National HSA use triples since March 2005

The number of people using health savings accounts in conjunction with lower-premium, high-deductible health insurance plans tripled between March 2005 and January 2006, according to a survey by America’s Health Insurance Plans. More than 3.1 million people in the United States are using that combination to cover their health care expenses.

The HSA program was signed into federal law in December 2003. An HSA is an account that allows people with high-deductible health insurance plans – defined as having annual deductibles of at least $1,050 for individuals or $2,100 for families – to set aside money that can be used for certain medical expenses. (See box at right.)

HSAs offer multiple benefits for consumers, said Bendie Anderson, marketing director for Benefits Unlimited, which offers HSA plans for individuals and businesses.

“You’re taking the money that you’d normally be paying toward the premium on a regular health insurance plan, and you’re putting it in your account,” Anderson said. “(HSAs) give more freedom to the insured. They can get more things done than what their actual health insurance plan would pay for.”

Annually, account holders can contribute up to $2,700 if they have individual health coverage or up to $5,400 if they have family coverage. People age 55 and older can make additional “catch-up” contributions. The current limit on catch-up contributions is $700 a year, but that will increase to $1,000 annually by 2009.

Also, according to the U.S. Treasury, out-of-pocket expenses under HSAs, including deductibles, co-pays and co-insurance, cannot exceed $5,250 for individuals or $10,500 for families. Those limits are for 2006; deductibles and out-of-pocket expenses are adjusted annually for inflation. The U.S. Treasury provides HSA information on its Web site www.ustreas.gov/offices/public-affairs/hsa/.

According to the U.S. Treasury, which does not endorse or recommend any specific companies, high-deductible health plans may be available through any business that sells insurance coverage in the state.

In addition to the insurance benefits, there also are tax advantages to HSAs. Contributions to HSAs are tax-deductible, while withdrawals for qualified medical expenses and earnings on HSA investments are tax-free.

Anderson said the HSA program also has advantages over the existing medical savings account program.

“With an MSA, you had to use the money by the end of the year,” Anderson said. “On an HSA you don’t have to do that – it carries over from year to year.”

For example, families with infants or very young children can roll over HSA contributions so that as the children age, if medical needs decrease, there will be additional funds left over to use for expenses such as orthodontics.

The response locally has been promising.

Great Southern Bank began offering HSAs in September. Barby Pohl, Great Southern’s director of retail banking, said about 120 people have signed up for the program in the first six months.

“It’s better than what we had anticipated, because as the accounts have been opened, there was an education process that had to go on with the public,” Pohl said. “As people have become more educated on the health savings accounts and high-deductible health plans, the number of accounts continues to increase. It has exceeded our expectations, and we fully expect the line will continue to grow.”

Great Southern’s program offers customers a 3.97 percent annual interest yield on their HSA deposits, though institutions offering HSAs do have the option of investing the money in stocks or mutual funds – any investment allowed for a standard individual retirement account is also allowable for an HSA.

Examples of allowable uses for HSA money:

Physician office visits, acupuncture, chiropractors, dental treatment, prescription and over-the-counter drugs, eyeglasses, home care, laboratory fees, long-term medical care, long-term care insurance, Medicare deductibles and premiums, psychiatric care, therapy and vaccines