MONEY

The Problem with HSAs

You can cut spending in almost every area of your household budget. But as I discovered yesterday during a trip to the opthamologist, health care is one category where prices remain stubbornly sticky. There are no end-of season sales to take advantage; it’s tough to research costs in advance; and you’re at a disadvantage in deciding which services are critical and which are discretionary. I left the doctor’s office owing $400 for the exam, lenses and frames–and I have insurance.

So I was intrigued when yesterday, the Center for Medical Progress at the Manhattan Institute, a think tank, released a study that argued Health Savings Accounts (or HSAs) have the potential to reduce medical care costs. As you may recall, HSAs are tax-deferred savings vehicles for anyone covered under a qualified high-deductible health plan. And it seems when it comes to annual premiums, HSAs increasingly are cheaper: According to the study, an employer-provided HSA plan carried an average annual price tag of $9,666 in 2007. By the following year, the bill dropped to $9,101. Compare that to an HMO policy, which rose in cost, averaging $11,879 in 2007 and $13,122 in 2008.

Sounds good, right? The only problem is those numbers reflect premiums only. They don’t measure the fees an HSA consumer is charged before he or she maxes out the deductible. Granted, federal law sets a limit on the deductible for HSA-qualified high deductible plans ($5,800 for individual policies and $11,600 for families in 2009), and many policies cap total out-of-pocket expenditures you can have in a year (50% of plans had limits less than $6,000 in 2008). But there’s still very little clarity on how much you’re going to be charged for an annual check-up, a MRI or an eye exam.

Small improvements have been made: Sites like HealthGrades and the Health Care Blue Book have started to compile pricing info on medical care. Other sites that help you “take charge” of your health care can be found here.

But HSA consumers–heck, all health care consumers–face an uphill battle. Benjamin Zycher, a senior fellow at the Manhattan Institute and the study’s author says that as long as low-deductible policies, such as HMOs, pick up the cost of routine care, there is little incentive to shed more light on prices. He argues: “If people had stronger incentives to comparison shop, that information would be forthcoming.”

–Carolyn Bigda

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