NCPA - National Center for Policy Analysis


June 12, 2006

The Bush administration and many insurers are pushing health savings accounts (HSAs) as a way for consumers to curb health-care costs. They're encouraging consumers to opt for cheaper plans that require enrollees to pay more medical costs upfront -- so-called "high deductible" plans. The idea is to sock away money in the HSA, a tax-advantaged financial account that can be used when medical expenses come up, says the Wall Street Journal.

But not all high-deductible plans are "HSA-eligible." In some cases, high deductible plans that aren't have lower premiums than HSA-eligible plans. Whether an HSA eligible plan is right for a particular individual can depend on several factors, says the Journal:

  • An HSA-eligible plan generally is not allowed to pay for any medical expenses other than preventive care before an enrollee has met their deductible; some non-HSA, high-deductible plans make other exceptions to the deductible, for example covering prescription drugs upfront.
  • HSA-eligible plans also have to follow rules that hold down the amount the plans can require enrollees to spend on out of pocket costs; because those "out of pocket limits" mean insurers can end up having to bear more health costs, they can push up premiums on HSA-eligible plans.
  • The HSA can also act like a retirement account; once you're 65, you're allowed to withdraw your money for non-medical expenses without penalty, though you'll owe taxes on those withdrawals.

It's also a good idea to watch the pricing on HSA plans, says the Journal. Some insurers say that if evidence emerges that consumers with HSAs use less health care than consumers with other plans, the prices on HSA plans are likely to become more attractive relative to other plans.

Source: Sarah Rubenstein, "High-Deductible Shoppers Find HSA Plans May Cost More," Wall Street Journal, June 6, 2006.

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