters have referenced the "use it or lose it" feature of FSAs. Contributions in an HSA are not forfeited if they are not used. That feature was in response to the FSA drawback. The biggest problem that I see with HSAs is that it's a great tool but only if you can stand the risk of being in a high deductible health plan. That's right. They are limited to folks in plans that have individual deductibles from $1000 to $2650 per year. Also, they are a great tool for those hat have the additional $$ to fund these accounts. Given the pitiful contribution levels for 401Ks and similar savings vehicles I can't get excited about HSAs as a tool for regular working folks.

[Cleita]

30. Thank you for saying that because that is the basic problem.

The first time I heard something like this was when someone suggested tax credits for medical expenses, to which I replied that once you ran out of taxes to credit, you were up the creek for the rest of the medical bills. So this solution would benefit the rich and the average taxpayer get's screwed again.

[Yupster]

35. Threads like this one are often where DU is at its worst Indykatie

You'll get so much plain wrong information spread around by people who don't know what the heck they're talking about.

It would be so much better for people to wait for responses by people like you who work with the products and actually know what they're talking about so DU threads aren't just chock full of wrong information all the time.

Economic issues seem to be where DU trainwrecks the most.

[Cleita]

37. Not always.

I have locked horns on this issue as far back as the nineties with so-called physicians who claimed free market was the best system and self proclaimed insurance company "experts" who really spread the BS far and wide.

There are many good websites that have good facts and are well researched. My favorite one is http://www.pnhp.org /
They also have many good links as well.

[LondonReign2]

45. I'll add to that

I'm in benefits consulting. What I would add is that what we are seeing in practice is that these amount to a tax break for the wealthy, and little real relief for anyone else.

The wealthy are taking that tax break, letting the accounts build up tax free, and simply paying the out-of-pocket costs. For them this amounts to another $4,500 that they can put into a vehicle that has the same benefits as a Roth IRA.

The problem for most people is that they cannot afford to fund this account in amounts that will be significant (relative to health care costs) in later years. Further, unless you are healthy (or wealthy as noted above) you are likely have to dip into the account, further eroding the value of the account come your retirement years.

Bottom line: nice tax vehicle for the wealthy, little help to average person.

[nadinbrzezinski]

19. Who is pushing this? First question

second, what we need is a national health single payer program... or you are going to have even more people WITHOUT access to medical care. I mean right now Cuba has a far better survival rate for new borns than we do... and a far better vaccination coverage than we do. That is a disgrace.

[Cleita]

26. It's been out there for years and pushed by RW think tanks

like the Heritage Foundation. Yes, we need national health care. Actually, we already have it. It's called Medicare. It just needs to be extended to everyone, fully funded and the benefits brought up to date so that hospitals and doctors like it.

If they removed the cap from FICA, it could be easily funded. There also is a super national health plan at the Physicians for a National Health Plan website. I'll go dig it up and do a post on it.

[nadinbrzezinski]

29. I know the heritage foundation and the rest of them

are just toxic....


We are paying for it as well, and getting squat for it

[Cleita]

43. I just put up a post on NHC.

I would have PM'd you but couldn't. I thought you might be interested in this:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x5522396

[Yollam]

24. Ummm... because they do nothing to address the ridiculous costs?

Because they do nothing to help the poor and uninsured, who already are not paying tax on their income BECAUSE THEY DON'T MAKE ENOUGH TO BE TAXED?


Because it's the exact opposite of the direction we should be going in, which is government-run Single-Payer health-care coverage, which gets all of the gouging, for-profit insurers OUT of the system?

(You know the system that works so well for a fraction of the cost in most other industrialized countries?)


I love the republican "solutions": "What? You're too poor to afford $500/month for health insurance? Well here's a tax-deferred account that you can put your NONEXISTENT MONEY into for a rainy day. Isn't that nice?" :eyes:

[Arkansas Granny]

27. Another problem is that you have to already have health insurance

to be eligible. This is from the U.S. Treasury website:

"Who is eligible for a Health Savings Account?
To be eligible for a Health Savings Account, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance” (see below) and will not jeopardize your eligibility for an HSA."

http://www.treasury.gov/offices/public-affairs/hsa/faq_eligibility.shtml#hsa1


If you don't already have health insurance, the Health Savings Account will not be available to you. So much for helping the uninsured.


Edited to add link.

[newportdadde]

28. Are we talking about accounts used for all your insurance or just co-pays?

Or just the ones that you use to pay off your copays, prescriptions etc. My company lets us put pre tax X dollars into an account we use for copays, over the counter sinus stuff like that. We have made good use of it when my wife was pregnant. The kicker for the account is that if you don't use it you loose it at the end of the year.

