Health Savings Account Blog

Health Savings Accounts are the most unfortunate victims of the current political polarization. They offer several attributes notably absent in our current health-care system: individual choice and flexibility, plus wider systemic benefits through the greater injection of economic incentives. Yet opponents have objected saying such accounts will raise rates by removing the healthy, wealthy and young from the traditional health insurance pool.

One way to resolve the debate would be to take direct aim at opponents' criticism and tailor personal accounts to help the sickest -- those individuals with on-going medical conditions.

While an April 2006 poll by Zogby International showed just half of respondents had heard of personal health-care accounts, they are not new. Around since 1997, they were greatly expanded in 2003 with 3 million Americans now owning and almost 1,100 banks offering them today.

Any individual with a qualifying health insurance policy (with a deductible of at least $1,100, or $2,200 for a family) can contribute up to $2,850 ($5,650 for a family) to an HSA.

What does this mean for individuals? It means that a person can purchase health insurance at a more affordable price -- because a lower premium results from a higher deductible -- and then deposit up to $2,850 for individuals or $5,650 for families into an account they own.

When they have medical expenses, they take the money out of their account -- far simpler than conventional insurance.

And the individual benefits from four economic advantages:

· First, the individual creates the account with pre-tax dollars.

· Second, the account balance benefits from compounding interest.

· Third, these account earnings are not taxed, as long as they are used for qualified medical expenses.

· Fourth, the account isn't linked to a job -- as is employer-provided insurance -- because the individuals own the account and can take them when they switch jobs.

Proponents now need to take the next step and qualitatively change the terms of debate. They should design an HSA specifically for individuals with an on-going medical condition.

Design would not be difficult. People with diagnosed medical conditions requiring permanent or prolonged care -- such as diabetics or HIV-positive individuals -- would qualify. Substantially larger contribution levels would be allowed, encompassing not just deductibles but out-of-pocket expenses as well.

These higher contribution levels could be based on individuals' past treatment experience. By increasing contribution limits for these people, account balances would be more likely to grow and offset their expected higher future expenses as they age.

HSAs give people both the incentive and the means to manage their health care needs now and in the future. Furthermore, if opponents are correct that removing the healthy, wealthy and young from the insurance pool will raise rates for those remaining, then using HSAs to remove these high-cost individuals from the insurance pool should likewise reduce the cost of general health care insurance premiums. That would further reduce the ranks of the uninsured by increasing health insurance affordability.

There are also strong arguments outside the health policy arena. Morally, individuals alone should have the right to make their health decisions -- not insurance plan procedures or government mandates. Additionally, every other sphere of American life is rushing to personalize products for consumer individualization.

HSAs offer the greatest opportunity for individual health-care choice and people with on-going treatment requirements have the greatest need for such a product.

Washington needs to show it can work across the political spectrum to achieve solutions. Properly designed, personal accounts will work for anyone and they represent the best hope for a more rational health-care policy. It is imperative that health policymakers make them work for those people with on-going treatment needs.

HSA opponents should concede that additional choices can only help those most in need of help and test their own theory that altering the proportion of those with costly claims alters the cost of health insurance. And HSA proponents should grasp this opportunity for personal accounts and confirm their belief that personal accounts are health care's future.

Learn more about Health Savings Accounts at: http://www.health--savings--accounts.com