Health Savings Accounts

I am not an expert in health care policy or insurance, but I have had several patients asking me about whether Naturopathic medicine was covered by the new Health Savings Accounts (HSA). At first I pleaded ignorance. However, given my mission of bringing Naturopathic medicine to as many people as possible, I decided to see if HSA’s would help to facilitate just that. The following is what I have learned about health savings plans.

The health savings account (HSA) legislation was signed into law by President Bush on December 8, 2003. At that time, then-president Bush predicted that 40 million Americans would participate in these accounts in the next four years.
HSAs are tax-favored financial vehicles that are paired with high-deductible health insurance plans. Participants must use funds from the HSA to pay for their initial medical expenses. Advocates say HSAs offer some of the nation’s 45 million uninsured an option for coverage that is not dependent on employment-based insurance and make consumers more aware of the cost of health services.

How do they work?
There are two parts to participating in an HSA.

    HSA qualified financial vehicle to put pre-tax dollars in. The pre-tax dollars in these financial vehicles can be used to cover smaller routine medical expenses until the deductible is met. Additionally, any dividends or interest earned by the vehicle is tax free, and withdraws for medical expenses are not taxed. It is like a medical IRA. Just like any other IRA, if you make withdraws for anything other than the medical expenses, there is a 10% penalty. You have to find a qualified HSA. There are many out there. You can then take money from this account to spend on most alternative and complementary health care.

    High deductible medical insurance plan- This will cover serious illnesses or injury once the deductible is met. Sometimes referred to as catastrophic insurance. Unlike the old medical savings accounts these accounts don’t have the use it or lose it clause at the end of the year, they roll from year to year.

The minimum requirements for a qualified insurance programs are:

Deductible Requirements        Max. Out-of-Pocket
Single          $1,000 for single                      $5,000
Family         $2,000 for family                     $10,000


The insurance plan will cost less. You can take the difference between what you are paying now for the low deductible health insurance plan and put it in a qualified HSA tax free, up to the amount of your deductible. So if you are in the 28% tax bracket, for every dollar you contribute you really get $1.28. You can also go to higher deductible programs as well to be able to put even more money tax free into the HSA.

One of the issues that is not well spelled out is exactly what healthcare providers are covered. The IRS publication 502 gives a list and many of the complementary and alternative modalities that are covered. It does not specifically spell out Naturopathic physician but does say physicians, surgeons, specialists and other medical practitioners. This is a 48 page document and serves well for your insomnia patients. It does define medical expense as “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for medical and dental treatments affecting any part or function of the body. They do not include things that are merely beneficial to general health like vitamins or vacations.” There is a list of defined services.

Who would want to use HSA’s:

    Self Employed
    Those with no employer benefits

Who would not want to use HSA’s

    Those that are going to have a lot of medical expenses
    Those who have employer coverage

With the rising cost of medical insurance, many employers are looking at offering HSA’s as well.

This is an option that is worth looking at for those patients that are self insured and don’t have employer provided medical insurance.