Thoughts on HSA’s & HRA’s...

One of the hats I wear says “Continuing Education Provider” on it (not really; it’s a metaphor, okay?). In preparing for an upcoming class, I’ve had my own learning opportunity:

Sometimes, a cat is a dog.

There’s been a LOT of press in recent months about how much more successful Health Savings Accounts (HSA’s) have been than Medical Savings Accounts (MSA’s) ever were. It seems that everyone’s talking about them, and they’re selling like hotcakes.

Except that they’re not (and no, I can’t back that up with hard numbers; no one can - yet. But I’ve got pretty good instincts on these things)

Turns out, a LOT of folks -- particularly employers who offer health coverage – are asking about HSA’s, but precious few are actually installing them. Why is that?

Well, it helps to know that HSA’s aren’t free. That is, just because the employer may save some premium dollars (and not as many as one might think), it doesn’t mean that he gets to keep them. By the time one adds in the actual contributions an employer has to make to the savings account to make it attractive (or even palatable) to employees, the savings don’t amount to much. Then, add in the admin costs, and all of a sudden they’re not so great a bargain.

Don’t get me wrong, I am still a tremendous advocate of the concept; I just have some issues with the execution of it. The problem is that HSA’s really aren’t about saving money; they should be about empowering the health care consumer to make better decisions (however one chooses to define “better”).

In any case, what I’m finding is that more often than not, when employers talk about HSA, they really mean HRA.

What’s an HRA? It’s a Health Reimbursement Arrangement (notice the “A” here is not for “Account”). With an HRA, the employer still offers a plan with a higher deductible, for example, but offers to subsidize said deductible. In other words, instead of just handing out dollars willy-nilly, the employer can control to whom the dollars go, and can actually look forward to potentially saving real money.

Next time, we’ll look at an actual case.