HEALTH PLANS: Promoting HSAs, by Ron Grenier

My commenter Ron deserves to have this post promoted from yesterday’s open thread. I oppose HSAs (and for that matter employment-based health insurance) as a policy because they are diametrically opposite to being the overall solution to universal health insurance, although I’m pretty much indifferent to whether we go with a tax-based single payer system or a strictly-regulated, compulsory, community-rated (non-underwritten) individual or group insurance system as the preferred outcome.  However, in real life we’re not getting to any of those politically any time soon, and as a solo operative with some of my own health problems it appears to me that a high deductible plan with an associated HSA is my best option.  So I’ve got one.

Ron explains in this example why that might be a good option for others….of course he doesn’t get to the community-rating/risk pool division issue, but that’s for another post.  Here’s Ron’s example:

A 30 Year Old Nurse Who Is A Single Mother
Pick Any Des Moines Hospital
Annual Income:  $50,000

A single parent mother making $50,000 a year is not rich. Many
employers will pay $400 a month for single coverage but the employee
must pay the additional $400 a month to add on their child, out of
their paycheck. Now the Mother has deductibles and co-pays on both her
and the child. Probably, knowing health insurance like I do, the
employee insurance has switched from co-pays on RX to co-insurance
($10 co-pay for Generics and $25 co-pay on Brand Name PLUS Co-Insurance
of 50% on Brand Name). Remember, some people when they get sick have RX
bills of $1,500 a month, ask Montel Williams. So if the mother or the
child got sick we have no idea what will be the out of pocket annual
expense for just RX. PLUS, If the mother got ovarian cancer and could
not work, a requirement for keeping her insurance, she would be put to
COBRA for insurance termination. Everybody, including people who sell
group insurance, say they can’t comprehend why that makes even the
slightest difference in the world. To me it’s simple, I would prefer a
contract that can’t be singled out for termination because of my
relationship to some employer.

The HSA Individual Option

The Mother pays the total family premium of $78.68 per month. Now
she saves $400 a month coming out of her paycheck that she can save or
spend on her baby. The $400 a month, that the employer is currently
spending on the Mother’s single insurance, is redirected to the bank,
in the Mother’s Tax Free Health Savings Account or HSA. The bank must
be FDIC insured, it’s the law.

Annual Deposit From Employer: $4,800
Maximum Annual Out-Of-Pocket (OOP) for the family:  $5,200

So the maximum annual OOP expense for this Mother and child is
capped at $400 a year and she is currently paying $400 a month, out of
her check, with no idea how much she could owe with co-pays and

No FICA Tax on HSA deposits. The FICA tax is 15.3% and is split
between employer and employee. Now the hospital won’t pay 7.65% on
every dollar the mother earns. Employers love the HSA when they figure
it out.

The Hospital is depositing $4,800 a year in the mother’s HSA. She or
her employer may maximize her HSA annual deposit and save on taxes,
another $400 or a maximum of $5,200 may be deposited each year.

When the mother goes to the doctor everything is the same. The
doctor’s bill is $80 for example. The first thing is the charge is run
it through the PPO, exactly like they are doing it now, and the charge
is sent to the insurance company. The insurance company then sends an
Explanation Of Benefits (EOB) that says, your $80 charge has been
diminished to (example) $50. Do you want to pay the $50 with personal
funds or would you prefer to have it deducted from your HSA? Once
covered charges hit the deductible they are paid at 100%.

If the mother put the max in her HSA and didn’t use any HSA funds,
which some people do, at 65 years of age she would have over $400,000
at 4% interest. If she uses average $1,300 a year she will have over
$300,000. If she uses $2,600 a year she will have over $200,000 at 65
years of age. Also she has the freedom to place her HSA balance in
mutual funds for the possibility of a higher return.

I tell clients to max out their HSAs because 30 years of retirement
health care expenses will be expensive. HSA funds dedicated to
retirement health care expenses are never taxed and money that is never
taxed will last longer in retirement.

Next month retirement will be high lighted when the House throws it’s retirement bill on the table.

Who thinks this Mother should keep her present employer’s insurance at $400 a month out of her check?

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  1. Oh, and for the person who made the insulting comment about “people thinking about getting pregnant more” because they’ll have to come up with the “front-end money”, how insensitive is that? If you’re not already collecting SSI, you’d better be praying that every fertile woman is having 3 and 4 kids so that you will have SSI to collect. Without another baby boom, our SSI will be in the tanker too. Too bad you won’t be able to use your HSA account to live off of when your SSI runs out. You’re all a bunch of kooky crooks.

  2. What I think is most humorous is how badly you “professionals” communicate. I’ve seen better grammar on a third grade writing test. I won’t even comment on the spelling errors.
    Frankly, the real problem is the high cost of medical care. That paired with crooked professionals in both the medical and insurance agencies means the customer gets screwed. These PPOs and HSAs make the HMOs look like the good guys.
    Here’s my story:
    We moved to ND where HSA/PPO insurance is the only option for us. But to get maternity coverage, my monthly premium would go from $200 to $600. So, I declined maternity coverage. But, when I told the underwriter about my c-section (only have 1 kid), they rated us up to $239/month. My husband is still unemployed and so we have no other coverage and no additional money to put into our HSA.
    Beyond that, when I called the company (assurant) to better understand what is covered and what isn’t, I received absolutely no help. The customer service rep couldn’t even give me an example of what would be covered. I asked if my son’s immunizations would be covered, if I’d have to pay at the office, or would be billed, or how would this work. I’m new to HSA. I’m used to paying a $20 or $40 co-pay and getting service. It’s been two months since his immunizations and I still haven’t heard anything from Assurant. Am I out of the woods or is a $150 medical bill in the mail?
    And what of his ER visit last month?
    So far, I feel like I’m paying $239 for nothing. The HSA/PPO policy is so confusing, it sounds as though I could end up paying $5000 for an ER visit.
    And for the lunatic who said pregnancy is planned, I’m glad your life is so neatly ordered. Both of my pregnancies occurred while on prescription birth control. I lost the first pregnancy but six months later, got pregnant again. I was planning on NOT getting pregnant and I did. If it were to happen now, while we’re on this ridiculous HSA/PPO thing, I’d have no coverage at all.
    Yeah, that sounds like a great alternative to an HMO. My agent can’t even tell me how the plan works entirely. And frankly what I’ve heard from you Ron makes me want to run screaming.
    Sure, I didn’t like paying the $600/month premiums I had when we had an HMO, but at least I knew what I was getting. I can barely afford the $239/month PPO/HSA that I have right now, so a $600 HMO is out of the question. But, given the chance, I’d switch to an HMO in a minute.
    I maintain that the real problem is that we have let the medical and insurance industries get out of control. When a hospital bills $3,000 for 3 vicodin, there’s something wrong. When an insurance company will pay $120 for a chiropractic adjustment that would cost the patient only $40 in cash, there’s something wrong. So the doctors, hospitals and insurance companies (HSA, PPO or HMO) are all to blame.

  3. My husband’s employer has just signed on with an HSA plan through the same insurance co. used previously. My ins. premium for the plan is $760 per mo. (That is an increase over last year’s premium in the PPO plan.) That $760 per mo. goes to the insurance company – not into an HSA account. We have a $2000 per person deductible. We will have to contribute $166.00 per mo. each into an HSA account in order to meet the deductible for this coming year. The employer is contributing nothing to the HSA accounts. We will have to pay all doctor visits and prescriptions up front out of pocket or out of the HSA account which is not yet established. I contacted our regular medical providers who were unable to tell me if we will be charged the full amount of each visit/procedure or if they will charge us at the ins.co. contract rate. Also, when we get prescriptions filled, the same problem may arise. While the end of year tax deduction will help our taxes, the upfront cost of this program is prohibitive for us because the premium alone takes a huge chunk out of my husband’s paycheck. This plan may be helpful if the monthly premium is low and there are cash reserves available to handle the HSA account, but I don’t see how it helps us in the short run when every dollar is precious. Your comments please.

  4. Zippy,
    Tell them we need a raise too. These agents getting commission on $20,000 a year premiums, per family, are playing golf while agents with HSA insurance that costs only $78.68 a month educate America for free.

  5. Ron comes off so sarcastic and obnoxious I wouldn’t buy anything from him. Someone should report this thread to the company he represents.

  6. Sue,
    Your association coverage costs with a family Out-Of-Pocket (OOP) of $8,000 plus 40% of all Rx cost is:
    Des Moines’ 30 year old Single mother and child = $881/month
    Calf. zip 90210 30/yr mother and child = $$1,280/month
    90210 — 50/yr old couple plus 2 children = $4,625/month
    90210 — 60/yr old couple = $5,004/mo or over $60,000/yr!!!!!
    Don’t grow older on your plan Sue, you can’t afford it.
    Heck, the example they use to determine rates is a 35/yr old couple with 2 children in Montana and the premium is over $20,000 a year.

