What’s so good about Health Savings Account Compatible Health Insurance Plans?

 

When Health Savings Accounts (HSA) were introduced in 2004 they were the most exciting thing to happen in health insurance in a long time. “Exciting” and “insurance” aren’t two words commonly found in the same sentence, but with Health Savings Account Compatible Health Plans that was different because HSA’s significantly reduced the monthly cost or “premium” of health insurance plans.  Sadly, the cost savings of HSA compatible plans has gradually eroded and by now (March 2016) the cost savings of HSA compatible plans has nearly disappeared.  They are no longer the great deal they used to be.

HSA California medical insurance plans were exciting for two reasons:

  1. The health insurance premium was significantly lower than conventional California health insurance plans; and,
  2. People enrolled in an HSA compatible health insurance plan are eligible to set up a Health Savings Account, which is much like an IRA. Essentially, people can pre-fund their California medical insurance plan deductible into an account which they own. Best of all, the money deposited into the HSA accounts is Federal Income Tax deductible.

HSA are designed to be catastrophic health insurance plans where small items, like routine doctor’s office visits are paid by the insured person. When something serious happens and the insured person needs major medical treatment, the health insurance plan will pay for that.

HSA plans bundle all of the medical and prescription medicine (Rx) expenses into a single “out-of-pocket” maximum (OOP Max.)   As a consequence, HSA plans have become magnets for people with bad risk – e.i., people who use A LOT of medical services.  Because so many “high utilizers” are on HSA plans the monthly premium has increased dramatically.  They are no longer a good deal.

Here’s an example of why HSA compatible plans have become so expensive:  We have a client who had a kidney transplant and must take medications (Rx) that cost $3,000/month for the rest of his life (he’s in his early 60s.)  By enrolling in an HSA compatible plan with his wife he has a $6,000 OOP maximum.  He meets the maximum by the second month of the year and the plan pays 100% of his expenses for the remainder of the year.  It is a great deal for him because the insurance plan pays just about all of the cost for his Rx and medical services.  Multiply the common sense decision making of this client by thousands of others with serious health conditions and you change the economics of the plans.  The only way to lower the monthly premium is with more healthy (low utilizers) enrolled.

With HSA plans the scale has tipped towards more high users enrolled and not enough healthy people.  Consequently HSA compatible plans are very expensive and no longer a good deal.   In fact, many of the conventional ACA plans offer doctor visit copays, Rx, and other benefits before paying a high deductible and these non-HSA plans are less expensive than the HSA plans which don’t pay for these services before the member pays the deductible.

About HSA Plans in General

One very unique feature of a Health Savings Account High Deductible Health Plan is that, unlike conventional health insurance plans in California, these plans do not pay for prescription medicine expenses until the entire medical deductible has been paid by the insured person. On most California health insurance plans prescription medicine is available immediately especially for generic medications. Sometimes conventional health plans have a separate deductible for brand medications. On Health Savings Account compatible High Deductible Health Insurance Plans in California, no prescription medicine benefit is paid until the entire deductible has been paid.

Another unique feature of Health Savings Account High Deductible Health Plan is that when two or more family members are covered on the same plan, all members of the family contribute to a single deductible. This is much better than traditional medical insurance plans in California where usually 2 separate deductibles must be paid before the insurance company starts to pay. In this situation, many members of a family can pay a lot for medical services yet never reach the medical insurance deductible.

Health Savings Account compatible health insurance plans did offer people an opportunity to spend less to finance their medical care – no longer. They are a bit complicated and for some people they still make financial sense.  If you offer group health insurance in California you may want to include an HSA compatible plan.  We can assist you.  Click here to request a group medical insurance quote.