Why Health Savings Accounts are No Longer a Banking Industry Pariah

The High Deductible Insurance Competition Heats Up

By Dr. David Edward Marcinko; MBA

[Editor-in-Chief]

As ME-P readers are aware, I’ve had a High Deductible Healthcare Plan [HDHP] coupled with a Health Savings Account [HSA] for my family, and consulting firm, for more than a decade. We’ve been very pleased with it thus far. No significant health problems along the way; just a few scares that proved costly, but benign, because of physician over-protection, over-reaction, or liability phobia; i.e., its better to be safe, than sorry!.

Still, having some economic skin in the insurance game because of the high-deductible feature, makes one an informed consumer. It also provides a sense of empowerment which, while ultimately illusionary for mortals, does offer a bit of self-control. After all, while we can’t mitigate against drunk-drivers and catastrophic diseases, we can live a healthy lifestyle and pay out of pocket for true health “maintenance” … much as we self-pay to maintain our cars and homes, etc. We can do our best … and hope for the rest.

Of course, the savings portion [HSA] has always been a secondary after-thought relative to the actual re-insurance coverage terms, exclusions and conditions. I personally remain focused on the indemnity or PPO type with full coverage, no co-payments and few restrictions. After all, if I use up my high-deductible for an adverse health incident, I figure I have far more problems to worry about than economic. My health, well-being and probably life are significantly in peril.

Nevertheless, as a health economist, I have always appreciated the above market rates given to my cash HSA account; 5% to 4.0% historically; and now 2.5% even after the domestic implosion thru 2010. Compared to the paltry 0.19% in my FDIC protected Wachovia money market deposit account, or the 0.5% in my non-FDIC protected money market mutual fund [brokerage] account; this is a great deal. And, it is tax exempt.

Oh the Irony! 

So, it comes as some surprise that after more than a decade, and the recent health insurance reform political debacle, that there is a surge of interest in the HSA companion. This time however, interest comes not from the insured’s – but the insurers. And, not from the health insurance industry, but rather from the affiliated [and desperate] banking industry.

How so – and why?

Well, it now seems some insurance companies actually desire the business of folks like me who are willing to bear a higher deductible in return for lower premiums, or who are willing to research CPT® code prices and question the efficacy of the procedures they negotiate with physicians in a collaborative fashion; or who are willing to watch their weights and abstain from over-indulgences for their own good. How novel; and again, why?

It’s the HSA pot-o-gold; Duh!

The Proof

Below, is a copy of an email I personally received from eHealthInsurance soliciting my separate health savings account [HSA] business; not my health insurance coverage business:

Dear David,

Did you know that your health insurance plan can be complemented by a Health Savings Account (HSA)? If you haven’t opened an HSA yet, it’s not too late! An HSA allows you to:

  • Use funds to pay for copays, deductibles, prescription drugs, dental services, vision care and more
  • Save money by deducting 100% of your HSA contributions from your taxable income
  • Earn tax-free interest on the funds that accrue in your account over time
  • Grow your account from year to year – the money you contribute won’t expire; you can even use an HSA as a secondary retirement savings account

There are no penalties or taxes when you use your HSA funds to pay for qualified medical expenses. Take advantage of your health plan’s benefits and open an HSA today! eHealthInsurance has partnered with nationally recognized, highly-rated HSA banks to offer you industry leading choices:

  • The Bancorp Bank
  • HSA Bank
  • JPMorgan Chase Bank
  • OptumHealth Bank
  • Sovereign Bank
  • Wells Fargo Bank

We’re with you every step of the way

Our representatives are also available for online chat 24 hours day.

Gary Matalucci
Vice President of Customer Care

The Question Is?

Such the deal; NOT!

So, any thinking HDHP participant [like me] must logically ask why such “nationally recognized, highly-rated HSA banks” would offer above market rates during these times of essentially zero interest rate levels.  Why the interest at all? Are they trying to loose money; or are they just befriending me?

As tennis player John McEnroe might say: are you serious!

Assessment

Yes John, the high rates are a serious loss-leader for more expensive products.

These banks want to make money; not from the non-existent interest rate spread on your HSA cash, but by enticing us to place this growing cash horde into their “investment vehicles.”  In the recent past, some of us mortgaged our homes chasing the stock market or were goaded into flipping houses. And now, these same bankers are encouraging us to mortgage our health insurance on whatever high-priced, low-quality, fee-ridden, load bearing, snarky “investment vehicles” they can pawn off on us.

Of course, the health insurance companies get a fat sales commission or percentage cut, as well. A win-win situation for all but us – the insured.

Think AARP.

My Personal Advice

Do not do it. Do not take the bait.

The HSA portion of your HDHP is for paying premiums and future medical care in the event of a health catastrophe. It is for savings, not for investing in a risk-bearing vehicle. Far too many of us realized too late that a home is a place to live – not an investment. Likewise, a health savings account is for your health, and health insurance – not risky investing.

