Understanding Health Savings Accounts A relatively new concept, the health savings account was created as a way to help consumers save and pay for family health care. The tax-free accounts require users to do their own research on medications and procedures, but they may be a big money-saver for some families.
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Understanding Health Savings Accounts

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Understanding Health Savings Accounts

Understanding Health Savings Accounts

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This is TALK OF THE NATION. I'm Neal Conan in Washington.

New census figures out today show that in 2004, the number of Americans without health insurance increased by 800,000 to almost 46 million people. The number with health insurance grew, too, by about two million. Over the next month, many of those with coverage will choose from various plans their companies offer, and some companies are beginning to offer a relatively new alternative called a Health Savings Account. An estimated one million Americans use HSAs already. This is an idea sponsored by the Bush administration and passed by Congress that works a little bit like an individual retirement account. You can deposit, say, a thousand dollars tax-free that you can spend on health care as you see fit. If you don't spend it, you keep it in an interest-bearing account or a mutual fund. Earnings are tax-free, too. If you change jobs, your HSA moves with you. Over time, your account builds up and it's not taxed as income when you do need to spend it for health coverage.

As you might suspect, the idea is actually a little bit more complicated than that quick outline. And today, we're going to try to cut through the confusion. If you want to know more about how HSAs work and the possible risks and benefits, give us a call. We'd especially like to hear from those of you with HSAs already and from small-business owners who offer HSAs about how it's working for you. Our number is (800) 989-8255; that's (800) 989-TALK. The e-mail address is totn@npr.org.

Later in the program, jazz great Herbie Hancock joins us.

But first, questions and answers about Health Savings Accounts. We are joined now by Dr. Henry Simmons, the president of the National Coalition on Health Care. He's with us here in Studio 3A.

Thanks very much for joining us today.

Dr. HENRY SIMMONS (President, National Coalition on Health Care): Thank you, Neal.

CONAN: So what kinds of people are choosing HSAs and why?

Dr. SIMMONS: Well, the kinds of people I think most choosing them, though it's still too early to really have a good summary of the type of population finding them attractive. But I believe that the ones who are finding it most attractive, Neal, are those who are young, relatively healthy and wealthy enough to bear the cost, obviously, because the cost could be substantial depending on what kind of a HSA they decide to buy.

CONAN: Well, let's talk about those costs, then. There are costs associated with it, beginning with that thousand-dollar deposit, I guess.

Dr. SIMMONS: Well, there's far more than that, of course. But yes, there's certainly no free lunch here. And it's very important for anybody contemplating purchasing an HSA and the insurance plan that has to accompany it to really understand thoroughly what they're getting into and what the pros and cons are short- and long-term.

CONAN: Now as I understand it, that insurance plan that comes along with it--you would be paying a lot less in monthly fees for your insurance policy if you have an HSA.

Dr. SIMMONS: Yes, but you've got to understand that the reason you're paying a lot less is because you have a lot higher out-of-pocket expense that you've decided to bear yourself.

CONAN: The deductible.

Dr. SIMMONS: Yes, the deductible. So it's not really fair to say that it's less expensive automatically because you have to pay, depending on what deductible you choose, a thousand, up to $5,000, up to $10,000 deductible as a family, depending on which plan you choose.

CONAN: And these plans, as you're suggesting, vary, and they also vary state by state because of different regulations.

Dr. SIMMONS: There is a great deal of variation, and that's what makes it so difficult for many, many people to understand.

CONAN: Now basically, one of the great confusing parts about this HSA is say you've got a Health Savings Account and, all right, you're young and healthy and relatively healthy and you decide to add up this money and look ahead to a major savings account, but what if something happens? What if you have to spend it? What happens after you've spent the money in your Health Savings Account?

Dr. SIMMONS: Well, of course, there's nothing left. You only have so much; you're allowed to put in so much each year. And if you are lucky and have no health expenses, obviously that amount accumulates and you can take it home and use it for future medical expenses. You can't use it for other medical expenses--you can't use it for other expenses.

CONAN: Oh, not without taking a big tax hit.

Dr. SIMMONS: Not without taking a very substantial tax hit.

CONAN: And--but the idea is that, you know, we're all going to need medical expenses sooner or later, so that there's a big pot of money maybe there when you're 65, 75 years old and need it.

