Downsides of an HSA
Are there downsides of an HSA-driven plan? Perhaps for some. While the downsides may not apply to those who are willing to take control of their healthcare spending, here are a few things to consider:
1) Heavy users of healthcare may pay more.
If you have a chronic condition which requires regular and moderately expensive medical care, what you save in premiums may not make up for maxing a high deductible each year. Additionally, major events such as having a newborn often require a level of care that can be pricey while not being expensive enough to fully utilize the high deductible health insurance. Do the math (be sure to include your newfound tax savings) and determine what is best for you. A risk pool, such as a large insurance group or Medicare, is designed specifically to soften the blow of people who need more services than the general population. Using a HDHP / HSA approach may cause you to lose the benefit of the risk pool.
2) Being in full control doesn't appeal to everyone.
Perhaps you find that it is easier to go to your managed care plan's physicians for visits and procedures rather than shop around, or maybe you are the type who doesn't like to have another account to manage. If you'd rather have someone take care of you than actively manage your healthcare, you may be a better candidate for a traditional plan. While the HSA concept appeals to many, there is still a significant chunk of the population who would rather just pay a $20 copay and not have to think about the rest.
3) Investment risk.
As we've seen in 2008 and 2009, investments don't always go up. While the historical rate of return on moderate-to-aggressive investments is 8% to 11%, in any given year you may see a significant gain or loss. An HSA is designed to grow, over time, with pretax dollars. That is not to say that it will steadily increase day-by-day. If you can't stomach market risk, consider a conservative mix of investments in your HSA or go with a traditional plan.