I have a relative who works for a health insurance company, and whose husband has all sorts of health problems. They use an HSA, because with all the prescriptions he has to take, it just makes more sense to do it that way than to run everything through an insurance plan that will cost ridiculous amounts anyway due to his problems.

No HSA's for me yet, but my wife may be able to snag one next year, which would be very nice.

I looked into HSA coverage for my company. With a $2500 deductible, coverage would still be $120 to $200 per month per employee. Our current cost (with a $20 copay for Dr. visits) is only $230. My agent is still in the process of firming up the figures. The deductible also applies to medication, so someone with an illness requiring regular medication (like diabetes) would have high out of pocket expenses instead of our current plan's $10, $20, $40 copay. The agent has not been able to find a company with over 15 employees that could save any money without really sticking it to older or less healthy workers by switching over. Finally, HSA coverage is all or nothing, and cannot be used for one group of employees while using traditional coverage for others. This is complicated due to insurance companies demanding at least 75% of the employees are covered. I'm all for HSA's but they have a long way to go.

sorry,
I left out that we pay $160 of the $230 premium.

Isn't all that more than made up for by the benefit to the employees? It's a kind of pay raise for the healthy.

Sure, the healthy would benefit, but I've a bunch of employees in their 50s and 60s who'd be crushed. Also, only 22 of our 70 (out of 130) employees making over $42k a year put money in a 401k (no employer contributions to the plan unfortunately). I doubt they would save for their health either. Forrest Gump had a saying about these people.

With an HSA they'd have no choice.

Pat: If all you saved was $50/employee it wouldn't be worth it? And let's say you're a swell employer and just redirect the $50 you saved on premiums into they're HSA account. That's $600/year/employee that you're already paying anyway.

Don't overlook the tax benefit of writing off the first dollar and all the rest up to the deductible amount with no AGI threshold test. The list of things you can buy w/ tax free dollars is VERY inclusive.

I look into this occasionally and the plans do not make sense for two self-employed people, at least in Illinois. Right now we have catastrophic major medical BC/CS. Both of us are healthy, buy a pair of glasses every couple of years and get a dental check up twice a year.

BC/BS wants to sell me a comprehensive policy for more money at twice the deductible exposure. After tax effect I am out a couple grand a year. I like the concept but no thanks with those numbers.

There's a 20%-25% net upside if the employer kicks in a contribution. In addition to normal fed+state income taxes, an employer's contribution also reduces FICA (15.3%), Medicare (2.9%), FUTA+SUTA (1-5%), and Workmans Comp (1-5%+).

You could also sign up for a full cafeteria plan, with a Flexible Spending Account, that would let the EEs take out pre-tax dollars for their out-of-pocket medical expenses. You can't do both the FSA and HSA for your EEs, but for your purposes a full plan would lower your FICA contributions, since the EEs are taking their elections out pre-tax. I put these in place all the time and EEs love this option, and it now covers over the counter medications, too.

Rick: For the same premium, I'll bet you could put an additional $5200/year away pre-tax, regardless of your income. Once you have your Max Out-of-Pocket covered in the HSA (let's say it's $8k), you're completely covered -- policy pays 100% after that. Meanwhile, any (mostly perceived) additional deductible "exposure" is a nominal risk for you healthy folks and, if ever invoked, is easily financed with the medical provider at 0% interest. Being SE, you write off 100% of the premiums anyway. It's nuts not to do it.

John:

No, the premium increases substantially from our current "bare bones" catastrophic plan to a more comprehensive HSA policy. I am still out money after tax, paying for coverages we have needed once in 25 years and exposing myself to a deductible twice as high as I have now. Even the insurance guy didn't try to sell me the policy after he ran the numbers.

Isn't the point that most of us don't need any for that 25+ years?

Rick: What's the deductible on the "bare bones" plan you have now? Doesn't it already qualify as an HDHP?