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The Health Savings Plans (HSAs) that have recently become popular (because they only recently were passed into law) do have some problems. Maybe not problems…more like things that steepen the learning curve. These are some differences from the traditional HMO/PPO that people should know.

The plan (or insurance company or provider or etc.) does not pay for anything anymore. You pay. Under traditional plans, you would have some medical treatment or pick up a prescription and pay either nothing or a small co-pay. The medical service provider would then bill the insurance company who would then pay it. The insurance company may or may not have let you know what the cost was, and you may or may not have had to pay a portion of it.

Now, with an HSA, the medical service provider bills the insurance company, which tells the service provider to bill you for the service. You get a bill for the full amount and are responsible to send them a check or use your HSA-provided debit card to pay for items that need to be paid at time of service. All the insurance company does is track your expenses and negotiate lower rates for you. After a certain point though (“the bridge”), the insurance company does start acting more like a traditional insurance company.

Before, with a traditional plan, if it said that you had coverage, you had that coverage from day one. Now, with an HSA, you have coverage but the money in your plan is not there right away. For example, if your company’s plan states that you will have $1600 of coverage from your pre-tax contributions for the year, you do not get $1600 at the start of the year. The company can divide it and give you only $400 per quarter.

I think that is the real draw for company’s to push HSAs for their employees – it helps manage their cash flow. If employees have significant health-care charges early in the year, now the employee is responsible for the difference. You have $750 of medical expenses but only $400 in the account, then you pay the extra $350 out of your pocket. You can reimburse yourself from the account once it gets the next installment, such as the next quarter. But the employee is now handling the float. The company’s cash flow is more even and the burden of what is effectively a small loan is passed to the employee.

“if he does not lend {money} on interest or take increase, {if} he keeps his hand from iniquity {and} executes true justice between man and man, {if} he walks in My statutes and My ordinances so as to deal faithfully– he is righteous {and} will surely live,” declares the Lord GOD.”
– Ezekiel 18:8-9