Before you commit, it's a good idea to read through the list of frequently asked questions (www.opm.gov/hsa/faq.asp) posted by the federal Office of Personnel Management. Even if you work in the private sector or are shopping for an individual policy, the questions should prepare you for a talk with your agent or your employer's benefits staff. This is especially important for individual policy buyers, since they'll likely be dealing with salesmen who may biased toward their own product.
Here are some reasons you may find an HSA tempting:
• You own the money in the account even if you retire or change plans or employers.
• Tax-free withdrawals may be made for expenses such as prescription drugs, a doctor visit for a sinus infection, setting a broken arm and physical therapy prescribed by a doctor. (See the IRS list at www.irs.gov/publications/p502/ar02.html#d0e516.)
• Unused funds and any interest they've earned can be carried over, without limit, from year to year. (You can even spend set-asides on nonmedical expenses. But do that before age 65, and you'll pay income tax on the funds used plus a 10 percent penalty.)
In the original model there wasn't a big gap between the cash portion and the indemnity portion. These incarnations with large gaps are much more suspect. They penalize illness too severely.
The article misses the most important question. Does the plan have an associated PPO with negotiated cash rates? If consumers pay "retail" fees for medical costs they'll blow through their cash portion in no time. Cash rates have been artificially inflated by the discounts demanded by payors.