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Health Savings Accounts: The Pitfalls

Today everyone is looking for more economical ways of providing health care. The health savings account was a way to offset expenses for both the employer and employee. Most of us today get our health insurance coverage from our employers. The cost of funding our own polices makes it a false economy. However, with rate of increase for medical costs insurance premiums are quickly getting out of control. Many employers are finding it harder to provide good coverage for their workers.

Health savings accounts were designed to help. They encouraged the purchase of high deductible plans which brought lower premiums. They are also tax deductible and tax sheltered until they need to be used. They funds in then can also be rolled over if you change jobs and can accumulate year after year. The plan sounds quite good on paper but does come under a fair amount of criticism.

Health savings accounts work best if the money stays in the account. The longer you leave it the more it accumulates. This will work if you’re a healthy person overall. However, those with health problems or chronic illnesses will have a difficult time accruing funds. They will need to use what is available to cover their day to day expenses.

The health savings account also needs to be created with a high deductible health insurance plan. However, those with health problems may find this difficult. They could be rejected because they present far too great of a risk to the insurance companies.

Before anyone signs up for a health savings account, they need to be aware of the fees involved. Some have administrative fees and service charges that can really add up over the long term. These can cut into your funds quite substantially.

Finally, a health savings account may force people to forgo care. They may want the funds to accrue so they go without care that they need. This can add up to even more money being poured out at a later time. It can also be quite dangerous.

Health savings accounts do offer advantages. However, they need to be looked into carefully. If you’re a person of general good health then they are likely a good option. However, someone with continuing health problems may find that they are of little help.

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