  7. Sue,
    I checked out your association insurance with no medical underwriting. Here is what I have found:
    The above 30 year old single mother’s premium would be $881 a month (This is insane). That is over 10 times the HSA premium. Plus, the family out of pocket is $8,000 a year (higher than HSA coverage) with Rx never paid more than 60%. The total lifetime max is only a million too.
    Under exclusions: any charges incurred as a result of any injury or sickness which arises out of or in the course of any occupation, except for owners, proprietors or partners who are not eligible for coverage under any Worker’s Compensation or Occupational disease law;
    In Iowa farmers and owners can get worker’s comp. they just are not required to do so. So this coverage wouldn’t cover self employed people on the job. I suppose a farmer who rolls a tractor could say, “It was recreational tractor driving.” But at least self employed people would be covered at night when they sleep, so that’s good. But it is really expensive.
    Of course the association membership dues would be in addition to the insurance costs.
    Who really is making money here? Me charging $78.68 a month from the mother or your plan charging $881 a month with far inferior coverage, I ask you?

  8. Oh and Sue,
    //You never fully answered the questions I raised relative to tax treatment of the account in the event of loss of insurance due to premium non-payment//
    Yes I did fully answer that and so did rdg. Nothing happens to the account. People can continue to use their HSA balance and get interest on their balances. You can’t make deposits in an HSA if you don’t have qualifying HSA insurance.
    HSA balances are never taxed if the funds are used for qualifying medical expenses which include medical, vision and dental expenses. I have seen ads that say the money for a parking meter at the dentist can be paid, tax free, with an HSA.

  9. Sue,
    Yup, when a hurricane takes out a business everybody loses their health insurance, it’s insane.
    You really said a mouthful. Of course to answer that many questions and correct all of the misconceptions would would take me too much time, so I won’t.
    I will check out your New York Life health insurance.
    CORRECTION SUE: You said//The issue I have with HSAs is that in addition to the high deductible, there can be pre-existing exclusion coverage//
    Would you prefer that HSA law said that if you have an exclusionary rider it is illegal for you to pay your deductibles and save for retirement health care expenses with a tax free HSA? Well it doesn’t, sorry. rdg has an exclusionary rider for miscarrage but he may use HSA funds for that expense because HSAs have no exclusionary riders.

  10. Ron, you want specifics here they are. The association I referenced, NMA stands for the National Management Association. Their insurance is managed by Marsh and handled through New York Life. It isn’t the best insurance I’ve ever seen in terms of premiums, but since I had been covered by a group plan I ended up with no pre-existing condition loopholes and it is cheaper than Texas high risk pool premiums. AARP also offers insurance through United Healthcare that I am currently exploring. Although not AARP age, my husband’s membership allows me to explore that option and it would be cheaper than my current premiums. According to their literature there is no pre-existing condition exclusion provided you have a certificate of insurance from a qualifying plan for the prior 12 months. My current insurance fulfills that requirement which is one of the reasons I’m glad I shopped for a group option. All of the policies have underwritng in that there are different pricing pools based on answers to the health questionnaire, but no pre-existing condition exclusion with evidence of qualifying insurance coverage. The issue I have with HSAs is that in addition to the high deductible, there can be pre-existing exclusion coverage which makes it very hard to predict what annual total out of pocket cost can be. If you are healthy and seeing a doctor once or twice a year, HSAs make perfect sense. If you have pre-existing condition exclusions and actually need high dollar health care frequently your combination premium and out-of-pocket expense may be higher than with a group plan. You never fully answered the questions I raised relative to tax treatment of the account in the event of loss of insurance due to premium non-payment. It would be interesting to understand those implications in terms of cost. My comment relative to President Bush stands–the issue isn’t whether he is being smart and saving money–the issue is that a guy whose health care I pay for with my tax dollars is touting a plan that will allow him to save money not because of the tax treatment, but because he has no health care expense. We can’t find a way to adequately insure our middle-aged, middle class as we transition to new health care scenarios, but we are taking care of guys who feed out of the taxpayer trough royally. For those of us who actually have to pay out of pocket, especially those of us who are older, HSAs aren’t necessarily going to fund our golden years. If it were up to me, the Federal government’s first money-saving step would be to eliminate subsidized health care for elected officials. If these guys actually had to shop for insurance we’d have better plan options. Ron, the thing I don’t understand is why you are so determined to paint the perfect picture of HSA clients socking money away with no health care expense. For some people, that is a reasonable scenario; for others it isn’t. Paint a balanced picture which is cost out your options and pick the one that makes the best sense for your health and financial situation. If I had taken the individual insurance plan which excluded my entire gastro-intestinal tract indefinitely as a pre-existing condition, one appendicitis operation would have probably exceeded my group premiums for the next decade. I may never need my appendix removed, or it could happen tomorrow. With my current plan, after the deductible is met, my appendix is paid for and with my current plan as long as I stay with group coverage I never have to play roulette with pre-existing condition exclusions. HSAs don’t give me that protection. If I were 20-something and could answer a health questionnaire without raising red flags, I’d sign up for an HSA in a heartbeat because then I’d have the time to save enough to balance out the health costs I’d be likely to encounter in middle age. And yes, I know that you would have never excluded my entire GI tract, just the hernia. But you are a salesman and therefore you don’t do the underwriting. My insurance salesman assured me that Golden Rule was one of the most liberal carriers and would never have ugly underwriting clauses. He told me to keep COBRA when the exclusion came through–suddenly he had no solutions. Fortunately, I was able to shop around and find some other options. By the way Ron, my house is built on solid ground–we’ll see who is begging politicians for relief at retirement. Remember, those potholes that don’t stay filled are the first sign of sinkhole. I hear you are going to have another bad hurricane season, better break out those sandbags–Tampa is prone to storm surge.

  11. I think part there is some confusion about HSA. The HSA is a health savings account. To qualify for an HSA you have to have a qualifying high deductible health insurance plan. You can have the qualifying health insurance plan and not open an account. You cannot have the account unless you have the health insurance. So there are two components. The first is the health insurance. Then you can open and fund an account at a financial institution. You can contribute an amount not to exceed your deductible in the account every year. You can pay medical expenses from the account and they are paid with tax free dollars. That way you don’t have to wait to exceed a percentage of your income to deduct medical expenses. It also equalizes individuals with employer sponsored plans. The premiums for employer sponsored plans are tax free.
    Most of the account providers I have seen charge what I would deem high fees. I am used to free checking at banks and Vanguard mutual fund fees. I loathe account set up fees, and ongoing maintenance fees. As more people open accounts the competition should increase and more low cost providers should be available.

  12. rdg,
    You are so correct so Sue will quit talking to you.
    Everyone is getting HSAs. Matthew, poltroon, President Bush, you, me and a million others so far. Soon Sue will be the only one with no HSA balance when she retires so she will have to get down on her knees and beg a politician for a handout in retirement.

  13. Sue,
    //my professional associations, NMA, offered a group insurance plan. Their insurer tried to avoid me too//
    Sure, sure Sue. Name this association and the name of the insurance carrier and I will check it out.
    //Group, HSA and individual policies all have loopholes that favor insurance companies over consumers//
    Sure, Sure Sue. Name an insurance company that has an HSA product besides us. HSAs are a bank product usually. You keep saying HSAs have loopholes and I keep asking what are they? A couple of days ago you were saying that HSAs have underwriting and at least I have got you to stop saying that uninformed blather.
    //I am personally insulted everytime President Bush talks about his HSA and how much money it will save him, not because it’s a “TAX DODGE” but because he’ll never need to pay for health care//
    I think you mean “THE BEST TAX DODGE” and all federal employees with an HSA must have an HSA qualifying deductible, it’s the law. President Bush get’s free care but it’s not insurance so he still qualifies, sorry. If I was advising President Bush I would say get an HSA too and set a wonderful example how a multi-millionaire should go tax free too, as an example for the rest of America.
    //poltroon, read your insurance documentation, learn your rights, and check your billing because if you don’t you are going to continue to get patted on the head//
    Just don’t pay attention to Sue because she makes all these wrong statements then rattles off a bunch of her uninformed opinions like her opinion is as valuable as someone’s who actually knows what they are talking about.
    Again Sue, what are these so-called HSA loopholes?

  14. poltroon,
    //Quote: Finally, going back to your to your last question which is if your employer shuts its doors; are there COBRA extensions–the best way answer is that if you had a group insurance policy HIPPA provides that another group plan must accept you with no pre-existing condition exclusion. You have a 90 day window after leaving a policy where that provision still applies.//
    Here is a better way to answer — NO. If the group is gone the COBRA extention is gone too. Then you have a 63 day period, not 90 as is repeatedly said on this board, to apply for new coverage with another group. Your flaw is that many employers make new employees wait 90 days on the job before they become eligible for the group coverage. That’s if the company offers coverage to employees at all, which many small employers don’t.
    Notice how you didn’t have a new employer who just automatically picked you up poltroon. But you are correct that association groups usually don’t offer insurance without underwriting. Maybe Sue will provide a list of association groups that do, but I doubt it.

