HSA Health Savings Account Wooden blocks near piggy bank on table
Health savings accounts (HSAs) will have their celebration 21st birthday in January. They have provided that for the past twenty years tens of millions of Americans with financial savings and incentives to improve health. With the rise of the gig economy and the increasing adoption of Individual Coverage Health Reimbursement Arrangements (ICHRAs), the potential for HSAs to benefit more Americans is greater than ever.
If Joel White, Dr. David Hymanand I discussed Health matters first last week, the 59 million and growing U.S. gig workers, unlike full-time workers, do not have access to employer-sponsored health insurance. Even among full-time workers, a rapidly increasing number are offered ICHRAs by their employers to take out health insurance independently.
These employees can purchase individual insurance plans through the Affordable Care Act Marketplace. However, due to regulations such as community rating, essential health benefits, the medical claims ratio, and the prohibition on coverage limits, unsubsidized premiums on the Marketplace are prohibitively expensiveoften accompanied by a high deductible.
Why not allow these workers to use their HSAs to receive contributions from employers, themselves, the government, or private parties, to fund routine medical needs and even pay premiums?
HSAs allow patients to directly benefit from lower prices and better health, reduce their vulnerability to medical debt, and provide a triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals. HSAs also allow patients to take advantage of competitive out-of-pocket prices and place downward price pressure on providers.
Academic research has found that cash prices are often cheaper than insurance-negotiated prices, even for less shoppable services such as costs for trauma activation. Numerous widely distributed fallen on social media have suggested the same. While healthcare prices in general are rose rapidlyservices not covered by insurance, such as plastic surgery and IVF, have experienced steep price drops.
Why? When patients pay directly, they retain supreme bargaining power, forcing providers to compete for revenue, which ultimately lowers prices and drives innovation. As a congressman Kevin Hern (R, OK-01) said: the best healthcare occurs when there is no third party between the patient and the healthcare provider.
Importantly, HSAs are not a luxury for the wealthy –68% of account holders live in areas with a median household income of less than $100,000. However, Medicare and Medicaid regulations limit beneficiaries’ access to HSAs.
A recent one study published in the Journal of the American Medical Association (JAMA) found that patients who received cash subsidies significantly reduced emergency room visits and improved overall health. Subsidizing low-income patients, such as Medicaid enrollees, through cash contributions to their HSAs would more efficient than the current system, which does not offer patients the opportunity to benefit from cost savings or better health.
Expand HSA access to all Americans is the right direction. Meanwhile, insurance companies should be allowed to offer affordable plans that cover only expensive medical events. Patients choose plans based on their preferences and risk tolerance.
Now that our decades of highly regulated approaches have led to disappointing healthcare outcomes with excessively high expenditures, it is time to empower patients, providers and insurers to explore more organic and flexible solutions.
When Americans gain more control over our health care dollars, affected interest groups will inevitably resist change. However, the demand for better and cheaper care on the buy side, coupled with the drive to innovate and generate returns on the sell side, can create irresistible momentum that pushes our system toward one that works for all Americans.