The Truth about Health Savings Accounts (Note: I've made some adjustments to the original post...in RED)

Today on the Thom Hartmann radio show, I heard some guy say that people who can't afford medical insurance should get a Health Savings Account. That's the same thing George W Bush was saying when he pretended to be concerned about the millions of uninsured and under insured Americans.

Just what planet are they living on?

First of all......a Health Savings Account is NOT medical insurance. It is exactly what it says it is: A SAVINGS ACCOUNT. Anyone who cannot afford to purchase medical insurance cannot afford to put extra money into a savings account.

Second......in order to qualify for a Health Savings Account, you must FIRST PURCHASE MEDICAL INSURANCE. That's right, you must purchase high deductible medical insurance, in order to open up a Health Savings Account.

Third......once you have a Health Savings Account, you pay for all your medical expenses out of that account up to the amount of your deductible. If you don't have enough money in that account, you pay for it out of your pocket.

Fourth......your medical insurance kicks in after you've used up your deductible. If your deductible is $2500, you must pay the first $2500 from the money you've put into your Health Savings Account (or from your own pocket, if you don't have enough money in that accout).

Fifth.....Most people open up Health Savings Accounts (HSA) so they can deduct it on their tax returns. The money they put into their Health Savings Account is pre-tax dollars. So if you don't need the deduction, there is no need to open up an HSA. You might as well just pay for high deductible medical insurance and pay for your medical bills out of your pocket. It's the same thing, basically. Plus, you don't have to put any money in your HSA if you don't want to. You can put in between $1 and the maximum allowed for the year ($2900 in 2008).

My husband and I are self-employed. Medical insurance is expensive, but thankfully we are healthy. This is why a Health Savings Account works for us. Here's how it works:

We purchased a high deductible medical plan ($2500) for $622 a month, for 2 people. This is for medical only; we do not have dental or vision coverage. We can each put up to $2900 annually into a Health Savings Account, which is tax deductible, and can be carried over from year to year. Because we are both over 55 years old, we can each add an additional $900 this year. All of our medical bills are paid from this account. When we retire, we can withdraw money from this account, much like an IRA.

Since our medical expenses have been below $2500 each year, we have paid for everything out of our HSA. But because we have medical insurance, our insurance company will sometimes make adjustments, and we get our services at a reduced fee. This does not apply to dental or vision.

The reason a Health Savings Account works for us is twofold: 1) since we are self-employed, we are able to deduct the amount we contribute to our HSA ($7600 for 2008. It will be raised $8000 in 2009); and 2) we are healthy, so our medical expenses are not high.

The total cost we will pay this year is $7467 for our high deductible insurance, and $7600 for our Health Savings Account. That's $15,067. And this is considered cheap, because we don't have any pre-existing conditions. How can someone making minimum wage afford this? How can a family with children afford double this amount? How can someone with medical problems afford this?

Basically, a Health Savings Account is a tax-deductible savings account that people can use to pay their medical expenses. But it is not medical insurance. You must have a high deductible medical insurance policy in order to qualify for a Health Savings Account.

The next time you hear someone say that a person without medical insurance should get a Health Savings Account, ask them to explain it to you. I don't think they can, because they probably don't understand it.

Ask them "Just what planet are you living on?"