  15. Poltroon, I went through the same thing you did–lost my job and went through COBRA. When COBRA was ending I found that one of my professional associations, NMA, offered a group insurance plan. Their insurer tried to avoid me too, but I pushed the issue by providing a certificate of insurance that showed I had maintained group coverage (not easy because my company had switched groups three times in prior three years so I had to present 2 certificates to show 18 months of coverage). I also contacted the president of my association and he called the insurer and questioned their practices. I got coverage with no pre-existing conditions pretty fast, but if I had taken the first set of answers I got, I’d still be uninsured. It’s not great insurance and the premiums have increased dramatically every six months but I didn’t get pre-existing condition exclusions individual insurance wanted to do. Being a good girl and paying premiums won’t get you anywhere, but being a tough consumer and asking hard questions can help. One of the reasons I’ve asked all the HSA questions I have is because I think most consumers don’t understand the full implications of any insurance they buy because they don’t know what questions to ask. The real issue we all need to face is that our health insurance market is a mess of confusing regulations and insurers looking to take advantage of consumers whereever they can. Health care providers exacerbate this with questionable accounting practices. Group, HSA and individual policies all have loopholes that favor insurance companies over consumers. HSA is cheaper upfront, but may not be if you have to buy a lot of healthcare services. We need a better system that shares risk, eliminates non-value added cost and more equally “charges” consumers for health expense. Most importantly we need a system where consumers can understand their “rights” and responsibilities. We aren’t even close to that yet. One of the problems is that consumers aren’t “lobbying” politicians for the programs they need. Instead, insurance companies are lobbying for the programs they want to sell. We all need to write our elected officials and explain the challenges we face so that they start to understand the issues better. A government official who gets free healthcare for life through his position doesn’t understand what those of us who have to shop insurance and pay premiums are going through. I guarantee you that any elected official over 40 who actually goes through underwriting would have a new view at the end of the process. But most of them have never gone through this. I am personally insulted everytime President Bush talks about his HSA and how much money it will help him save, not because it’s a tax dodge but because he’ll never need to pay for health care. It is an insult to working families that he even has that line in his speeches and demonstrates the total lack of understanding that our government has for the current situation. Poltroon, read your insurance documentation, learn your rights, and check your billing because if you don’t you are going to continue to get patted on the head and told you have no choices as people pull money out of your wallet.

  16. Quote:Finally, going back to your last question which is if your employer shuts its doors; are there COBRA extensions–the best answer is that if you had a group insurance policy HIPAA provides that another group plan must accept you with no pre-existing condition exclusions. You have a 90-day window after leaving a policy where that provision still applies. They can rate you in a higher premium class but they can’t exclude a serious medical condition and there are group insurance options you can obtain through associations as well as employers.

    Well, we had a group policy, and worked for a company that died because of 9/11… and when COBRA ended there were no other options. I asked about HIPAA and was told that didn’t apply. The company essentially went away, but one person kept it going, so maybe that made a difference.
    My daughter was born with a small heart murmur. None of the doctors were concerned or thought it warranted treatment. However, when I tried to get individual insurance I was told she was uninsurable for 5 years after the murmur disappeared on its own. (In my state, they are not allowed to exclude conditions, so they choose to decline the whole policy.) I spent the first year of running my new company trying to find new health insurance for us. As far as I could tell, all the association “groups” were not true groups – ie, they would still decline for preexisting conditions. When an insurance agent tells you going bare is your best option, you know everything’s SNAFUed. All the years that I had been a good girl and paid for insurance meant nothing to anyone.
    I don’t understand the HSA product. I say this even though I have one. Where I come from, There Is No Such Thing As A Free Lunch.

  17. Quote:Finally, going back to your last question which is if your employer shuts its doors; are there COBRA extensions–the best answer is that if you had a group insurance policy HIPAA provides that another group plan must accept you with no pre-existing condition exclusions. You have a 90-day window after leaving a policy where that provision still applies. They can rate you in a higher premium class but they can’t exclude a serious medical condition and there are group insurance options you can obtain through associations as well as employers.

    Well, we had a group policy, and worked for a company that died because of 9/11… and when COBRA ended there were no other options. I asked about HIPAA and was told that didn’t apply. The company essentially went away, but one person kept it going, so maybe that made a difference.
    My daughter was born with a small heart murmur. None of the doctors were concerned or thought it warranted treatment. However, when I tried to get individual insurance I was told she was uninsurable for 5 years after the murmur disappeared on its own. (In my state, they are not allowed to exclude conditions, so they choose to decline the whole policy.) I spent the first year of running my new company trying to find new health insurance for us. As far as I could tell, all the association “groups” were not true groups – ie, they would still decline for preexisting conditions. When an insurance agent tells you going bare is your best option, you know everything’s SNAFUed. All the years that I had been a good girl and paid for insurance meant nothing to anyone.
    I don’t understand the HSA product. I say this even though I have one. Where I come from, There Is No Such Thing As A Free Lunch.

  18. Sue, your comments about maternity coverage raise a couple of points. The fact is that maternity care is a money maker used to subsidize the rest of the hospital’s operations. A local hospital is currently running radio adds touting their new maternity care ward. Why would they do this? To attract profitable business. The way that health care system works now is based on huge cost shifting and trying to get somebody else to pay the bill. So mothers with uncomplicated pregnancies and healthy babies end up subsidizing the ER. If people had to pay their own bills out of pocket they would be more likely to be sensitive to the cost they were incurring.
    How is a healthy pregnancy insurable? It is not. Pregnancy is a planned event. People should save up for it and be prepared to pay for it. If people don’t want to do this, they can pay a high maternity rider and the insurance company will save and invest to pay for the planned expense. Economically what is the best deal for the individual? My view is that people would come out ahead if they saved on their own. With an HSA the maternity care could be paid for with pre tax dollars.
    In my own case the HSA makes sense because by the time we could have a baby my COBRA coverage would be terminated. This would leave me with no coverage for a healthy prenancy, a miscarriage or a c section. My options are to join another group plan (through an employer or maybe joining the state high risk pool) or to get individual insurance. The individual insurance with no maternity rider and a miscarriage rider will still cover an emergency c section.

  19. Sue,
    Most of my clients are self employed and don’t get unemployment benefits so I never bring it up. I was responding to you saying you can’t use HSA funds for insurance. Also, HSA funds can be used to purchase insurance after the age of 65. My Mom pays $171 a month for her Medigap insurance. HSA funds may also be used to purchase Long Term Care (LTC) insurance at any age. And nothing happens to HSA balances under $10,000 if clients drop their coverage.
    //But do us all a favor and share the facts//
    Because I have the longest experience in America enrolling MSAs and HSAs I would be in a perfect position to do just that. You make me feel so welcome Sue with all of your slanderous remarks.
    So instead I’ll focuse on Dan Perrin’s remarks above, how I have “done a great service.” You are probably aware that Dan Parrin has arranged for HSA clients to be interviewed by President Bush. Dan also is active in educating elected officials in DC and without Dan we probably wouldn’t have the HSA enacted into law.
    I told you I used the initial example of a 30 year old single mother for a reason. It is darn hard to argue with so I’m glad Dan has it when he contacts our politicians in the future. However, I never use it talking with prospects, it’s a waiste of time.
    And as far as me sharing the facts I have told you more correct information on the HSA than anybody else ever has, unless you can name someone who has informed you more. What person has given you more correct information on the HSA than I — Sue?

  20. Ron, I never said that you lose your HSA–my example suggested that a mother with a sick child with significant health expense and no job wasn’t likely to have a large HSA balance. I asked if the balance became taxable without the qualifying insurance in force. You chose not to answer that question. You are indicating that people can pay insurance premiums when on unemployment. Does that privilege end when unemployment benefits end, even if the person doesn’t have a job? Is the premium payment taxable income when taken from HSA? What happens if people drop their HSA insurance with a balance below $10,000? Ron, I realize that you would love to troll for prospects by posting only positive messages with a link in your email to your website. But do us all a favor and share the facts.

  21. //can use HSA balances to pay insurance premiums when they are on unemployment//
    Just to make sure I understand, you mean when I person is “unemployed” not “on unemployment” – unemployment only lasts a few months (6 in California).
    It’s still cruel to make a person who dutifully took up the independent responsibility to save for their health care costs pay it all out in premiums (note that this carries an additional cost of all the tax-free interest that would have accrued). I outright regret putting my savings into an IRA for the same reason: the savings allowed me to outlast unemployment, but having to use the money this way deprives me of retirement savings. At retirement if I raise my hand and say I have no money, people will just stare at me angrily and say “why didn’t you sacrifice and scrimp and save!??” It will take everything I have not to scream back at them, “I DID!!!”

