Summary

When it comes to health care coverage, there is no such thing as one-size-fits-all. Health savings accounts (HSAs) and high deductible health plans (HDHPs) can be a good choice for many people. But there are risks associated with HSAs and HDHPs, especially for low-income workers.

Risks of Health Savings Accounts and High Deductible Health Plans

Health savings accounts (HSAs) are a recent innovation available to U.S. taxpayers. HSAs provide a way for individuals to set aside pre-tax dollars to pay for current and future medical costs. Health savings accounts and the high deductible health plans (HDHPs) that go with them make good financial sense for a lot of people (and for companies that they work for). But there are some risks associated with them as well.

There are financial risks with health savings accounts and high deductible health plans. By it's very nature, an HDHP has a much higher deductible than most traditional health plans. Until your deductible is met, there are no co-pays for office visits or prescriptions. In other words, you are required to pay the entire cost of the prescription or physician's charge until you have paid the full amount of your plan's deductible. If you don't contribute faithfully to your health savings account, you could be facing large medical bills without the resources to pay them.

Some advocates are concerned about the effects that high deductible health plans can have on lower-wage workers. The basic purposes of health insurance are to make sure that people have access to needed care and to help avoid financial hardship. Individuals with higher deductibles are more likely to forego a needed follow-up or specialist visit. Those with incomes of less than $35,000 per year are especially at risk for financial barriers to needed health care. If they don't get needed preventive care, their health may deteriorate to the point where expensive medical procedures are unavoidable.

There's always the risk that individuals who are less savvy about savings and investment options may not achieve optimum investment growth of their health savings account. A health savings account is like a savings account for medical expenses. You should compare HSA providers before making a decision about where to open your health savings account. There can be significant differences in the features associated with HSAs. Fees charged, interest rate earned and available investment options can all vary greatly.

It's possible that high deductible health plans may discourage some patients from seeking the medical care they need, and could add to their financial burdens. However, lawmakers may be considering modifications to the health savings account program to address these serious risks.

Health savings plans and high deductible health plans are not for everyone. But no single health care solution is. If you're generally healthy and most of your health expenses are for preventive care, a high deductible health plan can be a good choice for you. This is especially true if you're able to make full contributions to your HSA. Any decision to change your current health insurance coverage should be taken with care. In the end, your health and your financial situation should be your guide in any decision about your health care coverage.