Dr. SIMMONS: Well, in a way that's sort of a misnomer, that there will be a big pot of money there. In fact, the Employee Benefit Research Institute just recently did a study--and they're a very respected organization nationally, frankly--and they--you know, for those who think, well, if I build up this account, I'll be able to use that to pay all my expenses as I age. And as a matter of fact, that's a misconception. Even if you started at a very young age accumulating these dollars, the costs of health care are rising so rapidly and the cost of insurance premiums that at the age of--if you were lucky enough to live to be 80 years of age, even though you've saved money all that time, your expenses out of pocket, which are projected to continue to increase, would be about $337,000. Now you're not going to--no matter how early you start and how much you put away, you're not going to be able to save that amount of money. So you would fall far short.

CONAN: No, go ahead. I'm sorry.

Dr. SIMMONS: Well, that's it. But again, I think it's important for whoever's contemplating this to recognize that there is that liability at the end.

CONAN: Just let me clarify that if I could. In other words, health-care costs are rising really, really rapidly, and no matter what kind of interest-bearing account you have your HSA in, even if you put it into stocks that do pretty well, you could be losing money on that side, too.

Dr. SIMMONS: Well, you could. And the fact is that health insurance premiums are rising at four to five times the inflation rate and four to five times the rate of, you know, take-home pay. Yes.

CONAN: We want your questions about HSAs, how they work, do they work for you if you've got one. (800) 989-8255, (800) 989-TALK. Our e-mail address is totn@npr.org.

And let's start with Gretchen. Gretchen calling us from Christianburg, Virginia.

GRETCHEN (Caller): Yes, hi. I just wanted to make a comment that I'm a mother of three. My husband works and we have an HSA high-deductible insurance policy through his work. And we were previously uninsured. And we found that the HSA and the high deductible policy have been very beneficial to our family in that they make us very conscientious health-care consumers. We're much more aware of what we're being charged for services, and we actually have been erroneously charged both as uninsured patients and insured patients. And in both cases, because we're paying that up-front cost until we've reached that deductible or in the case of being uninsured we were paying everything, we are very aware of that and we were able to let the provider know that we were charged erroneously. And the charges were taken off. And I think it's just made us more responsible overall in finding health-care people who meet our needs.

CONAN: Well, Dr. Simmons, that's--proponents of HSAs, Gretchen's point exactly is what they're arguing about, that consumers get to make more choices about how they spend their money as opposed to having all their choices made by HMOs.

Dr. SIMMONS: Well, that's a supposed advantage, and I think in some respects it is a real advantage. But it's important to point out that the charges for health care, which the average person and their family will be exposed to throughout their life, are so complex and so difficult even for experts to understand, and most of them are incurred long after you've sought the care. So you can't make an intelligent decision beforehand. And I know you're going to have Professor Uwe Reinhardt on later in your program, who will explain that this is--the average consumer trying to understand the pricing system, it is an extremely difficult task, not only for the individual consumer but for experts in the field.

CONAN: Gretchen, do you find yourself spending a lot of time on this?

GRETCHEN: No, we actually don't. We haven't had--as I said, our main concern has just been with being erroneously charge--I mean, when I say erroneously charged, I mean charged for a service we didn't receive, such as an ultrasound or in another case there was an emergency room visit and we were charged for a doctor's visit that didn't happen.

CONAN: I see.

GRETCHEN: And so I also wanted to point out, though, that I have plenty of friends who are insured in a traditional manner within traditional health insurance policies, and they still incur substantial personal costs, even though they're paying this monthly...

CONAN: Premium.

GRETCHEN: ...premium and they--still, there are services that aren't covered by their policy or maybe they want to get a second opinion, and that isn't covered. There's--I think the implication that because you buy a traditional health-care policy that you won't incur personal costs outside of what you're paying for the premium is false.

CONAN: And Gretchen raises another point, Dr. Simmons, and that is she and her family were previously uninsured. This is an alternative for people who don't have insurance right now, isn't it?

Dr. SIMMONS: Sure. And, Gretchen, I would--first of all, what is the deductible in your plan?