  22. Sue,
    I didn’t call you a kook because you disagreed with me I called you a kook by the way you answered that question.
    I can’t call you a kook but you can say about me//sales pitch…saying you give them full disclosure is different from actually taking the time to outline the relevant differences as they make their decision…high pressure tactics…gloss over the details…What are you afraid of Ron…..Be a man….rhetoric/scare tactics…you’re low cost pitch…//
    I don’t shut down your discussion of HSAs, just your lies. You say we should fully discuss the differences but if I bring up cancer that’s a scare tactic and off limits. Sue who made you king?
    And Sue, if sick people are declined on individual insurance, why don’t those people just get in the uninsurable state program?
    The state uninsurable pools should have the HSA option too. After all, uninsurable people would like to pay their deductible with tax free HSA funds too.

  23. gadfly,
    //From what Sue says, it sounds like the insurance terminates once a person can no longer keep up regular payments. But what happens to the HSA savings?//
    Yes, all insurance terminates when you stop making premium payments, employer group coverage or indivdual insurance, there is no difference. Sue is wrong on the HSA though. People can use HSA balances to pay insurance premiums when they are on unemployment for example.
    Also you can’t lose your HSA. People who drop their insurance with a $10,000 HSA balance may continue to use HSA funds for all medical, vision and dental expenses. Sue is just plain wrong.

  24. Ron, the thing that amazes me is that you seem so intent on shutting down any discussion of pros and cons of insurance option selection and that you also insist on the very immature tactic of calling people kooks who disagree with you. I would think that you want to be very sure your clients fully understand the financial obligations they are accepting with an HSA. It is a new product and many people who have been covered by group plans all their lives really don’t understand what they may be signing up to when they hear a pitch centered on low premiums and 100% coverage after the deductible is met. Average people do not read the detailed policy coverage document, so saying you give them full disclosure is different from actually taking the time to outline the relevant differences as they make their decision. I can tell you that I don’t buy insurance or financial services from people who use high pressure tactics and try to gloss over the details. I like intelligent discussions that cover the pros and cons so that I can make the decision that makes the most sense for my particular financial situation. What are you afraid of–that once a client understands the cost they’ll back out? Be a man, have an open debate on the real issues. HSAs are a good choice for people who understand the risks and still feel it makes financial sense, but they shouldn’t be a choice people take without fully understanding the financial obligation they assume. The real goal of HSAs and similar products is to start a culture of individual responsibility toward health care vs. the current dependence we have on employmer-based or government-provided insurance. Fundamentally that is a shift we need to make as a society, although the current product doesn’t really provide the transition phase safety net needed to absorb middle-class, middle-aged Americans due to its underwriting feature. The reward you may gain by dropping the rhetoric/scare tactics and discussing what is good and bad is that you might get clients who see a benefit and actually can afford the downside risk. HSAs aren’t all bad, they just aren’t a perfect solution, particularly if the client is chasing a low premium without understanding total cost. Short-term your low cost pitch may help your sales volumes, but longer term signing up informed clients and accepting the loss of clients not comfortable with the risk is the better way to build a market because guys that jump into this without understanding the obligations won’t be able to make the payments long-term.

  25. //the baby’s insurance terminates just as fast if she doesn’t pay her HSA premium//
    This raises an HSA question for me.
    Ron says people need to purchase insurance as part of the HSA. Ron has also likened an HSA to a savings account where accumulated savings can be used for retirement if they aren’t drained by health care expenses. My question is what happens when a person is unemployed and runs out of money. From what Sue says, it sounds like the insurance terminates once a person can no longer keep up regular payments. But what happens to the HSA savings? Do they just remain in suspended animation until the person can get new insurance and make regular payments again? Can a person draw on their HSA savings while they don’t have the insurance? Does the HSA become a de facto IRA?

  26. Sue,
    You’re a kook.
    If you were licensed you would be breaking the law with your goofy answers.
    PLUS, it’s a serious ethics violation not providing “Full and Proper Disclosure” even if the client didn’t ask you. But if they come right out and ask you a question, under the law, you must provide correct answers.
    I ask group salesmen, “You arn’t telling people that they can keep this group plan if they get so sick they can’t continue too work do you, I mean with your license an all?” They usually studder and say, “Of course not.”
    Then I say, “It amazes me that people buy your insurance then.” These group salesmen are as goofy as you Sue and they say something like, “Usually they don’t ask.”

  27. Ron, the baby’s insurance terminates just as fast if she doesn’t pay her HSA premium–actually faster because with group insurance she has 90 days after stopping coverage to get back in with no pre-existing condition exclusions. With individual coverage including HSAs she is subject to underwriting the minute her policy lapses. The one question I don’t understand is whether or not she will also lose the tax protection on the money in her HSA account if she drops the HSA insurance. That would be a nice kick, out of money, no insurance and owing the IRS for taxes on a non-qualified HSA account. By the way, you can’t pay premiums for HSA insurance out of your HSA account.

  28. Ron, I haven’t spent time on that question because it isn’t the issue. If the mother doesn’t switch to another insurance plan at the end of 18 months she will lose coverage and if she has to go to the individual insurance market vs. another group plan with HIPAA protection her baby may be uninsurable thanks to aggressive underwriting practices. If she could go to another group plan her baby stays fully insured by law and there are group plans available through associations which don’t require a person to be employed. But let’s assume that mother took out an HSA and then lost her job because she had to take care of the sick baby. She’d be paying her deductible out of the HSA account—a really sick baby would probably max the deductible. Then let’s say she senselessly has sex and gets pregnant again—whoops more out of pocket expense. She runs out of money and stops paying premiums. Bam! her baby is uninsurable for life–hopefully her state has legislated a high risk pool that she can join. The issue is that neither HSAs nor group insurance really offer long-term protection for anyone who can’t keep writing checks for premiums and/or out-of-pocket medical expense. Instead of promoting HSAs as a cure-all quick fix, it would be better to look at long-term solutions which adequately insure against costs of health care when chronic illness strikes. The HSA solution only really works if people have a lot of healthy years before they have sick ones and it really won’t work if people are conned into joining HSAs without really understanding the trade-offs they are making. This is a plan where the individual is taking on the financial risk traditionally covered by the insurer. For mature folks who understand that, it is a good alternative that saves premium cost but for people who see it simply as a cheaper premium without understanding that they have other financial obligations it may be a bad choice because once you take an HSA if you ever lapse on the insurance payments you open the door to have any serious medical conditions excluded from covered expenses. Personally, I’d love to see an insurance plan that eliminates underwriting in exchange for the high deductible. That way both the insurer and the insured are sharing risk. I also think a payment method where the insured pays straight the provider on deductible expenses would be more efficient that insurer claims processing. But no one is talking about how non-value added cost can be removed from the system. We are limiting ourselves to insurance industry provided choices.

  29. Nice dodge of the question Sue
    I answer your questions but you won’t answer one of mine, figures.
    Question Sue; If a mother has her insurance at her employer and quits to take care of a sick baby, will the baby’s insurance be terminated in just 18 short months?
    Sue you sound exactly like a “Group” insurance salesman.

  30. Ron,
    Thanks for your response: //You ask if none covered expenses apply to the deductible.
    The answer is no, only covered expenses apply to the deductible with any insurance.//
    I knew that–I just wanted to make sure everyone else understood. To reiterate the math, a person with an HSA without the maternity rider who wants to have children is looking at their standard deductible, PLUS all the maternity expenses (typically about $6-8K) PLUS any expenses tied to underwriting exclusions. RDG you’d better start understanding how your HSA defines miscarriage because it gives them a nice loophole for excluding coverage of emergency pregnancy complications that would otherwise be covered even with the maternity exclusion. Welcome to the world of individual health care cost responsibility. The great thing about HSAs is that with the sticker shock families will be getting with maternity cost outlays, perhaps we’ll have less families have babies that they can’t afford. In Ron’s mother quitting work to care for sick baby and losing insurance example, the mother’s insurance coverage probably enabled her to foolishly get pregnant in the first place at minimal expense. Now women will have to think carefully about the costs associated with having children and perhaps those who can’t afford the front-end fees will practice better family planning.

