Health Savings Account Blog

The findings of the report indicate that Health Savings Accounts have potential to cut costs while maintaining quality care:

- Premiums for HSA qualified policies are significantly lower than those for other types of plans, by about 10 percent to 40 percent

- Participation in HSA/high-deductible health coverage, as a proportion of all health coverage, has grown slightly faster than the proportion of total retirement assets that IRA assets alone represented in the early years of IRA eligibility

- 6.1 million people have chosen to be covered by HSA and other high-deductible plans as of 2008

- Deductibles for HSA-qualified plans recently have risen much more slowly than the deductibles for the other types of health coverage plans

- A wide range of preventive-care services count toward plan deductibles (or are covered on a "first-dollar" basis) under most HSA-qualified policies

Policy Recommendations:

Tax policy:

- Payroll taxes now imposed on amounts employees direct to their Health Savings Accounts should be lifted

- Insurance premiums for HSA-qualified health insurance purchased in the non-group market should be made deductible from income taxes

- Funds in an HSA account should be allowed to cover all "qualified medical expenses," as the tax code defines them, so long as they have been incurred after HSA-qualified coverage begins

- Sums paid by patients to their primary-care physicians for the right to receive medical services on an as needed basis should be deemed qualified medical expenses

Insurance policy:

- Policyholders should be permitted to pay insurance premiums with funds deposited in Health Savings Accounts

- The maximum contribution that an HSA participant is allowed to place in his HSA account should be raised to match the limit on out-of-pocket expenditures, so that he does not have to pay out more than he has put in

- Spouses aged 55 and over should be allowed to make extra contributions to a single health savings account up to the maximum allowable for a couple, instead of being required to establish a second account

- High deductibles for hospital and chronic care should be lowered, since they are unlikely to discourage excessive consumption of health-care services, because of the non-discretionary nature of treatment for acute or chronic conditions

Legislative:

- Congress should allow participants, after turning 65, to continue to contribute to their Health Savings Accounts, even if they have become Medicare beneficiaries

- Simplification of HSA-qualified insurance would enable clear comparisons with other types of plans, help familiarize consumers with its features (with the assistance of insurers and employers)

Health care costs are continually rising and policymakers are looking to reform our health care system. The early data on Health Savings Accounts suggests that use of these health insurance policies may achieve lower costs and greater savings for health care consumers. Reforms of the tax policy and insurance regulations should be put in place so consumers can more easily understand how Health Savings Accounts function, allowing them to have greater control over their healthcare choices.

The Manhattan Institute, a 501 (c)(3), is a think tank whose mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility.