Health Savings Accounts in 2009

MedSave Admin | November 24, 2008

Health Savings Accounts for 2009 look much different than the original bleak and barren products that made their debut to the public five years ago. Introduced just in time for 2009 enrollment season, the new Health Savings Accounts now include optional features like fixed cost doctor visits, generous preventative care benefits, dental insurance and extra insurance to protect against an early catastrophic expense in the first years of the plan.

When Health Savings Accounts were signed into law on December 5, 2003 the first plans were simply a combination of no-frills high deductible major medical insurance with an option for a separate savings account with a bank or brokerage firm. The design failed to attract consumers. While some people (mostly the insurance agents who sell them) have always promoted HSAs as the savior of our health care system, the facts reveal a different story. Over the past twelve months a number of reports published by the Blue Cross Blue Shield Association, the General Accounting Office and the Kaiser Foundation showed that Health Savings Accounts have had limited success. About 5% of the population is covered by a high deductible insurance plan, only half of hose are Health Savings Accounts. Projections of rapid growth of HSAs were scaled back this year. The appeal of HSAs among the strongest supporters could almost be described as "cultish" and generally limited to higher income tax savvy participants. Some employees who were forced into these plans by their employer (for example when some US government employees found their former managed care plan eliminated from the available choices) described HSAs as "worthless insurance" citing the high deductible and lack of front-end benefits. According to the General Accounting Office, almost half of the people who had the qualifying high deductible insurance never bother to open the tax-favored savings accounts and missed out on the main benefits of this program. Health Savings Accounts needed to change! In fact, all these negatives could be interpreted as the beginning of the end for Health Savings Accounts. We think this is far from the truth. In fact, we suspect a new wave of employers will adapt the plans in 2009 and 2010 as part of necessary cost-cutting maneuvers. Insurance companies have learned from customer feedback and introduced completely redesigned.

This is a wonderful example of free market behavior where consumers voiced their concerns with the product and providers reacted decisively to meet market demand. Changes have arrived for both the insurance and the savings/investment component of HSAs:

The most dramatic changes come from UnitedHealthOne (formerly Golden Rule Insurance, American Medical Security, Pacificare and Oxford Insurance). The insurer introduced a number of front-end benefit enhancements including low co-pay doctor visits, coverage for preventative care, accidental medical supplement and a two year rate guarantee. This company is the nation's largest issuer of Health Savings Accounts and qualifying insurance to individuals and families.

Celtic Insurance is another major provider of HSAs to the "high end" of the individual insurance market. The company updated its Health Savings Accounts for 2009 in 34 states and designates these as "Version 3.0".

The companies that administer the Health Savings Accounts are also learning from their past mistakes. Big firms like JP Morgan that partnered with Aetna to jump into the HSA account business without providing adequate customer support are likely to withdrawal.

Several companies that offered low cost or free account administration have now added Visa or Mastercard debit card access for members. Almost all account administrators now offer a Visa or MasterCard debit card an online account management as a standard features.

The administrators are now publishing the recommended deposits in monthly amounts rather than the annual amounts set by Congress. This makes much more sense from a consumer's perspective when the need to budget a big ticket expense. Car dealers, for example, quote the cost of a vehicle as $299 per month rather than as $3,600 per year.

Will these changes by themselves resurrect a massive public interest in Health Savings Accounts? Clearly not. But the added features will certainly make the adaption a lot easier when scores of employers drop their full coverage health plans in the coming months of the current recession.

Tags : health savings account, hsa

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