  31. rdg,
    That is great you were approved for you HSA individual insurance in just 5 days.
    Now don’t ever go on a dangerous employee group plan again. I know you won’t, you seem pretty informed.
    Isn’t it amazing that your group plan cost $850 a month and the individual insurance cost $150 a month and uninformed people, and the media, say that group is less expensive than individual? It’s just all propaganda.
    //I say destabilize the market. The faster the better//
    Me too. Group health plans terminating young women’s health insurance, with cancer, because they are too sick too work is immoral. I say let’s protect the citizen and hold these group health plans feet to the fire and make them pay the bills.
    In other news yesterday, Iowa passed sweeping Medicaid reform that enables HSAs as an option in Medicaid for the poor. Iowa is the first state to offer HSAs in Medicaid. We have been advertising MSAs and HSAs on WHO Radio 1040 in Des Moines, during Rush and on the Jan Mickelson show, since 1997. I have been a guest on Jan’s show which is syndicated to Cedar Rapids. Jan interviewed President Bush last month on Social Security and changed the subject to HSAs. If you are a going to run for President in ’08 you better bone up on HSAs because you must start in Iowa.
    Democratic Gov. Vilsack of Iowa is running for President in ’08 and he said of the tax free HSA Medicaid Reform, “This is extraordinaryily unique. It’s the cutting edge, and it is all about providing opportunity for quality health care to Iowans.”
    At the first Presidential debate for President, then Gov. Bush started his remarks by saying, “I believe in more choices, more options, more freedom in Medicare, including Medical Savings Accounts (MSAs now HSAs).”
    The MSA is coming back. The HSA in Medicare is called the “Medicare” Savings Account. Now that Medicaid is reformed to include HSAs it’s time to move on to Medicare reform with HSAs.
    It’s nice that liberal Democratic Gov. Vilsack is on the HSA bandwagon too, finally.
    Iowa’s Medicaid reform with HSAs would have never been enacted into law without Jan Mickelson.
    Thank you Jan. (And Pauline at WHO.)
    Jan’s email is: mickelson@netins.net

  32. theorajones,
    you say //HSAs are pretty complex, have lots of loopholes (depending on which state you are in, depending if it’s employer based, or individual) and don’t necessarily cover lots of conditions//
    This is all hogwash. HSA banks don’t care if it’s individual insurance or group, the HSA is exactly the same. What condition have you found that you can’t use HSA funds on? But you never answer any questions anyway.
    //one thing that you won’t be able to mitigate is the fact that this is a comparatively new and untried insurance product//
    Rumor is our insurance company had the first health insurance product in America, in 1913. And it was not group insurance but individual. This is our 9th year enrolling the tax free accounts, we were the first in America with a product. I agree, don’t get an insurance company that’s only been in the HSA business for 9 months, like all of our competition.
    //I’d talk to a smart traditional insurance agent and ask him why I shouldn’t buy an HSA instead of his insurance//
    Yes you should theorajones and then your HSA attacks may be better informed. Please call one right away and post his comments here. Find a really smart one.
    //Oh, and also, there’s the moral issue that you’re helping to destabilize the insurance market for the sick by pulling yourself out of it//
    You are so confused theorajones. rdg isn’t pulling himself out of the group health plan he was terminated by them and put to COBRA which will terminate too.
    ANSWER ONE QUESTION THEORAJONES: If a mother has insurance at her employer and has a sick baby, can she quit her job and take care of the baby and keep the insurance on that sick baby for more than 18 months?

  33. Sue,
    You ask if none covered expenses apply to the deductible.
    The answer is no, only covered expenses apply to the deductible with any insurance.

  34. //f they had no balance in any of their savings accounts, like you?//
    Once more showing you know nothing about me. I faithfully put money away in a Roth IRA even though I had a low paying call center job. That small savings is the money I’m living off of now. Needless to say, it won’t be there for my retirement.
    // looking for a job as you do blogging you would be employed too, with health insurance//
    Again, you’re making a lot of assumptions based on no personal knowledge of me. I truly hope you aren’t subjected to the same treatment should you ever be in my situation.
    //you are depending on the state and everybody else to pay your costs.//
    Yes. And I’m very unhappy about that. I think other people should be unhappy, too.
    //You can’t retire//
    I might as well be retired, lol.

  35. Just got a call from the insurance agent. We are approved for the HSA policy but there is a permanent rider. The policy won’t pay any expense due to miscarriage. My wife has had two previous miscarriages.
    I’m surprised at how quick the decision came back. We put in our application on Monday and today we got a decision.

  36. //This underpaid young mother may have have been more inclined to move to a higher paying job if her current employer wasn’t holding the HSA over her.//
    This example was of a woman whose employer was making contributions for her. This is part of her total compensation. Total compensation is her salary plus her benefits. If her employer was paying her 20k a year plus making contributions of 2k a year to her HSA (22k total compensation), and she was offered a job that paid 25k a year and no HSA contributions, she would be better off taking the 25k a year and getting her own HSA. The money in her current account is hers to keep. It is in her best inerest to take the job with the highest total compensation.

  37. Gadfly,
    You are saying people would be better off if they had no balance in any of their savings accounts, like you?
    Well tell us how does it feel?
    If you spent as much time looking for a job as you do blogging you would be employed too, with health insurance I might add, instead of being uninsured.
    You say you understand that with a serious illness, that costs $400,000, the money would be better spent on poor children but you are depending on the state and everybody else to pay your costs.
    You can’t retire yet gadfly you are much too young. Are all these “higher paying jobs” that you talk about not good enough for you?

  38. //why I am subsidizing every one elses doctor bills?//
    Because they agree to subsidize yours in turn? Have a heart for that “27 year old young mother who is broke”, Ron!

  39. //A 27 year old mother, with 2 young sons, with zero in all of her other savings accounts, with an HSA balance now is golden hancuffs.
    gadfly have a heart fo young mothers who are broke.//
    This underpaid young mother may have have been more inclined to move to a higher paying job if her current employer wasn’t holding the HSA over her.

  40. theorajones,
    You make some good points. Especially with the scare tactics. There are a lot of scare tactics when it comes to health insurance.
    But regarding destabilizing the insurance market. I would view this as a good thing. The current system is broken, IMO. People with employer provided health care have no idea what it costs. Meanwhile a lot of people are left out in the cold. And it ends up costing us all more in the end.
    Early on in my working career I knew something was wrong. At 22 and just out of college in, why I am subsidizing every one elses doctor bills? This isn’t insurance, it is cost sharing/income redistribution. My thoughts more closely align with Arnold Kling on this:
    I say destabilize the market. The faster the better.
    I have seen suggestions in the comments here about making the politician’s and people who don’t see a problem go through the underwriting process. This seems like a good idea.
    We need to take care of people in catastrophic cases. I had a coworker that wracked up ~20k of bills when his soon needed brain surgery. About ~9k was for the MRI. I think insurance for this case is a good idea. But making everyone pay hundreds of dollars a month so that people can go to the doctor’s office, pay $15 dollars and then have the doctor fight with a third party for the rest of his money is not a good scenario.

  41. “Imagine your wife getting cancer…what would you do if the baby was really sick…imagine if you told that agent your wife had ovarian cancer…”
    Jeez, scare tactics much?
    rdg–Read these boards carefully. It’s pretty clear that while HSAs are a very good option for some, they don’t work for everyone. Also, (Regardless of what Ron says), they are pretty complex, have lots of loopholes (depending on what state you’re in, depending on whether it’s employer-based or individual) and don’t necessarily cover lots of conditions, so getting yourself educated on the fine print will be important. There’s lots of websites on it (though some are run by schills, so be careful).
    If I were buying an HSA, I’d talk to a smart traditional insurance broker and ask him why I shouldn’t buy an HSA instead of his insurance–be kind of an ass and push him really hard to get all his substantive objections based on your specific situation–and then ask the HSA salesman his response (and get his answers in writing!). If an HSA is the better choice, it’s the better choice, but don’t trust a salesman’s word on that.
    One thing that you won’t be able to mitigate is the fact that this is a comparatively new and untried insurance product. So, like every new product, there’s a “wild west” factor here–companies are going to screw it up in ways that regulators never dreamed imaginable, and given the mores of the “ownership society,” there may not be immediate legal recourse for people who get screwed over as a result. OTOH, there’s not much legal recourse for you in the current system and unexpected things happen even in established insurance markets, so I may be drawing a false dichotomy here. I still get very nervous, though, about depending on this plan if one becomes sick, because the success of this business model is almost completely dependent on keeping a very healthy risk pool.
    Oh, and also, there’s the moral issue that you’re helping to destabilize the insurance market for the sick by pulling yourself out of it, but you know, that’s an issue I think is better advanced through public action in support of universal health care than private acts of possibly misguided sacrifice. When you’re in a screwed up situation, you’ve got to take what you can get today while working for a better tomorrow.

  42. By the way Ron, under your plans do non-covered expenses like the $6000 maternity cost example above count toward fulfillment of the annual deductible or do you have to also pay another $5000 (or whatever your deductible is) in covered expenses before that 100% coverage kicks in?

  43. rdg,
    If you don’t get the maternity option your wife’s visits to the doctor are not covered and if the bill was $6,000, you owe $6000. When she becomes pregnant you should tell the doctor and see if he has a package you can pay for during the 9 months of pregnancy.
    All cmplications of pregnancy I assume are covered. And your baby will be covered from the second of birth if they are sick. I personally would not stay on a COBRA if your wife may become pregnant. What would you do if the baby was really sick, if the COBRA even lasted that long? So I think you are making the right move. Imagine your wife getting cancer, I would prefer your new HSA plan instead of a termination date starring you in the face on COBRA.
    Some here say don’t worry about it and pay more for the COBRA because it’s no problem getting insurance once you are sick. Don’t believe that prpaganda. You are already “worried” just imagine if you told that agent your wife had ovarian cancer? Then you would have a reason to worry.