GRETCHEN: Well, actually, we've experienced two different policies now. The first one through his employment was a $5,000 deductible, which was pretty substantial.

Dr. SIMMONS: Sure.

GRETCHEN: However, his employer did contribute the maximum amount into the HSA. They recently rolled over to a different policy carrier, and this new deductible is, I believe, 2,600 a year. It's a lower deductible. So--but that also means we get less put into our HSA.

Dr. SIMMONS: Sure.

GRETCHEN: So if we don't--you know, so that's less--it doesn't build up as quickly that way...

Dr. SIMMONS: Sure...

GRETCHEN: ...if we're not using that money.

Dr. SIMMONS: And I would imagine being a young family that you haven't had any extraordinary expenses, you know, to really judge how your plan would fare for you in that kind of a situation.

GRETCHEN: Well, I guess that's true in a real medical crisis such as maybe, you know, a diagnosis of a terminal illness or...

Dr. SIMMONS: Right.

GRETCHEN: ...something like that. You're absolutely right. But again, I mean, this report that came out just last year about 50 percent of bankruptcies are medical--people who are covered by insurance and they still have to claim bankruptcy 'cause they have all these other expenses.

Dr. SIMMONS: Sure.

GRETCHEN: I mean, I think that's a real statement to...

CONAN: It's also part of the way that Medicaid works 'cause you have to in some cases not have any money to qualify for Medicaid. So...

GRETCHEN: Exactly. Exactly.

CONAN: Yeah.

Here's an e-mail we got from Diane in Golden, Colorado, that sort of echoes your point, Gretchen. `We've had an HSA for over a year. We've been happy with it, but it certainly makes you evaluate and re-evaluate every time you have to take your child to the pediatrician's office because you're paying for the visit yourself. It puts a lot more responsibility in your lap for your health care.' So...

GRETCHEN: Exactly.

CONAN: Gretchen, thanks very much.

GRETCHEN: Sure, thank you.

CONAN: Bye-bye.

GRETCHEN: Bye-bye.

CONAN: We're going to take a short break now and continue taking your calls when we return about Health Savings Accounts. We'll also be talking with a co-owner of a restaurant who's offering health service accounts for his employees. See how it's working for him. If you're involved in one of these plans, give us a call. How is it working for you? (800) 989-8255, (800) 989-TALK. The e-mail address is totn@npr.org. Back after the break.

I'm Neal Conan. It's TALK OF THE NATION from NPR News.

(Soundbite of music)

CONAN: This is TALK OF THE NATION. I'm Neal Conan in Washington.

We're talking today about the ins and outs of Health Savings Accounts, an idea endorsed by the White House, passed by Congress, to offer an alternative for health-care consumers and for employers trying to keep costs down on the benefits that they provide. If you have questions about how it works, if you're involved in one of these plans, call us and tell us how it works: (800) 989-8255. E-mail us: totn@npr.org. Our guest is Dr. Henry Simmons, president of the National Coalition on Health Care.

And joining us now is Frank Ciotola, co-owner and vice president of DaVinci Ristorante in Columbus, Ohio. And he's with us by phone from his restaurant.

Nice of you to be with us today.

Mr. FRANK CIOTOLA (Co-owner and Vice President, DaVinci Ristorante): Thank you very much, Neal. Good to be there.

CONAN: Why did you start offering Health Savings Accounts to your employees?

Mr. CIOTOLA: Well, you know, it was a typical scenario of many small-business owners. You know, through the years, with premiums going up at double-digit rates, the way we would have to compensate is we continuously raised our deductibles; you know, we cut back the benefits of the plans to help keep costs from going up as high. We also went from we, the employer, paying 100 percent of the premium to having to co-opt that with the employees, and we were only paying 75 percent of the premium currently. Last year, our renewal came up in September this time last year...

CONAN: Right.

Mr. CIOTOLA: ...and our premium was going to go up 31 percent.


Mr. CIOTOLA: Yeah. It was going to be a big hit. So we quoted an HSA, and basically what happened was our premium went down by 31 percent. So we were able to keep the same premiums and go with an HSA account and not have an increase last year.

CONAN: Now do you contribute to the accounts as well?

Mr. CIOTOLA: We don't contribute on the behalf of the employees.

