HSAs welcome credit and convenience

When health savings accounts (HSAs) are attached to high-deductible health plans, employers find the accounts' low cost and high employee accountability attractive. They can bring in lower health insurance premiums, reduce payroll taxes and, for employees, serve as tax incentives and an additional source of retirement savings.

But there's a catch: account owners can only spend what's actually in their HSA. And as employees begin to build their HSA balances, they may find they don't have enough stashed away to cover large medical expenses. Employees, then, are faced with tough choices: delay the procedure, find another way to pay, or make up the difference, in addition to their deductibles, which start at $1,050 for individuals or $2,100 for families.

Financial institutions can provide a solution that bridges the HSA cash flow gap. They've started to add credit lines to their HSAs to enhance customer usage.

Spinning off the acceptance of stored value, debit, and credit cards, healthcare cards are becoming the standard for all healthcare spending accounts, such as HSAs, HRAs and FSAs. With a swipe, the cards can access eligibility requirements and health accounts, providing a one-card solution at the point of care.

Already the feature-rich cards can: carry insurance information; offer multipursing capabilities that sort transactions and process claims from an employee's HSA, HRA and FSA accounts; complete selective authorization that determines eligible purchases and merchants; and facilitate autosubstantiation.

By adding a line of credit to the healthcare card, financial institutions effectively provide a safety net for HSA account holders that helps them meet the greater financial responsibilities of high-deductible health plans. The line of credit, limited to medical expenses and often capped at the employee's deductible level, is automatically activated when expenses exceed the funds in the employee's HSA. Like credit cards, outstanding balances may accrue interest. Employees can then use the funds in their HSA or their personal funds to pay off the principal on their monthly credit card statements.

With this flexibility, employees aren't forced to delay necessary or even elective medical procedures, can spread out their medical payments over an extended period, free other lines of credit for other uses, and keep track of their healthcare expenses.

The line of credit helps employees assume the costs of a high-deductible health plan, especially at the beginning of the plan cycle. In the past, some employers have helped their employees build their accounts by directly contributing to their HSAs when they open them. The problem is the employee owns the HSA. Any contributions made to their accounts belong to them, regardless of their future employment status. The line of credit shifts that helping hand from employers to the credit holder or bank.

In the individually underwritten approach to lines of credit, employees apply directly to the financial institutions for their credit lines. In turn, it's the bank-not employers or insurance administrators-that determine employees' eligibility and credit limit based on their healthcare plan and individual credit histories, regardless of medical need. Employers and insurance carriers do not need to become involved in the application process-freeing them from the decidedly awkward position of denying credit to employees-and because each account is individually underwritten, employers hold no liability for their employees' ability to pay.

Because lines of credit are so new to the industry, we haven't seen how they'll affect participation in or acceptance of high-deductible health plans. What we do know, however, is that attaching credit lines helps make healthcare more user-friendly, accessible, flexible, convenient, and efficient for medical practitioners, insurance carriers, employers, and employees.

Dennis Triplett is president, Healthcare Services, UMB Financial Corp.