Don’t be too hasty to write off health savings accounts as a means to reduce your health costs. There’s finally some good news.

A few years ago, health savings accounts (HSAs) were hailed by some as the most promising solution to the sky-high health costs. Nowadays, they’re seen by many as a flop – bogged down in IRS red tape and useless to all but young, healthy, and/or high-income employees.

But a recent insurance industry study by America’s Health Insurance Plans’ Center (AHIP) discovered a 37% increase in HSA enrollments over the last year. Key reasons:

• The growth of wellness programs has helped make HSAs more realistic for employees enrolled in high-deductible health plans
• More employers are willing to contribute to employees’ HSAs, providing a stronger enrollment incentive, and
• Employees are getting the hang of managing their own accounts.
  The average HSA contribution in 2007 was $1,380 for the year. The average total deduction was $1,080.

A powerful combo with wellness

In general, the employers that have had the greatest success getting employees to sign up for health savings accounts have been firms with wellness programs.

But the wellness program needs time to do its thing before employees are ready for HSAs. One report suggests that the wellness program should be in place at least two - and preferably three - years before the HSA is likely to get widespread buy-in and help moderate or cut costs.