CONAN: You don't?


CONAN: OK. Now how do your employees like it?

Mr. CIOTOLA: Well, they like it because actually our deductible had gone up so high that, for example, for a family, the deductible for a family of a husband and wife and children was $6,000. So we were already at a high deductible type plan anyway. Now with the HSA, the deductible for a family is 3,400. So whereas before the maximum out of pocket was going to be 6,000 for a family, now we have a maximum of 3,400. And the 3,400 gets to be tax-deducted, whereas the 6,000, you know, with the traditional health plan, your deductible is an out of pocket.

CONAN: Right.

Mr. CIOTOLA: You don't get to tax-deduct that.

CONAN: I'm also wondering--I've read that this can be confusing to manage. A lot of paperwork involved here?

Mr. CIOTOLA: No. It's--you know, you want to keep your receipts from doctors or prescriptions and everything. But other than that, it's just the same paperwork as with traditional health plans.

CONAN: So as far as you're concerned, it's working for you, it's working for your employees, you're going to hold on to it.

Mr. CIOTOLA: Oh, absolutely. And if I can just plug in a little bit more, Neal, I also do financial advisory work for small businesses. Being a business owner myself, it was very important for me to kind of spread the word on something like this. I think they're fantastic. Your previous caller, Gretchen, called in and said that she was previously uninsured. I'm not exactly sure of the statistic, but I think 40 percent of HSA enrollees were previously uninsured. I know myself, I've helped three or four different people get an HSA, and they previously were uninsured. And I think it's a tremendous product. You know, it's not going to be the end-all to health insurance problems, but it's a great step in the right direction.

CONAN: Thanks very much.

Frank Ciotola, co-owner and vice president of DaVinci Ristorante, and he joined us by phone from the restaurant in Columbus, Ohio.

And, Dr. Simmons?

Dr. SIMMONS: Neal, I think Frank made some important points that might warrant some comment. He mentioned that his costs have fallen. And of course it's important to note that that's because somebody else is picking them up now through the employee themselves.

CONAN: Costs have been transferred from the employer to the employee.

Dr. SIMMONS: Exactly. Exactly. Certainly, you know, his costs have gone down, but they haven't gone away. They're just being paid by somebody else. He also mentioned that his premiums were rising 31 percent, had risen 31 percent. Because of the structure of the system now, one of the most critical problems in the system is that our costs are out of control and unless we do something very dramatic and comprehensive, they're going to continue to rise. So this problem hasn't gone away because of HSAs. It's still out there and it's going to affect every one of us and ultimately could have a good chance of compromising the whole economy, which many competent observers are concerned about. So I think it's important to point out what's happening to the total costs of care, not to the costs borne by a particular element of our society.

CONAN: Let's get another view on this. Health Savings Accounts are meant to push consumers to assume more responsibility for the money they spend on health care, as we've been talking about. To make it work, consumers need access to information about how much health care costs. Uwe Reinhardt is a professor of economics and public affairs at Princeton University, and he joins us now from the school's studios in New Jersey.

Professor UWE REINHARDT (Princeton University): Hi, Neal. Good to be back.

CONAN: What specific information will HSA consumers need?

Prof. REINHARDT: Let me get to that in a second. But can I make a quick remark on Gretchen?


Prof. REINHARDT: That puzzled me. She said now that she has a policy with a high deductible that forces her to look at her bills; she doesn't pay for visits she didn't have. I think she mentioned visits and so on. But if she was previously uninsured and paid the whole thing, why wasn't she then paying attention to being billed for visits she didn't have? You mean, when she was uninsured, she just paid for them and now that she's partially insured, she looks at the bill? Did that story sort of ring true to you?

CONAN: It rung true to me in the sense that maybe when she was uninsured, she didn't go to too many visits before because maybe she couldn't afford them.

Prof. REINHARDT: Well, that--OK. That's probably the only explanation because otherwise, it just wouldn't have made sense to me.

