Policymakers at the state and federal levels should be doing whatever they can to expand and promote the use of Health Savings Accounts (HSAs).
An HSA is an account that allows a user to set aside money on a pre-tax basis to pay for health care expenses. Often, employers will match an employee’s contributions to an HSA. And, depending on how the HSA is setup, employees can earn interest in the account.
An HSA puts the power of everyday health care spending in the hands of the consumer. Instead of forcing citizens to abide by all the rules of their health insurance company, they can shop around and, in doing so, help put pressure on the market to lower costs and improve care. Current HSA account balances exceed $100 billion nationally roughly $3,000 per account, on average.
Unfortunately, 90% of Americans lack access to health savings accounts. Why? Because, under current law, it is illegal to have an HSA unless you have a high-deductible health care plan. This means even those who are uninsured cannot legally save for their health care in an HSA. Most federal health care programs like Medicaid and Medicare don’t meet the definition of high deductible, so Americans are shut out there as well.
This makes no sense. Lawmakers can change the system by either decoupling HSA’s from insurance altogether, or it could allow most insurance plans to be HSA-qualified.
One proposal recently introduced would even allow citizens to accept federal contributions to an HSA in lieu of reduced cost-sharing of insurance purchased through an exchange.
For example, if a citizen buys health coverage through an exchange, cost-sharing by the federal government reduces the cost. Citizens would be able to choose whether they wanted a lower insurance premium, or a higher premium with the option to have an HSA partially funded by the government.
Researchers with the Paragon Health Institute contend doing so would result in approximately $1,400 a year being placed in a citizen’s new health care savings account. For a younger adult who has few health care costs, the account could grow and be worth as much as $119,000 in 30 years.