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June 22, 2006
House should consider Health Savings Account improvements
Last month, the United States Senate scheduled a "Health Week" to consider modest changes to the health care system. It failed to pass anything. The House of Representatives can do better. It can make serious progress in health care reform by considering legislation that would meaningfully change the health care system to improve access and affordability.
The House of Representatives should consider policies that promote personal control over health care dollars, expand consumer choice and competition, and reduce the regulation of health care. A key aspect will be to make improvements to Health Savings Accounts.
A key objective of Health Savings Accounts is the promotion of direct payment of health care dollars, without a tax penalty, to doctors and other medical professionals. This aspect of HSAs levels the playing field in the marketplace between traditional health insurance and these new tax-free payment arrangements. Ideally, Congress should separate the savings component of HSA arrangements from the federally designed high-deductible health plan requirement. This concept is supported by several free-market think tanks, including the National Center for Policy Analysis (NCPA) and the Cato Institute. This change would encourage individuals to save for their health care expenses and give them full control over how best to use those savings, whether for premiums, deductibles, or other cost-sharing requirements.
At the very least, the House of Representatives should make technical improvements to the design of HSAs. First, individuals who buy their own HSA policy should be allowed to use the HSA to pay premiums, which they cannot do today. To this end, Representative Sam Johnson (R-TX) has introduced the "HSA Premium Affordability Act" (H.R. 5586) to allow individuals to use their HSAs to purchase non-group coverage under a high-deductible health plan. Second, the contribution levels for HSAs should be increased to match total out-of-pocket expenses, not just the deductible. Finally, changes should be made to better coordinate HSAs with other health accounts, such as Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs). For example, individuals and families should be able to transfer funds from these accounts into their HSAs or, in the case of an FSA, to take the balance as taxable income. To these ends, Representative Eric Cantor (R-VA) has introduced the “Tax Free Health Savings Act” (H.R. 5262), a comprehensive HSA proposal that reflects several of these recommendations.
Let's hope the House of Representatives will do a better job than the Senate at promoting Health Savings Accounts. Learn more about HSAs at: http://www.health--savings--accounts.com
Posted by Wiley Long at June 22, 2006 09:23 AM