Now on the information, the idea of this concept called Health Savings Account, which is actually just a misnomer. What we're really talking about is an insurance policy with a very high deductible, anywhere from 2 to 10,000, and cost sharing often on top of it. That's the core of it. To help people meet the deductible, the law allows them to deposit money out of pretax income into a Health Savings Account, which therefore is tax preferred. Now that Health Savings Account, of course, is cheaper for a rich person than a poor person. Why is that so? Because we have a progressive income tax. So someone in a high bracket like myself, a professor, for every buck I put in there, it costs me only 50 cents after taxes. For the janitor of Princeton, for every dollar they put in there, they save only 15, 20 cents in taxes. So it costs them 80 cents on the dollar to buy health care. That in itself is a strange way--I'm not a rabbi or a priest, but I wonder what a rabbi or a priest would think of a design that makes health care cheaper in after-tax dollars for rich people than for poor people.

But leaving that aside, to make it consumer-driven, the consumer would have to have information on the quality of the services and the price of the services offered by different hospitals and doctors in their market area. I would invite any listener to try to do that today. Just tell me what Web site you would click on to get information on all the community doctors' prices. Given that each doctor's price schedule can have up to 9,000 items in it and a hospital can have up to 20,000 items in it, how will information on prices actually present themselves to the consumer? And then you have the issue of quality on top of it. How would you learn about the quality of an individual doctor, an individual hospital?

Again, I challenge listeners to try to do that today in their community. But without information, you are in the health-care market like somebody blindfolded in a department store who's supposed to be a smart shopper. How can you be a smart shopper when you're blindfolded?

CONAN: Well, mightn't this--if these expand and there's a million of these already, if these do expand, might they force providers to significantly change the way they do business?

Prof. REINHARDT: That is the hope. This is--basically, the advocates of this construct say once enough people have these and clamor for information, it'll come forth. And it might. I'm not sure. The reason I am somewhat cautious here is we were made the same promises in the early '90s that we would have this sort of information for the HMOs. And for the most part, people with HMOs were forced to buy a pig in the poke. They did not have information on the quality of the providers associated with the HMOs or even on the HMOs. It was very sketchy information and on top of that voluntarily provided by the providers. And obviously one would have to have some question about information that is provided by the very people who are the providers.

CONAN: Here's an e-mail question we got from Mike in Cleveland, Ohio. `Can HSAs be used on alternative medicines such as acupuncture or hypnotherapy?'

Prof. REINHARDT: It depends. There is a regulation now from the Treasury of what does qualify for spending out of the HSA. You can't spend for things that the IRS doesn't recognize. And I don't know at the moment whether alternative medicine is in there. My hunch is, the way our laws work, eventually more and more stuff will be funded out of HSA, including trips to Hawaii that some doctor feels are necessary. They're not now covered, but at some point the pressure might be to cover them. You know how legislation and lobbying works.

CONAN: Let's get a caller in on the conversation. This is Ray. Ray is calling us from Reno, Nevada.

RAY (Caller): Hi. Thanks for the good show you have...

CONAN: Thanks.

RAY: ...Neal. Got a question and I'm offering you some advice. I know it is not often a benefit as far as investment. If you have a way of doing it, please let me know, because the one I have--basically no investment benefit, no interest, and also pretty good charges every month. My comment was HSA really could be used for prevention, not treatment, because treatment typically costs a lot more than prevention. But, unfortunately, HSAs cannot be used in many preventive items, such as, for example, fitness or exercise, nutritional treatment or what you're just talking about...

CONAN: Is that right, Uwe Reinhardt?

Prof. REINHARDT: Well, I mean, obviously, there are limits. When you talk about exercising, that can be so abused. Probably at the moment, the IRS is very cautious on some of these items. But regular preventive health care--going to the doctor's, getting colonoscopies--that would clearly be covered. In fact, in my mind, a very smart offer of this construct would make those things covered with insurance. I know Aetna, for example--they offer a product like this and they make preventive care, in fact, first-dollar insured. They exclude that from the catastrophic policies...

CONAN: Yeah.

Prof. REINHARDT: ...simply because they want to encourage it.

CONAN: Thanks very much, Ray.

RAY: All right. Thank you.

CONAN: And here's another e-mail question, this from Dave in Madison, Wisconsin: `Can Health Savings Accounts be used to fund long-term care, such as in a nursing home?'

Prof. REINHARDT: I would imagine it could. Again, I don't have that list in front of me, but I think that would be an easy one to get on that list because it's really part of health care, and probably already is.

