In era of high health care costs, health savings accounts grow in popularity

In era of high health care costs, health savings accounts grow in popularity

Not so long ago, people who had health insurance through their employer often paid nothing at all in premiums, and deductibles for service were low or nonexistent.

Not anymore. Many employees now share the cost of their health care coverage with employers, and deductibles are often much higher than in the past.

The result: Pinched budgets and a need to build up savings to help defray the cost of unexpected medical procedures. The solution for a rapidly increasing number of Americans: Health savings accounts, or HSAs.

HSAs defined

In simplest terms, HSAs are like the 401(k) accounts we’re all familiar with, only instead of saving for retirement they are used to build up funds for health care expenses. As with 401(k)s, contributions, investment earnings and withdrawals from HSAs are all tax-free.

First introduced to the public in 2003 as part of the federal Medicare Prescription Drug Improvement and Modernization act, health savings accounts are becoming the most popular type of medical savings account for many reasons. According to the National Center for Policy Analysis, more than  21 million people in the U.S. — or about 12 percent of the privately insured market — are enrolled in “consumer-directed” health plans that include a health savings account.

With that in mind, Blue Care Network recently announced a new HMO group health plan, BCN HMO HSA, that combines a high-deductible health plan with an HSA..

Explosive growth

Why such explosive growth?

One explanation is that health plans that include health savings accounts are attractive to employers. Aside from encouraging employees to become more actively involved in their health care spending, HSAs allow employers to set things like employee deductible levels or out-of-pocket maximums and design a plan that meets their health care budgets.

The savings for employers can be substantial. Employers offering low-premium, high- deductible health plans save on average $1,500 per employee every year compared to employers who offer regular HMO or PPO plans.

Employees, meanwhile, are able to budget and save for their health care expenses and decide how to spend their money. Contributions to the HSA account are immediately fully vested and can be made by the employee, employer and employee and in some instances, a third party.

Many believe that if an employee is more responsible for their health care expenses, they’ll be more likely to make positive health and wellness choices. So, while this type of health plan fosters consumer accountability on multiple levels, it also can help stabilize health care costs.

The new BCN HMO HSA product joins BCN’s already successful Healthy Blue HMO HRASM plan and Blue Cross Blue Shield of Michigan’s Healthy Blue HSASM, Healthy Blue HRASM and Healthy Blue FSASM PPO plans.

Learn more about the new plan here.

Photo by apandaneal

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