Tax benefits make HSAs an attractive option

It's not the fig leaf that some would advocate for a fragmented healthcare system. But even though the jury appears deadlocked about the value of the health savings account (HSA), the movement toward consumer-directed healthcare (CDHC) is accelerating. In the midst of this fracas there is good news for the savvy healthcare consumer: The tax incentives for HSAs are compelling.

Be warned, however, that some states, such as California, Wisconsin, Alabama, Pennsylvania, New Jersey, Maine and Massachusetts, do not allow contributions to be deducted on the state level. Participants in these states still receive federal tax benefits.

In addition to choice and decision-making power, consumers can reap plenty of other benefits from their HSAs. One encouraging sign for the future of CDHC is that many new policies are being purchased by individuals who had previously been uninsured. Based on those factors, many experts estimate that these uniquely tax-advantaged accounts could number more than 14 million by 2010.

For health plans, the task is simple-create tools that simplify consumer navigation and provide an accurate and easy method for consumers to track their HSA expenditures:

Confusion breeds dissatisfaction, even for world-class products and services. In a recent study, Hewitt Associates discovered that some employees who enrolled in a high-deductible health plan failed to fill out the correct forms to open a bank account for their HSA. Individuals could enroll in their plans electronically, but lacked the tools needed to enable the seamless integration of the insurance plan with the HSA. Such disconnects between consumers and the market can cause frustration for all healthcare players and stunt the progress of this burgeoning market.

All organizations that hope to benefit from these unique, market-driven health plans must first commit themselves to learning the intricacies of this new business model.

The sky is the limit for HSAs, but helping members understand and take advantage of their myriad benefits is the first step on that path.

Kathy McAleer, a veteran in the rapidly growing field of consumer-directed healthcare, is vice president of operations for QCSI's MyHealthBank product line.