CONAN: Yeah, up to the--depending on how much money you have in your Health Savings Account, go through it pretty quickly for nursing home care.

Prof. REINHARDT: Very quickly, yes.

CONAN: Uwe Reinhardt, thanks very much for being with us today.

Prof. REINHARDT: Oh, my pleasure.

CONAN: Professor Reinhardt teaches economics and public affairs at Princeton University and joined us from the studios at Princeton in New Jersey.

And you're listening to TALK OF THE NATION from NPR News.

Earlier in the broadcast, we were talking with Frank Ciatola, the co-owner and vice president of DaVinci Ristorante in Columbus, Ohio, and he's rejoined us now. After he was off the air, Dr. Simmons was characterizing some of the way he was using his money, and I understand we were incorrect about that.

Mr. CIOTOLA: Yeah, Neal. Thank you for the opportunity. Yes--I'm sorry, was it Dr. Simon?

CONAN: Simmons.

Mr. CIOTOLA: Simmons--mentioned that I had redirected the cost from our company to our employees, and that is not correct. We lowered our premium to be able to continue to offer the health-care plan, period, but--and I mentioned in my segment the important part was we reduced the exposure to the employees from $6,000 of out-of-pocket expenses to $3,400, which is tax-deductible to the employee, meaning that their net out-of-pocket probably is reduced to about $2,500. So the employ--we didn't shift costs to employees. Their costs remained the same. And, in fact, we were saving the employee a potential, you know, out-of-pocket expense of $6,000. We reduced that to $2,500. So it's a great benefit to the employees. We did not shift our cost and pile on more on the employee. And I thought that was an important point to correct.

CONAN: OK. Thanks very much. We appreciate your getting back to us on that and clarifying it, and I'm glad we had the opportunity to do that.

Mr. CIOTOLA: Thank you, Neal. Bye.

CONAN: All right. Bye-bye.

Now let's see if we can get another caller in on the line. This is Reagan, Reagan calling from Tulsa, Oklahoma.

REAGAN (Caller): Hi.


REAGAN: I had a question. We are looking into doing an HSA, and we had talked to an insurance salesperson. He said that the HSA--what you paid into it personally was considered a tax credit and taken off the bottom line of how much you owed every year. And I wasn't sure if he was just, like, aware of the difference between a deduction and a credit...

CONAN: Mm-hmm.

REAGAN: ...because, you know, it makes a lot of difference. And so I just wanted to know if you had an answer for me.

CONAN: Dr. Simmons, can you help us out there?

Dr. SIMMONS: Well, Reagan, the contribution that comes from the individual--that individual, on his tax return that year, takes it off as a deduction. That's how that's handled.

REAGAN: So it's not a credit--like if you owe $6,000 and you paid $5,000 in, now you only owe a thousand to the Internal Revenue Service, right?

Dr. SIMMONS: Well, no. I'm not quite sure I understand what you just said, but the way it's handled, whatever contribution you decide to make to your HSA, which in a family is limited to $5,250 a year and individual $2,650--that is a--you take that off your tax return. That's not taxable income. That's how you handle it.

REAGAN: OK. OK. That answers my question.

CONAN: OK. My head is spinning, Reagan. I hope yours is on straight.

REAGAN: I'm ready--I'm there, I think.

CONAN: All right.

REAGAN: Thank you.

CONAN: Thanks very much for the phone call.

REAGAN: Uh-huh.

CONAN: We're going to continue taking a couple of calls, more questions on HSAs, a new service being offered, a new kind of alternative being offered by many companies. Of course, many Americans will be choosing their health service providers and their plans in the coming months, so this is relevant now and a million people have already chosen HSAs. (800) 989-8255, if you'd like to join us; (800) 989-TALK. The e-mail address is totn@npr.org.

Also after the break, we'll be talking with Herbie Hancock, jazz legend. I'm Neal Conan. You're listening to TALK OF THE NATION from NPR News.


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We're wrapping up our conversation about health-care accounts. Our guest is Dr. Henry Simmons. He's the president of the National Coalition on Health Care. He's with us here in Studio 3A. Our number, if you'd like to join us, is (800) 989-8255; (800) 989-TALK. Our e-mail address is totn@npr.org.