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Assessment

Well, that’s my opinion as a retired surgeon, former insurance agent and financial advisor.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, urls and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

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10 Responses

  1. Dr. Marcinko,

    Absolutely a “right-on” post.

    I bet you are like me, longing for reinstatement of the Glass-Steagall Act, legislation that separated commercial and investment banking activities.

    Keep up the good work!

    Stuart

    Like

  2. HIMSS Meeting in Atlanta, GA

    The HIMSS chief touted the Medical Banking Project and unveiled it this past Sunday at HIMSS10, in Hot-lanta, as CEO Stephen Lieber kicked off the Medical Banking Boot Camp with a keynote address.

    http://www.healthcarefinancenews.com/news/himss-chief-touts-medical-banking-project.

    Nice call Dr. Marcinko.

    Mary

    Like

  3. Dr. Marcinko,

    You are right about the banking industry and its emerging interest in healthcare.

    In fact, Mary is correct with her comment on the new HIMSS medical banking project [MBP] showcased recently at the annual meeting in Atlanta. And, in a recent comment, Esther Dyson called medical banking a “top lever for healthcare change.”

    Sharon

    Like

  4. 10 Million HSA Users … and Counting

    While healthcare reform is causing many people to pause in buying an insurance policy, 10 million Americans have chosen Health Savings Accounts.

    Many individuals and companies are turning to HSAs as a means of reducing total healthcare costs while building a retirement nest egg.

    In fact, such industry giants as GE and Deere are using HSAs to improve worker health and also reduce the climbing costs of healthcare insurance. For many individuals and smaller businesses, HSAs have proven to be a vital channel for managing costs and also creating a retirement account that is often better than an IRA or 401K.

    Your thoughts are appreciated.

    Dorothy McGinty
    [Insurance Agent]

    Like

  5. Austin Frakt PhD, over at the Incidental Economist blog, was looking for health savings accounts (HSAs) and consumer directed health plan (CDHP) literature reviews (and by “literature,” he means peer-reviewed health services and health economics papers).

    A few recent papers on these topics are listed below (with abstracts, or portions thereof, and excerpts). They likely cite much of the rest of the relevant literature.

    http://theincidentaleconomist.com/health-savings-accounts-literature-reviews/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheIncidentalEconomist+%28The+Incidental+Economist+%28Posts%29%29

    Judging from these alone, it doesn’t appear as if HSAs/CDHPs are a slam dunk for substantially lower costs, but we may not have enough experience with them yet to say this with much certainty. He hasn’t seen anything that reports results on outcomes, but his was going by abstracts alone.

    So, what are your thoughts and citations?

    Dr. David Edward Marcinko MBA
    [Publisher-in-Chief]

    Like

  6. Best HSA Provider for Investing HSA Money

    Choosing a HDHP also means choosing a provider for your HSA. Because a HSA is tax deferred and because there is no time limit for reimbursing yourself for qualified health expenses, it’s best to pay for the expenses out of pocket and leave the money in the HSA to grow over time.

    As long as you keep the receipts, one can withdraw from the HSA in the future free of taxes. This way the HSA works almost like a Roth IRA.

    http://thefinancebuff.com/best-hsa-provider-for-investing-hsa-money.html

    Cameron

    Like

  7. HSA Limits Increase for 2013

    Cameron – In Rev. Proc. 2012-26; 2012-20 IRB 1 (27 Apr 2012), the IRS announced increased limits for health savings accounts for 2013.

    Each year, a participant in HSA may make contributions from earned income. These contributions will reduce taxable income. The limit for 2013 for a self-only coverage policy is $3,250. For a family policy, the contribution may be up to $6,450.

    An HSA must use a “high deductible health plan” to qualify. This plan must have a minimum deductible each year of $1,250 for self-only coverage or $2,500 for family coverage. The maximum out-of-pocket payment for self-only coverage is $6,250.

    For family coverage, the out-of-pocket limit is $12,500.

    Ann Miller RN MHA
    [Executive-Director]

    Like

  8. Health savings account enrollment jumps 26% in large group plans

    Almost 14 million people were enrolled in a health savings account (HSA) as of January, a growth of 18 percent from last year and an almost 50 percent increase since 2008, according to the 2012 census released Wednesday by America’s Health Insurance Plans (AHIP).

    http://www.ahip.org/redirect/2012hsacensus.pdf

    What does this say about free and competitive markets?

    Dean

    Like

  9. A New EBRI Report
    [Consumer Directed Health Plan members more likely to research healthcare costs]

    The Employee Benefit Research Institute (EBRI) shows the employees enrolled in a Consumer Directed Health Plan (CDHP) are more likely than members of traditional health plans to exhibit cost-conscious behaviors including doing additional research on healthcare costs.

    http://www.healthcarefinancenews.com/news/ebri-consumer-directed-health-plan-members-more-likely-research-healthcare-costs?topic=21

    I am a fan of HSAs and CD-HCPs, etc.

    Dr. David Edward Marcinko MBA
    http://www.CertifiedMedicalPlanner.org

    Like

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