HSAs-Not just for patients!

We had seen this coming for over a year. Health insurance premiums and deductibles for physicians and staff in our small rural private practice were becoming unaffordable. It was time for a major change-to health savings accounts.

As per federal legislation signed into law in December 2003, HSA coverage consists of two components-the HSA itself and a high-deductible health plan (HDHP). The HDHP has a minimum annual deductible of $1,100 per individual and $2,200 per family, which is noticeably higher than the $352 average for workers enrolled in HMOs. HDHP premiums, however, are much lower than those of traditional plans. Otherwise, like PPOs, HDHPs offer a defined package of benefits with annual limits, potential first-dollar coverage for preventive care, discounts for in-network providers, and considerable variety from plan to plan.

Just as with other payers, all HDHP claims are processed through a third-party insurance company to get the negotiated price reduction (which we loathe as physicians, but appreciate as patients) and to tally contributions toward the deductible. The biggest difference in the claims process is that when the explanation of benefits comes in the mail, it will most likely indicate that I'm stuck with the bill.

To dip into my health savings account, I scan a debit card at a pharmacy, physician office, or other venue. Funds in my HSA can even be used to purchase items that are almost never covered as part of a typical health plan, such as over-the-counter medications, orthodontics, and childbirth classes.

Before making this change, my partners and I met with our insurance broker to get a handle on the concept and make sure it was the right decision for our practice. In the end we decided to also offer staff a PPO option, but one that called for another bump in their annual deductible. Concurrently, we agreed to contribute to a health reimbursement arrangement, which doesn't offer as many advantages as an HSA, but would help employees with the deductible.

How things worked out for doctors and staff

During 2005, my family of four paid $630 per month-or $7,560 total-in premiums for a basic PPO health plan. On top of this I was responsible for a $500 annual deductible, copays, the percentage of any service left to me (e.g., 80/20), and all over-the-counter medications. In 2006, we paid $230 per month ($2,760 for the year) in premiums for an HDHP, or about a third of what we paid the previous year. The catch is that the HDHP requires a $5,400 annual deductible, compared with $500 for the PPO. To pay for this, we contribute $450 per month, which not coincidentally works out to $5,400 a year.

If you do the math, you'll notice that I paid $630 per month in premiums for the PPO plan and $680 per month for HSA/HDHP coverage. So where's the benefit? In 2005, if my family didn't use the $630 in premiums, the insurance company got to keep the money. In 2006, we got to keep the unused funds in our HSA account and to invest it tax-free. In fact, the same investments allowed for IRAs-including stocks, bonds, mutual funds, and certificates of deposit-are allowed for HSAs.

Feedback from employees has been mixed. Although our staff was aware of the limitations of the PPO plan-fewer services were being covered and the deductible was rising every year-they've experienced a lot of angst over using the HSA to defray the $5,400 deductible. We've reassured them that this is what the HSA is for, and that by using it they're not really taking a huge out-of-pocket hit. At the same time, they've been pleasantly surprised that our HDHP still gives them a discounted price on services.