Health Savings Accounts--and let's get another caller on the line, and we'll begin with Jan, Jan calling from Parkville, Missouri.

JAN (Caller): Hi there.


JAN: I have the prototype of the Health Savings Account called the medical savings account, an MSA.

CONAN: Mm-hmm.

JAN: They--and I heard about it on the radio in 1998. At that time, the only company that offered it was Fortis. But I started saving. I'm self-employed and I just started saving then because it was, you know, taken off of my tax liability, whatever I contributed. So I've saved since 1998, and this year I ended up with a cracked kneecap, and I had saved almost $7,000. So as I would, you know, go to my providers, I would give them my insurance card, and then they would--you know, my insurance would deduct, you know, what was above their customary charge, and then they would, you know, print out a check to me from my medical savings account, and then I would deposit that in my account and then I would pay the doctors myself. And I just thought it was very slick, and I was just so happy to have that money set aside.

CONAN: So it worked for you.

JAN: It worked really great.

CONAN: All right, Jan. Thanks very much. Appreciate it.

And let's talk now with Julia, Julia. Julia's calling from Warren, Michigan.

JULIA (Caller): Hi.


JULIA: Thanks for taking my call.

CONAN: OK, and I think you only have one Julia in your name, not three, but go ahead.

JULIA: Well, I was just calling because my husband works for a small business in Michigan. He's 28, and his company was looking to take over an HSA for their insurance--problems with premiums going up. And when the whole business went to enroll in the HSA, only one of the 20 employees qualified. There were all of these restrictions on pre-existing conditions, and the main age it has worked with--between 30 and 50. And because it turned out only my spouse qualified under the plan--they had a minimum number of people that would have to enroll for the business to be accepted.

CONAN: Hm. Dr. Simmons, would that be true of one particular plan, or is that true of HSAs in general?

Dr. SIMMONS: Well, I guess it's true of the--whatever population group you're trying to insure, no matter whether under HSAs or otherwise, faces that potential problem. How many have a pre-existing condition? How many does the insurer note will be very expensive to cover? And they can either refuse them or establish such a high premium that it no longer is attractive.

CONAN: So that's...

Dr. SIMMONS: So it's a potential problem, you know, throughout the insurance world.

CONAN: And not specific to HSAs.

Dr. SIMMONS: Not specific to HSA, no.

CONAN: So what did--what was the decision, Julia?

JULIA: Well, the company decided to stick with the local Blue Cross in the area, just because it did not have the pre-existing clause on their coverage. And so everyone was able to remain insured and it didn't create the headache for the owner that he was looking at getting with his employees basically having no benefits under the HSA.

CONAN: But then stuck with the high premiums of the Blue Cross.


CONAN: Yeah, so in a way, it's a no-win situation there.

JULIA: Correct.

CONAN: Yeah. Thanks for the call, Julia.

JULIA: Thank you.

CONAN: And, Dr. Simmons, the no-win situation--in a way, HSAs may work for some people, may not work for others. I think we're just beginning to scratch the surface of some of the problems and some of the benefits that people can accrue. Nevertheless, the whole health-care system--that's out there--these costs continue to rise by double digits every year, and this is a problem that's not going to go away, even if everybody has HSAs, unless there's this massive, somehow, consumer rebellion that, again, the proponents of HSAs talk about that could force providers to act very differently than the way they're doing now.

Dr. SIMMONS: Well, Neal, I think you make a critically important point that I hope your listeners, you know, take to heart. The proponents of HSA basically had two important points to make: one, that this would help in dealing with the number of uninsured in this country and, two, that they would put a real brake on rising health-care costs, which are the two most important problems we face. Neither of those is likely to happen the way HSAs are now structured, and if we lose sight of that--you know, if we expect too much benefit from this--we're going to be harmed for not having dealt with the existing crisis that exists throughout the system. And, you know, that would be a tragedy for this country, because that's got to be dealt with or we're all going to be in very bad shape.

CONAN: Dr. Henry Simmons, appreciate your time today.

Dr. Henry Simmons is president of the National Coalition on Health Care, and he was kind enough to join us here in Studio 3A.

Coming up next, Herbie Hancock and "Possibilities."

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