Hooray for HSAs? Are health savings accounts an answer for increasing health-insurance costs?

• Author: Kaelble, Steve
• Position: Employee Benefits

IT SEEMS LIKE A SIMPLE and sound concept: Save on health premiums while giving employees financial incentives to be better healthcare consumers by letting them write the checks. But health savings accounts are so new that some employers looking into them have had a tough time getting all of their questions answered.

The good news is that the HSA picture gets clearer every day as new players enter the market. Though there are relatively few turnkey HSA products on the market yet, the field will be full of choices before long.

"One of the big pushes has been consumer-driven health care, trying to place more responsibility on the employee as far as managing their health care," says Tom Pollert, HSA product manager at Columbus-based SIHO, which rolled out an HSA product called SIHO Select Savings at the beginning of the year, the first day HSAs were authorized under federal law. The theory behind consumer-driven health care is that patients will become better health-care shoppers if the money they spend is their own.

How HSAs work.

HSAs are a tool to help those who have certain lower-premium, higher-deductible health plans.

The accounts accumulate pretax money that may be spent on expenses incurred in the process of meeting the annual deductible, as well as health services not normally covered by insurance. They're a refinement of such earlier consumer-driven health care concepts as medical savings accounts and health reimbursement accounts, with some significant improvements.

For one thing, the funds in an HSA belong to the employee, even if the accompanying high-deductible health plan is paid for by the employer. Unlike in some earlier incarnations of consumer-driven health care, HSA funds don't disappear at the end of the year, but instead roll over for use in the future. HSAs are available to groups of all sizes, not just individuals and small groups like medical savings accounts, and unlike flexible-spending accounts they can earn interest.

HSAs may be spent on a wide variety of expenses related to health care. They can pay for doctor visits, hospital bills, medications and related expenses, even things not covered under the high-deductible insurance plan. "They can also can be used t0r COBRA premiums if a person is between jobs," Pollert points out, as well as long-term-care insurance premiums.

The funds grow tax-free, and are never hit with income tax as long as they're spent on health care. If any HSA funds remain at age 65, they may be...