HSA Figures

I’ve already admitted that Health Savings Accounts are not the full solution to our health care system, but they are among the most powerful tools that we have today. The example of Whole Foods grocery really illustrates the point.

Five years ago, the Whole Foods grocery chain switched to a high-deductible plan. If an employee has a sore throat or a sprained ankle, he pays. But if he gets cancer or heart disease, his insurance covers it.

Whole Foods puts around $1,500 a year into an account for each employee. It’s not charity but part of the employee’s compensation. It’s money Whole Foods would have otherwise spent on more-expensive insurance. Here’s the good part for employees: If they don’t spend the money on medical care this year, they keep it, and the company adds more next year.

It’s called a health savings account, or HSA.

CEO John Mackey told me that when he went to the new system, “Our costs went way down.”

Yet today, some workers have $8,000 in their accounts.

The same articles states that:

If people paid their own bills, they would likely buy high-deductible insurance (roughly $1,000 for individuals, $2,100 for families) because on average, the premium is $1,300 cheaper. But people are so conditioned to expect others to pay their medical bills that they hate high deductibles: They feel ripped off if they must pay a thousand dollars before the insurance company starts paying.

From my own experience when people really understand the program they like it. Here are the numbers that our company found as we have been shopping for insurance lately. We chose one high deductible plan and one standard plan that each employee could choose from. The high deductible plan was $2500 a year cheaper in premiums. We calculated that the worst case scenario for the high deductible plans – paying every penny of the deductible without receiving a cent from the insurance company – would cost $884 more than the same medical care under the standard plan (this assumes that much of the deductible is used in preventive care where the standard insurance charges a copay for each visit, if it were some accident that cost the whole deductible for the HD plan the difference is no more than $700). On the other side – the person on the HD plan has to spend a minimum of $3900 (okay it came out to $3899.99) before they have spent as much – including premiums – as the person on the standard plan.

When we started discussing the plans as employees there were 2 of us who were already planning on getting HD plans. By the time we made the decision on what plans to offer 70% of the company had decided to switch to HD plans.

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About David

David is the father of 8 extremely organized children (4 girls / 4 boys) who is constantly seeking answers to tough questions related to parenting, education and politics while moonlighting for 40 hours each week as a technology professional. He also enjoys cooking, gardening, and sports.
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2 Responses to HSA Figures

  1. Reach Upward says:

    A few decades ago most insurance plans were high deductible plans and were intended to only cover catastrophic situations. But there was widespread criticism that these plans incentivized people to forego preventative treatment that could minimize catastrophic conditions.

    The medical industry, the insurance industry, public health officials, unions, politicians, and many other players pushed for changes. There was a relentless push to erase barriers that might keep people from going to the doctor or from getting a medication. That is part of the reason people today are nearly completely separated from the direct economic burdens of their health care choices.

    HSAs are an attempt to straddle the fence and get the best of both worlds. They try to reconnect people to the economic realities of their most common health care choices. HSAs do not, however, completely overcome the original complaint that they incentivize avoidance of preventative care.

    HSAs are imperfect on the freedom side because people are not free to use their savings for anything but politically approved expenditures. Politicians should have no say in how I choose to use that money. HSAs are imperfect on the medical side because they arguably promote avoidance of preventative care, which can lead to future catastrophic costs that might otherwise be avoided.

    Still, imperfect HSAs can be part of fixing our medical system. A few additional elements should include lifting government controls on how many of which kind of medical degrees can be offered, having most routine care administered by nurse practitioners, and limiting extensions of drug and medical equipment patents. Jesse Harris had a good post on some of these ideas at this link: http://www.coolestfamilyever.com/2007/01/26/solving-the-health-care-crisis-why-nobodys-solution-will-fix-the-problem/ .

  2. David says:

    One of the things that I like about our HSA plan (that I didn’t mention above even though it makes the numbers even better) is that preventive care such as regular checkups and immunizations are free even before the deductible has been met.

    I just think that it’s important to help people understand the power of the few tools that we already have at our disposal. When people really understand HSA’s they start to take advantage of those tools and that can start to make a difference before we ever manage to get our congressmen to agree on any other solutions to improve our ailing system.

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