Now if your talking about having this account you use to purchase your own insurance NO THANKS! No way I could buy the insurance I have at any decent price.

On Edit: If Bush and Republicans are pushing this it won't help average people, none of their plans ever do. I already have to save all of my pension there isn't a whole lot left.

[mmonk]

31. Pretending to do something while doing nothing

[suffragette]

34. Great article in the New Yorker on this

Here are some salient points from it:

Under the Health Savings Accounts system, consumers are asked to pay for routine health care with their own money—several thousand dollars of which can be put into a tax-free account. To handle their catastrophic expenses, they then purchase a basic health-insurance package with, say, a thousand-dollar annual deductible. As President Bush explained recently, “Health Savings Accounts all aim at empowering people to make decisions for themselves, owning their own health-care plan, and at the same time bringing some demand control into the cost of health care.”

The country described in the President’s report is a very different place from the country described in “Uninsured in America.” Sered and Fernandopulle look at the billions we spend on medical care and wonder why Americans have so little insurance. The President’s report considers the same situation and worries that we have too much. Sered and Fernandopulle see the lack of insurance as a problem of poverty; a third of the uninsured, after all, have incomes below the federal poverty line. In the section on the uninsured in the President’s report, the word “poverty” is never used. In the Administration’s view, people are offered insurance but “decline the coverage” as “a matter of choice.” The uninsured in Sered and Fernandopulle’s book decline coverage, but only because they can’t afford it. Gina, for instance, works for a beauty salon that offers her a bare-bones health-insurance plan with a thousand-dollar deductible for two hundred dollars a month. What’s her total income? Nine hundred dollars a month. She could “choose” to accept health insurance, but only if she chose to stop buying food or paying the rent.

~snip~

Health Savings Accounts represent the final, irrevocable step in the actuarial direction. If you are preoccupied with moral hazard, then you want people to pay for care with their own money, and, when you do that, the sick inevitably end up paying more than the healthy. And when you make people choose an insurance plan that fits their individual needs, those with significant medical problems will choose expensive health plans that cover lots of things, while those with few health problems will choose cheaper, bare-bones plans. The more expensive the comprehensive plans become, and the less expensive the bare-bones plans become, the more the very sick will cluster together at one end of the insurance spectrum, and the more the well will cluster together at the low-cost end. The days when the healthy twenty-five-year-old subsidizes the sixty-year-old with heart disease or diabetes are coming to an end. “The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance,” the Stanford economist Victor Fuchs says. Health Savings Accounts are not a variant of universal health care. In their governing assumptions, they are the antithesis of universal health care.

There's much more there and it's explained very well. It is a detrimental approach to healthcare predicated on a callous disregard for society.

Link: http://www.newyorker.com/printables/fact/050829fa_fact

Edited to add link

[depakid]

40. is a detrimental approach to healthcare

You can say that again.

Like most Republican ideas- it only makes existing policy (as dysfunctional as it is) all that much worse.

[patcox2]

41. There's a legitimate point to be made about other people's money.

Its precisely true in an economic sense that once a commodity is not paid for by the consumer, the price rises way out of line because the consumer doesn't give a crap what it costs, its all someone else's money.

That is a piece of the problem here. Its not wrong, its just that it addresses one of the problems and not the other.

Two separate but interconnected problems: high and rising costs, and uninsured people.

These basic policy approach may well reintroduce some consumer price-pressure into things and help keep prices for health care services down. Doubt it, though, just encourage doctors to blow through the deductible quick.

But thats a completely different problem from the problem of uninsured people unable to afford health care.

[The Whiskey Priest]

39. One of the problems is

people with health savings accounts are reluctant to go get preventative health care services...they don't want to spend the money in account, consequently many want until the illness becomes so bad that it is more expensive to treat. The bottom-line is that taken care of an illness early is less expensive than waiting until the illness progresses to the point that it takes extraordinary care to stabilize or cure.

[KerryOn]

44. In many of them if you don't use the money then...

... you lose the money.

At least that is how the one works where I'm employed. I think they would be fine if you were on a regular medication, for maternity or expenses you new were coming up, but they would not work for a normal healthy person. You would just be trowing your money in the trash.

[flaminbats]

47. there is no problem!

We have savings accounts...we can use them to buy groceries, clothing, gas, and even medicine.

The problem is with Bush's proposed tax increase on health insurance benefits provided by employers.

http://www.businessweek.com/magazine/content/05_50/c3963093.htm#ZZZBQ3MYOGE