Health Savings Accounts Aren't Immune to Risk

And a worker needs to be conscious of who is funding the account. The more of the burden an individual, rather than the employer, bears, the more he or she is self-insuring for everything less than the deductible and out-of-pocket limits.

Then, too, there is the question of how much tax-preferred savings Americans can afford. Already we have 401(k) plans and IRAs for retirement and 529 plans for education, which, fully utilized, allow families to put aside tens of thousands of dollars into deductible or tax-free accounts. Indeed, the total of possible tax-preferred savings far exceeds many families' entire income, let alone the amount they can afford to save.

On the other hand, HSAs clearly make sense for healthy, well-paid workers, especially young singles. They offer another tax benefit that, over the years, could really add up if the owner is healthy enough to avoid tapping it.

They also offer in the individual market what amounts to catastrophic coverage along with the savings opportunity -- features that may appeal to self-employed people and young workers who have not yet nailed down a steady job or one with benefits.

Federal workers are now offered HSAs, and according to Congress's Government Accountability Office, the workers opting for an HSA are slightly younger, predominantly male and single (or taking self-only coverage), and better paid than other federal workers the same age.

Last year was the first in which federal workers were offered HSAs, and the GAO found that enrollment was "modest." It also cautioned that one year's findings might not be predictive of future trends.

But the enrollment pattern of the federal workforce for 2005 "does raise the possibility that individuals with certain demographic characteristics may be disproportionately attracted to these plans," the GAO said in its report, which was released last week. For example, it noted that HSA enrollees "had consistently higher incomes across all age groups."

Although the GAO left it at that, saying more data are needed, the findings reinforce the worry of some experts that HSAs will draw healthier, wealthier workers out of traditional insurance plans, leaving the latter dominated by poorer, sicker people. That trend would likely force premiums up for traditional plans whose participants would be those least able to afford higher costs.

The message here for individuals is that workers who are offered an HSA (or its variant, the HRA) need to analyze their choices carefully. What, exactly, are you getting? Who funds the account? How healthy are you and, if you have one, your family? How much of your medical bills could you afford to pay if you had to?

These plans do offer a chance to build yet another nest egg, something we all need. It's an opportunity, but as with most economic opportunities, it comes with risks.

* * *

Officials of the Pension Benefit Guaranty Corp., the government's pension insurance agency, will meet with workers and retirees covered by United Airlines' retirement plans for ground employees, flight attendants and managers this week.

The meetings will be held Tuesday and Wednesday in Chantilly. For a complete schedule, go to http://www.pbgc.gov/media/news-archive/2006/pr06-21.html

* * *

Gender reassignment surgery doesn't qualify as a deductible medical expense, the Internal Revenue Service has ruled. A recently released memorandum concluded that such surgery does not appear to meet "the strict standard" imposed by Congress in barring deductions for a procedure that is "directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease."