CONSUMERS, COMPETITION AND A COMMODITY:

Health Savings Accounts: More Time, Less Money: The effort involved in opting for HSAs over traditional insurance keeps most employees from choosing them, but those who do can really save (Lauren Young, 10/13/08, Business Week)

Although the deductible is high—averaging $1,500 for individuals and $3,000 for families—HSAs don't skimp on coverage. Plans pay 100% of all medical expenses once the deductible has been reached as well as preventive-care costs. There are no co-payments.

HSAs can be a smart savings tool, particularly for small businesses and self-employed workers who need tax shelters and lower out-of-pocket expenses. That's why Vijay Goel, 31, of Los Angeles opened up an HSA to cut his health-care costs for his startup, HealthShoppr.com, which helps consumers shop for health-care services online.

Goel says his COBRA insurance, which would have extended coverage for 18 months after he left his job as a McKinsey consultant, cost $450 a month—and it covered only him, not his wife. Instead, he's spending $200 per month for a plan with a $3,000 deductible that insures both of them. "We've gotten our premium way down, which allows us to be protected without wasting tons of money that would go straight to the insurance company," he says. In addition, since HSA contributions can pay for dental and optometry services, the Goels have eliminated the need to pay for those two areas separately.

(The average premium costs for health coverage for a U.S. worker is $1,946. However, according to the Kaiser Family Foundation, the median per-person spending was just $776 in 2005, which is the most recent data available.)

Another perk: If you are generally healthy and don't rack up many bills, you can stash away a lot of money in an HSA. Mimi Grant, president of the Adaptive Business Leaders Organization in Orange, Calif., which offers executive leadership coaching, has more than $10,000 in her HSA, which she opened in June 2005. "Thank God I've been healthy, so the few charges I've had have been so relatively minor I've paid them out of pocket," says Grant, 60.

Most people don't have that much saved—the typical HSA account balance is just $1,348, according to the newsletter Inside Consumer-Directed Care. But savvy savers can build up substantial balances because participants may fund an account well beyond the deductible. Pretax contributions max out at $3,000 for individuals and $5,950 for families in 2009. There's also a $1,000 catch-up contribution if you are over age 55.

Another benefit HSAs offer is potential medical savings. When Fatima Mehdikarimi of Atlanta started thinking about having a second child, she and her husband switched into an HSA with a $7,000 deductible and no maternity coverage. It may sound counterintuitive, but their monthly premiums dropped from $900 per month to $360.

Then, after she found out she was pregnant, Mehdikarimi shopped around for a new hospital as well as a doctor to cut costs. Her bargaining chip? Cash. By offering to pay cash up front for all expenses, she first struck a deal with the hospital's finance manager to cover the delivery charges at a 40% discount. She also found an obstetrician willing to slash his fees by 40%. The lab cut its price, and so on.

In the end, Mehdikarimi figures she spent about $7,000 less on the second birth than the first one by driving a hard bargain with health-care providers.