  44. rdg,
    Don’t worry you will be fine. If your EKG was normal you will fly through underwritting.
    It’s quite a choice $815 a month for COBRA or $149 a month for HSA coverage. You save $666 a month or $9,992 per year. Of course everyone here thinks you are rich, it’s crazy.

  45. Some clarification and a question. I’ve seen the premiums that get taken out of my check go up more than 10% a year. My quoted rates are for me and a spouse.
    You are fond of saying that people don’t think and just take the COBRA. From my experience it is the fear of the insurance companies that makes people choose an option that they are gauranteed to be accepted into. And based on my underwriting interview, the fear is justified.
    Regarding the maternity. Let’s say that you don’t get the maternity rider (don’t pay extra premium per month) you pay maternity costs from your HSA with pre tax dollars. Let’s say you have a routine delivery. Let’s say your deductible is 5200 a year. Let’s say that your bill was 6000. How much do you have to pay out of pocket? Do the payments for the visits to the ob/gyn during the pregnancy and the hospital stay for the delivery count toward the deductible?

  46. Ron,
    Thanks for your response. You make it sound so easy, would that it were so.
    I have seen the light on HSAs and believe it is the best option for me. I don’t like employer sponsored health care. I’ve seen people go to the ER to get stitches out because there was no co pay. I’ve also seen double digit increases in premiums in my brief working life at companies that had health plans. From 99-04. I am currently on COBRA. My COBRA is ~$815 a month with a PPO and delta dental. I was quoted $149 a month for an HSA qualifying plan with no dental plan.
    I am actually awaiting an underwriting decision right now. Let me tell you that the underwrining process is difficult. There is a lot of fear and tedium involved. I am 28. The last time I went to the doctor was for a physical 5 years ago. The underwriter still managed to make me feel like I was going through a criminal trial. I had a chest Xray and an EKG done at the time. When I mentioned this the agent immediately locked on like an attack dog and asked “Why did you have such an extensive physical?”
    I can only wait and see how it goes.

  47. rdg,
    Individual HSA insurance can not single you out for rate increases or termination no matter what kind of cancer you get.
    On the other hand when one client gets cancer on a “small group” of 7 the agent will blame the sick employee for the premiums going up at renewal. Then sometimes all the other employees vote to have him fired because he is making everybody’s premiums go up.
    The first franchisee at 7-11, in January of 1997, who enrolled had a heart attack and he quit smoking and his premiums went down. After all these years his premium for him and his wife is just over $300 a month and he was 50 year old when I enrolled him.
    At the first group meeting with all the 7-11 franchisees some brought their agent to the meeting. The agents went crazy, I kid you not. They were screaming that group insurance will not cancel the franchisees if they sold their franchise (What a lie). One agent was screaming the loudest and really made the meeting go insane. I talked to the client with the heart attack not long ago and he said “That agent is more for HSAs today than you Ron!!!” The client asked him why he made such a fuss at the original meeting and the agent said, “I have seen the light.”

  48. Ron,
    What happens if I have HSA coverage and then I get diagnosed with a condition like skin cancer? Will I be allowed to renew the policy? Will my premiums skyrocket after the diagnosis?

  49. Even small companies could use Matthew’s abilities.
    If a company had just 100 employees on family coverage paying $10,000 per year each, that’s 1 million in premium, per year, on families only, growing at double digit inflation. $10,000 is probably too small today. However, if switching to HSA coverage could save just 25% that’s $250K saved just in one year. Over ten years, with inflation, the savings would grow to millions and the employees would be getting a lot of the money instead of the insurance industry.
    Make a manual Matthew. The savings for bigger companies with 1,000 families would be 10 times more. And don’t forget about the large emplyers.
    Education is the key. Of course the insurance industry will hate you if you move too quick before they are prepared to downsize, that’s an art that downsizing and lay offs.

  50. Sue,
    you said//Ron, why don’t you share the “fine print” on your dependent conversion priviledge?//
    Just click on my name Sue and go to “Plan Coverage” in the upper left and scroll down.
    My own son was diagnosed with Crohn’s Desease as a 21 year old college student. When he quit school he was switched to Single HSA coverage with a $2,600 deductible that pays to $8 million for $55 a month and can now move to 43 states and keep his coverage. No other company can make that claim. We pay his premiums because we don’t trust him, he would probably miss his first one and the coverage would lapse. When he got a job they don’t offer health benefits. Sue your grand plan transfer would not work Sue.
    What is sick is people actually listen to you Sue and group health salesmen and then they end up really over paying on the state’s uninsurable pool. That’s if your state has one. Talk to Sue and end up on the state uninsuranble pool paying through the nose marching in front of the state capital screaming, “I thought this was suppose to be affordable.” That’s what they do in Nebraska anyway.
    Sue if you are so smart how do uninsurable children in Michigan get coverage? It’s a problem and a bunch of people want to know. In Nebraska they can just over pay and get the uninsurable pool but in Michigan it’s not that easy, good luck.
    Sue, now you post your dependent conversion priviledge.

  51. Lin,
    I work for my wife, she is the GA. Yes we do preform customer service for clients, for free I might add, unlike you, and she is very good. Maybe that’s why we have not had one consumer complaint on an HSA product and this is our ninth year.
    And yes, I would be very interested in hearing your other so-called HSA problem.
    About half the time when bills are not being paid it’s the health provider sending the bills to Blue Cross, it’s pathetic. It has happenned so much that she is pretty quick at repairing the problem.

  52. With HIPAA protection, dependents have a built-in conversion privilege that allows them to transfer to another group plan without any pre-existing condition riders. Ron, why don’t you share the “fine print” on your dependent conversion privilege? Just cut and paste what your clients get to read.
    An HSA with HIPAA protection would be a great balance of individual responsibility and true safety net, but no one in the insurance industry is promoting that option because then they’d actually have to insure sick people.

  53. Sue,
    You are correct my client don’t have to purchase the “pregnancy” option. I have a client, who used to be one of my agents and wrote the first MSA in America, who has moved to Dillion, Montana to drive trucks, because he couldn’t make enough money selling insurance, who is now required, by state law, to purchase the pregnancy rider. That aught to make you happy.
    And Sue I think you are wrong when you encourage women to have coverage at their employer when they have a baby. What happens if the baby is sick, down syndrom for example, you are not telling these women that they can quit their job and take care of their sick baby and keep their insurance on that sick child are you?
    Oh and by the way. Without the pregnancy rider all complications are covered and the baby is covered from the second of birth. Plus, we have a “dependent conversion priviledge” so sick children can keep their coverage at a majority age without any questions.
    Sue how can you recommend employer insurance without a dependent conversion priviledge for their children?

  54. Dave Kempton,
    Our competitor has online quotes at goldenrulehealth.com but I tried an Overland Park zip code and they say they are not in your state, which I totally understand. We are, but some think I should not help you get ours so I suggest going to your local State Farm office.
    You might have to argue with them but just say you want the HSA plan and stick to your guns. Tell them you want the $2,600 deductible 100% plan if you’re single and double that if you have a family. If you do live in the Lenexa area your premiums are 30% more than the Dayton, Ohio examples above. These are P & C people so don’t expect them to be totally knowledgeable on the HSA. That’s another account Matthew should get is training the State Farm agents too on HSAs, they have 18,000 of them. Contact Golden Rule Matthew, their agents need training as well.

  55. I’ve avoided answering Ron too. Selling tax havens as good health policy is immoral, and is not worth my time. But hey – I’d like an infomercial too!
    I audit medical bills for individulas (uninsured and self-insured businesses), two of which have HSA’s. One was overcharged for an EKG by @ $700. Doctor refuses to recode the bill, even though he has charged for the proceedure, the professional component (the reading), and additionally for the equipment. The component charges are all included in this code, and cannot, legally, be billed separately. Appealing to the HSA insurer won’t work – it’s not their overcharge since it is coming out of the patient’s pocket and they don’t care. Too small an amount for a lawyer to take. Too small for the AG. Small claims? You think the judge will understand? It will cost more to fix this than it would cost her to just pay it. Ron you going to go to bat for this woman?
    And remember, according to CMS, 80%-90% of ALL hospital bills have errors on them, heavily weighted in the hospital’s favor. If you have an HSA (or even a 80%/20% plan), you are being overcharged. The insurers know it, the brokers know it, the hospitals know it – the only one who doesn’t know it is the patient, er, consumer.
    Anybody want to hear my other HSA case?

