One of the major ways insurers and customers have adjusted to the high costs of health care is to come up with ways to turn over more control of insurance plans to consumers themselves – if they’re willing to foot the extra out-of-pocket costs and accept the financial risks that this method entails.
Federally regulated Health Savings Accounts are the latest big vehicle for so-called “consumer-directed” care, and have taken over from an original concept called Medical Savings Accounts.
Here’s a guide to evaluating whether a Health Savings Account (HSA) is the right route for you and your business:
Understand the HSA concept
Health Savings Accounts combine a high-deductible health-insurance policy (minimum annual deductibles of $1,000 for an individual and $2,000 for a family) with a tax-free savings account. The high-deductible policy covers major – so-called “catastrophic” – medical bills. You pay for all costs until the deductible is reached.
You can deposit money tax-free into the account up to a certain amount each year, as of mid-2006 about $4,000. When the need arises, you withdraw the money tax-free to pay for medical expenses that aren’t covered by insurance – including routine costs that aren’t covered until you’ve met your high deductible. The account belongs to you, and at the end of the year you can roll over unspent funds.
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