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Health Savings Accounts May Help Tame the Health Insurance Monster
Highlights from 2004 Articles

By Philip M. Perry
Date Posted: 1/3/2005

More employers are looking at a new vehicle called the Health Savings Account (HSA), which promises to reduce wasteful medical spending by appealing to employees’ self interest. Under these plans, the individual who spends less money on medical care ends up with more cash in pocket. And employee control over medical spending means, in turn, a lower financial burden for the employer.

            An HSA combines two financial vehicles. The first is a personal, employee-owned savings account dedicated to money earmarked for future medical needs. The second is a high deductible health insurance plan. This plan kicks in when medical expenses exceed the specified deductible.

            Employer contributions are excluded from employee income for tax purposes, and employee contributions are deductible from taxes.

            At retirement, the money in the savings account can be withdrawn without penalty.

            Employees will spend money only on health care they really need. The less the employee spends, the bigger the accumulated nest egg.

            Smart consumers will ask questions such as these: Is that generic drug as powerful as the expensive name brand? And that procedure the physician wants to do — is it really necessary? As for that emergency room visit that seemed so automatic in the past — would a Monday morning office appointment be more appropriate for the symptom?

            "As an employee I know that I will save money if I take a little more active role in my health," said Marcus B. Newman, an employee benefits consultant at GCG Financial, an insurance services firm in Bannockburn, Illinois. "It encourages me to be more attentive."

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