  56. Ron,
    I’ve avoided commenting for the last few days because it just drives circular arguments that repeat the same the points vs. enlarging the discussion. But watching you run an infomercial in this thread is too much. In the example above the reason you recommended that pregnant woman keep her individual COBRA was because your HSA wouldn’t cover an existing pregnancy and in fact, full maternity benefit coverage requires an extra rider under most HSA plans. COBRA did cover her maternity expenses which could have run as much as $5000-$8000. Low premiums have a price. A family that takes an HSA without the extra premium cost maternity rider pays 100% for pregnancy unless there are complications in which case the HSA coverage kicks in. Normal pregnancy equals a BIG charge to HSA account because even with the rider’s coverage you’re still picking up the deductible and the expense of pregnancy may drive full usage of deductible. This woman’s COBRA premium was still a deal compared to the safety net the individual insurance market would have provided her–which is zero coverage of that existing pregnancy. The real question is which is better: the $180/premium which pays no pregnancy expense or the $300/month COBRA premium which significantly offsets the thousands of dollars that pregnancy cost? Had she had an HSA all along and low medical expenses she might have had the money to pay for maternity expense, but had she had an HSA with higher medical expenses that were emptying her account regularly she could have found herself in an even worse situation than you described because unless she had bought the extra maternity rider there would be no obligation to pay for that pregnancy and even with the rider a significant cost portion would still get the question: do you want us to debit your HSA or will you pay directly?
    HSAs can make sense for people who can get fully underwritten and are relatively healthy, but selling them as the cure-all for the insurance crisis we currently face is wrong. People who get really sick are paying as much in combined medical costs/premiums with an HSA as they are likely to have been paying with more traditional plans. You have a deep pocket if you’ve had an HSA for 20 years and no major medical cost, but when you start an HSA later in life or get an illness early in the HSA cycle you aren’t pulling money from a deep well. I don’t disagree that for healthy individuals who can be fully underwritten that the HSA option can be a better current financial choice than high premiums for a great plan that is offering unneeded coverage since the individuals aren’t needing much medical care. But focusing on premiums vs. looking at total cost is a bad idea because it doesn’t adequately prepare people for the level of responsibility they take on over time by agreeing to self-insure a large portion of their likely annual medical expense through a large deductible policy. And let’s not forget that 100% of “covered” expenses doesn’t mean 100 percent of the rest of the cost beyond deductible. It just means 100 percent of what the insurance company agrees to cover either based on plan coverage fine print or individual underwriting criteria.
    Finally, going back to your last question which is if your employer shuts its doors; are there COBRA extensions–the best answer is that if you had a group insurance policy HIPAA provides that another group plan must accept you with no pre-existing condition exclusions. You have a 90-day window after leaving a policy where that provision still applies. They can rate you in a higher premium class but they can’t exclude a serious medical condition and there are group insurance options you can obtain through associations as well as employers. An employee with a serious medical condition with an HSA who loses his/her job and can’t pay the HSA insurance premiums loses insurance coverage and no insurer is required to insure him or her ever again (unless the state has legislated a high risk pool of coverage). If they had a large HSA they have money to pay for their long-term medical costs, but if they were relatively new sign-ups they are in a much uglier situation. There is no perfect insurance plan in the group or individual category and trying to pretend that HSA is all good and group is all bad won’t solve that.

  57. therajones,
    You ask //So, Ron, you’re saying with that your company’s primary marketing target for HSAs is the low-income currently uninsured? Yes or no?//
    Yes, and that is so sad.
    That’s why Matthew should get our company’s account to train our agents, we have over 100,000 of them, and in the first 7 years we had only our share of a total of 70,000 MSAs (Now HSA) nationally. Tell them Matthew that our agent training needs to be enhanced and that the company income will soar even more.
    Let’s target all employees too.

  58. Golden Hand Cuffs and a Broke Company
    When a medium sized company in Omaha was closing their stores because they couldn’t compete against the “Big Boys” in the hardware and lumber business, a fired 34 year old pregnant, single, mother of 4 children, called me for insurance because her COBRA was too expensive.
    The company said that she was fired “For Cause” so she couldn’t get unemployeement benefits either, even though she worked there for 11 years. Of course the HR people are being laid off too, moral is bad, so no one will help her with her COBRA options and she said, “I’ll just pay for my own and get away from that sinking ship.” The COBRA family coverage was about $900 a month and she had to come up with $1,800 for 2 months premium to continue.
    I told her to find out how much the COBRA single premium would be, it was about $300 a month, I told her to pay the $600 because she should keep her coverage till the baby is born and I will insure the 4 children for under $90 a month, and when the baby is born, we will add her and the new baby with the rest of the children and the final premium will double up to $180 a month from then on. I also said, “Never put your family on a “employee group plan” ever again, it’s too dangerous and it costs too much.”
    I told her that company can’t take away her unemployment benefits. She said, “They say they can and it is hard getting a job when you are 6 months pregnant.” I told her to get a lawyer but she refused because of the cost. So I called the Nebraska Gov. Office but they said they couldn’t get involved. Next I called both Nebraska Senators’ offices and Senator Bob Kerrey’s office called me and said I had to get her signitures and then they would help. So I go and get her signitures and the 5 year old boy has just been to ER and I have just submitted the children’s application earlier in the day.
    One letter to the employer from Senator Kerrey’s office and the employer discovered they had made a mistake and unemployment checks will start coming, and they did. The woman had her baby and I dropped her premium again. When she got a new job I just kept the family’s coverage. Now she has remarried and has moved to Colorado and her coverage went with her.
    Sometimes when you separate from a company there is some problems, ask the gadfly. Yes, even the group health employee plans put their own employees to COBRA for insurance termination. If gadfly would have had an HSA balance of $30,000, after all her current working years, her health care needs would be better served today.
    If your employer shuts it’s doors; is there COBRA extentions?

  59. gadfly,
    A 27 year old mother, with 2 young sons, with zero in all of her other savings accounts, with an HSA balance now is golden hancuffs.
    gadfly have a heart fo young mothers who are broke.

  60. //woman knew that if she quit the MSA balance would quit going up.//
    Just what the world needs – more golden handcuffs.

  61. HSAs enhance employee retention.
    I had a 27 year old female employee tell me, “I have more in my MSA than all my other savings accounts added together.” I asked her how much was is in her MSA and she replied $10,000. I asked her how much was in all her other savings accounts and she replied, “They add up to zero.” Her employer, nicest woman in the world, was making employer MSA deposits. The woman knew that if she quit the MSA balance would quit going up.
    This was years ago and her MSA automatically became an HSA. The employer was enrolled a few years before that employee, with the $10,000 balance, so her balance is probably getting pretty large by now. This is good because this owner will stop getting HSA deposits very soon because at 65 years of age she has to stop making HSA deposits in own account.
    Do you want happy employees with $10K HSA balances or do you want employees complaining about co-pays going up again?

  62. Also additional accident coverage is permitted.
    Our clients can add on an additional permitted accident insurance with our HSA coverage that only requires a $100 deductible. This way HSA clients don’t have to spend their HSA funds on accidents.
    If one family member has an accident, that is larger than the HSA deductible, the deductible is $100 and the entire family has met the annual deductible. We also cover $500 a year in wellness expenses so the entire family would get covered physicals up to $500 paid without a co-pay. These HSAs can almost be magical.

  63. The IRS concludes in Rev. Rul. 2004-38, 2004-15 I.R.B. 717 that coverage for prescription drugs is neither permitted insurance nor other permitted coverage. Thus, an individual that is covered by a supplemental prescription drug plan that is not an HDHP (i.e., that provides coverage before the minimum annual HDHP deductible is satisfied) is not eligible to make deductible contributions to an HSA.
    Apparently, because of the short period of time between the enactment of the HSA legislation and the January 1, 2004 HSA effective date, a number of employers and health plan providers have been unable to modify their prescription drug coverages to exclude coverage below the minimum annual HDHP deductible. For this reason, in Rev. Proc. 2004-22, 2004-15 I.R.B. 727, the IRS has provided transition relief for prescription drug coverage: An individual who would otherwise be eligible to contribute to an HSA but for prescription drug coverage below the minimum annual HSA deductible will nonetheless be eligible to contribute to the HSA through December 31, 2005.

  64. thorajones,
    I said 43% of HSAs were uninsured before getting HSA insurance.
    But you are right the HMOs are not popular. Many HMO clients are dropping their premiums way down and leaving the HMO and getting HSA coverage.
    And saying that 7-11 employees are rich because they get HSA coverage is a good one theorajones.
    Senator Kennedy (D-MA) likes HMOs, he hates HSAs, see the difference?

