I recently wrote an article for TechnoLawyer.com on "The Benefits of Health Savings Accounts for Small Law Offices. The synopsis reads:
Has your insurance company ever rewarded you for being frugal or being a low utilizer of health insurance? Patent attorney Stephen M. Nipper doubts it, and in this article discusses his experience in switching from a traditional health insurance plan to a health savings account. Mr. Nipper explains why he believes he will be able to save thousands of dollars a year in insurance premiums by doing so.
Neil at TechnoLawyer (did you know that there is a TechnoLawyer Blog???) was kind enough to give me a reprint of the article for the blog: Download "The Benefits of Health Savings Accounts for Small Law Offices".
If you don’t already receive the TechnoLawyer newsletters (free!!!), you are really missing out on some great content. Check www.technolawyer.com for more details.
I’ve received a couple of comments from readers to this post…
COMMENT #1 (with my two cents):
>health care providers who will not negotiate price, as they do with large insurors.
My understanding (ours was just set up, so I can’t give you a definite answer) is that it doesn’t matter. You still have the same insurance, you just have a much higher deductible. Your bills will still go through your insurance company…they’ll mark them down and send them on to you to pay “Patient’s Responsibility” (because you haven’t met your deductible yet).
>You don’t say how many employees you might put on this coverage
None. For my firm (and our employees) the insurance agent ran a cost analysis and it didn’t make financial sense to put any of them on it. The only ones (in my case) moving to an HSA is me (one of my associates moved his family to an HSA last year). Whether your employees are male/female, smokers, preexisting conditions, etc. all determine their insurance rates…and whether it makes sense to put them on an HSA. If your employees are high health care utilizers and a high risk….you’d be foolish to switch them off traditional health care plans.
COMMENT #2:“Just wanted to make you aware of www.hsadecisions.org. The site is the most complete and up to date resource available on the web for information on HSAs.”
COMMENT #3:Another person emailed me these comments:
You are so right about the high deductible health insurance. We switched over last year. Let me add a couple of things to your knowledge base.
- An individual can purchase her own insurance and set up a Health Savings Account. Then the money in the HSA belongs to that individual. Just as you said it is pre-tax, can grow over time and can be used to pay for things that the insurance company does not pay for. But be sure to claim everything you can on your insurance so that they properly credit your deducible.
- If an individual sets up an HSA in the middle of the year she can only fund a pro-rata share of the deductible.
- A company can offer the same plan to an employee. Or re-imburse the employee for this expense. Alternatively, the company can set up a Health Reimbursement Arrangement for the employees. In this case the money is still pre-tax but does not ever belong to the employee. The max amount that can be spent per year per employee from the HRA is the deductible. The money is only paid by the employer when it is spend by the employee. So if the employee does not spend all of the allowed deducible each year the company experiences a savings.
- In contrast to the HSA an HRA is not pro-rated if the plan is set up in the middle of the year.
- The best list I have found for expenses payable from your HSA/HRA is at msabank.com or hsabank.com.
- BTW the actual maximum one can contribute each year is the insurance deductible amount. Except individuals over 55 can contribute somewhat more as a “catch up” provision.
- I would strongly advise against investing these monies in equities or mutual funds. The banks that handle the HSAs pay minimal interest on the funds deposited but I don’t think you would want to take a chance on the funds not being there when you need them.
- One final comment. This is one of the best things the government has done for us in a long time. But they have now set up a cottage industry of HRA/HSA banks. And there will be problems – fraud and bank failures for example. They could have accomplished the same thing much more simply by making these expenses TAX DEDUCTIBLE.
[Update: August 11, 2008. I'm still using the HSA and still think it was a good decision. In the last year I've asked a couple doctor buddies what they do...they both have HSA's too. Edit: cleaned up post formatting.]
Related posts:
