Failure to understand the concepts of a
Health Savings Account will cost a consumer
Recent surveys have shown that only 59% of American consumers even know about Health Savings Accounts and half of those who do know about them admit that they do not understand the concept.
According to the survey conducted in December, 2008 by Opinion Research Corporation of Princeton, New Jersey, consumers listed expense and lack of knowledge or understanding of how Health Savings Accounts work as the main reason they did not consider them as an alternative to traditional health insurance.
Even among those who said they were “fairly familiar” with the HSA concept, most did not understand the key features of Health Savings Accounts.
- 52% of the participants did not realize that HSA contributions are not subject to income tax.
- 55% thought they had to pay taxes on money when it was withdrawn, even if the money was withdrawn to pay for qualified medical expenses.
- 60% did not know that Health Savings Accounts were portable and could be taken with them if they moved to another job.
More then half of the participants confused Health Savings Accounts with Flexible Spending Accounts. They stated that they would not want a Health Savings Account because they did not want to “lose” the money at the end of the year. Only Flexible Spending Accounts (FSAs) are "use it or lose it." One of the key features of an HSA is that money deposited in an HSA is forever the money of the account holder until they withdraw the funds. Any money left in the Health Savings Account at the end of the year rolls over year after year and earns tax deferred interest .
Many did not know that an employer could deposit money in the employee's Health Savings Account and that the employee was free to use that money as they saw fit. Half of those who knew an employer could deposit money in their Health Savings Account thought that the employer could take the money back if they left their job or at the end of the year.
Neither of these assumptions are correct. Once money is deposited in a Health Savings Account it is, for all time, the property of the employee. It cannot be returned to the employer. It cannot be refunded to the employer even if the employee leaves his job. The funds in the account remain the property of the employee even if terminated for cause.
Understanding and making use of Health Savings Accounts would go a long way toward helping to solve the problem of escalating health insurance costs. More consumer education is needed if people are to make intelligent decisions concerning their health insurance needs.
For more information: Find out if an HSA plan would work for you or your small business, send you inquiries to planners@sbcglobal.net
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