  65. LOL, this song and dance sounds very familiar. Pay less money and get all that you got before and even more! It’ll be great for everyone–poor and rich, sick and healthy!
    Does anyone else remember the HMOs telling us the same thing a decade ago? Of course, there’s no reason to suspect that HSAs will have the same fine print as HMOs so that they can take your money when you’re healthy and then not take care of you when you’re sick. Especially when sales guys like Ron have been so upfront about their underwriting practices, their tendency to refuse coverage, the fact that they’re being targeted to the comparatively affluent who already have health insurance…

  66. Sure some companies don’t cover RX. So you are right Anil, don’t get one of these newbie players. Both of the largest companies, in MSA market share, have RX as a covered expense.
    Your financial advisor saying “Most HSA programs across the US will drop RX next year,” is the first time I’ve heard that and I’m usually up on HSA news. It wouldn’t be fair if we were the only ones with RX coverage. So I don’t believe it. I live in Florida and I will state that our HSA program does cover RX.
    It is difficult to find a health plan that pays 100% on RX, after the deductible, unless it is HSA coverage.
    Having co-insurance on RX, like many employer plans do today, can cost a lot if your RX costs are $1,500 a month. Imagine a 50% co-insurance on brand name drugs. Or an HSA plan with no RX. So like Anil suggests, get an HSA plan that does cover drugs.
    I have emailed your info that all competitor HSA plans will be dropping their RX next year to our V.P. of Individual Medical. His name is Scott, so you better be right Anil.
    I think, but don’t quote me, some new HSA insurers got a short waiver on RX from the Feds. But, as I understand it, these cheap competitors must bone up and include RX on their programs in the future.
    It does make a difference who you choose.

  67. Can you confirm the following:
    My Maryland based financial advisor questioned the veracity of my Florida based healthcare broker’s statement to him that not only doesn’t the BCBS HSA in Florida NOT cover outpatient prescriptions, but that my advisor’s Maryland’s based HSA will also drop his current Rx coverage next year (and so will most HSA programs across the US). Does this ring true with you?
    I can typically cover most healthcare expenses out of pocket, and an HSA makes sense for me overall. However, if I get cancer and the outpatient Rx aren’t covered under an HSA (as stated to me), I can’t take the risk of eating massive Rx costs associated with a catastrophic illness. In this case, an HSA makes no sense for the 50M+ baby-boomers facing a similar dilemma.

  68. Ohio Premiums (Dayton)
    37/yr old male HSA $2,600 ded. cost: $74.15/month
    37/yr old couple HSA $5,200 ded. cost: $142.21/month
    37/yr old couple + 2 Children cost: $197.92/month
    30/yr old female and 1 child: $95.78 (compare with IA, $78.68)
    Rural Ohio has cheaper rates.

  69. I performed a similar analysis for myself that compared my actual medical costs from 2004. I went into a HSA plan last year – which resulted in a monthly savings of $175.00, this amount was invested into my HSA account. At the end of the year I saved $1500 by going to into a HSA compared to a traditional health plan. I also performed additional analysis by changing my income to $20,000, $40,000 and $60,000. I also used medical expenses of $1000, $3000, and $5000.(actual expenses was $1000 for 2004) No matter how I ran the analysis, I still saved between $800-$1600 in 2004.
    I am in the process of running the same analysis for my sister, brother in law and their daughter. However, for any single, 37 year old living in Ohio, HSA type insurance is the best choice regardless of income level or amount of medical expenses.

  70. David Hogberg is stating today, at national review online; Though introduced just recently — on 1/1/04 –HSAs are booming…while only 438,000 Americans had signed up for HSAs as of last September, by March of this year the number had swelled over a million. And the market for HSAs looks set to grow by leaps and bounds….”John Reynolds, a senior vice president of Wells Fargo & Co., predicts there will be an HSA boom on Jan. 1 2006, when many large employers go live with HSA-qualified health plans.”
    David quotes Assurant Health (That’s us, Fortis Insurance Company), “Last year Assurant Health found that 43 percent of those purchasing its HSA plans were previously uninsured…The same Assurant Health survey found that 70 percent of those purchasing HSAs were over 40.”
    I saw Assurant Health projections on HSAs and we predicted millions of HSAs in ’05 and ’06 but the real explosion happens in ’07 and after.
    Between 1/1/97 and 1/1/04 there were only 70,000 MSAs enrolled in 7 years. I thought we should put those years on the chart too.
    When the first MSA was enrolled we were called Time Insurance Company. Then we switched our name to the parent company and became Fortis Insurance Company, then we went public and became Assurant Health who is bringing back the old name of Time Insurance Company.
    The motto is: we bring clarity to complexity
    David’s blog site is Hog Haven.

  71. Ron has done this blog’s readers a great service by educating them on how a Health Savings Account is funded — by reducing your health insurance premium and using the savings to deposit into a portable account, the unused balances of which can be spent in retirement or tax-free on health care expenses.
    If you want to go to a site dedicated to the promotion of HSAs, visit http://www.hsainsider.com.

  72. theorajones,
    //Your single mother above is not typical. She a very well off single mother at $50K a year with benefits//
    If we drop the single mother’s income down to $27K per year the results are “exactly” the same as mentioned above. Should she drop her monthly cost of $400 out of her check down to $78.68?
    In 1997 when I enrolled the first 7-Eleven employee, an uninsured single mother with 2 children for $78 a month, I told the head guy at 7-11 that Hillary said MSAs (now HSAs) were a tax dodge for the rich. He laughed and said, “Jay Leno has never confused our 7-11 employees as being amongst the rich.”

  73. COBRA for $1,150 a Month or HSA?
    I just finished talking with a 54 year old woman who just lost her job. COBRA started 5/1/05 and the cost is $1,150 a month for herself and husband. She said she has until 6/1/05 to pay May and June COBRA payments combined equaling $2,300.
    She is 54 and her husband is 48 and in their zip code my HSA family coverage is $378 a month.
    She asked, “Why would you take money out of the HSA, growing tax free, even if you could?
    I said, “I wouldn’t get a COBRA that lasts only 18 months; what happens if you get cancer next month? I know a guy that took the COBRA and his teenage daughter was diagnosed with a liver disorder while he was on the COBRA.” She said, “I bet it was just easier for him to pay than to think about it.”
    She was thrilled that people over 55 years of age could deposit more in their HSA.

  74. I don’t understand how widespread adoption of HSAs will have anything but a bad effect on the healthcare system. I also don’t understand how they’re better for anyone (except the wealthy) than a healthcare system financed through progressive taxation.
    HSAs discourage individuals from getting preventive care. Underwriting means they are useless for the sick. High deductibles (and catastrophic coverage coontingent on ability to pay them) mean they are useless for the less affluent. They cherry pick the healthy, increasing the cost of insurance that’s available to sick people (who need it in order to access care). They don’t have any cost-control mechanisms, so they’re eventually going go into adverse selection death spirals (unless they figure out how to drop coverage for sick folks). And they are fundamentally the same as employer-based coverage in that they have no guarantee of continuing coverage when you get sick enough that you can’t work anymore.
    Let’s have a reality check–HSAs simply aren’t going to help that many people access healthcare. They may help some individuals who already have access to healthcare (or who are healthy and decently off) access it more cheaply, but at the enormous social cost of making it harder for OTHER people (notably, the sick) to access care.
    Your single mother above is not typical. She a very well off single mother at $50k a year with benefits and a generous employer who’s willing to match her contribution.
    The median income for single mothers is just under $30k–fully half of all single mothers make LESS than 30,000 a year. The median household income in the US is just over $43k. When you just look at families, they’re not rich either. The median income for a two-parent household is $54k, meaning half of all 2-parent families are pulling down LESS than $54 grand. Furthermore, in the real world, 43% of American families spend more than they earn each year.
    Why am I boring you with census stats? Because people in debt and people who make very little money to begin with aren’t going to be able to build a nest egg to tap for their routine medical care! And god forbid they should get sick–they’ll get fired. How are they going to pay the $5k annual deductible then? The monthly premiums?
    And frankly, Ron, you know this. If you had a salesman who was going to Medicaid offices because he knew that most parents of Medicaid-eligible kids are uninsured and thought they might buy an HSA, you’d fire him. I suspect that most of your good salesmen spend their time talking to employers who already provide traditional comprehensive insurance, right? And whose employees aren’t single moms making $25 grand a year, right?
    Listen, I support the idea of creating more tax-sheltered savings options for middle income and lower income people. That’s a great thing!
    However, I think it’s a really bad idea to further weaken our healthcare system to do it. I think a tax shelter that as a side effect makes it harder for sick people to access care is really bad policy. I think one that discriminates against the sick is bad policy. I think one that pretends it’s making health care more accessible for everyone is a lie, and a dangerous lie at that.
    What if, instead of HSAs, we had a universal health system funded by progressive taxation and also some tax-sheltered savings options for middle and low income folks? Then everyone would have health insurance they could really never lose, and a retirement (or whatever) savings account that didn’t depend the luck of their health.
    Wouldn’t that be better than HSAs?

  75. Abby,
    Most of my HSA client, 99%, have a PPO. This way they get dicounted claims before the deductible is met with no balance billing.
    Most HSAs today are PPO programs.

  76. HSA clients simply show their insurance card at the time of RX purchase and the discount is applied on the spot. If the client is past the deductible the claim is paid by insurance. Thank you Medco Health, the RX PPO.

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