The Senate Finance Committee’s policy options for financing healthcare reform include three potential limits on health savings accounts.
The first would “restrict HSA contributions to the lesser of the individual’s deductible or the statutory limit.” To qualify for an HSA, a person must enroll in a health plan with an annual deductible of at least $1150 individual, $2300 family in 2009. Maximum annual HSA contributions, however, are $3000 individual, $5950 family regardless of the deductible. Contributions to HSAs are pretax.
The second option would “increase the penalty for withdrawing from an HSA for non-medical expenses” from 10% to 20%. However, people who qualify for Medicare wouldn’t have to pay the penalty.
The third option would “require certification from the employer or from an independent third party that HSA withdrawals were made for medical expenses.” Right now, no substantiation is needed except during an IRS audit. A prior attempt to require substantiation raised a political and industry outcry in 2008, with the Bush Administration ultimately threatening to veto a bill that would attempt to require substantiation.
I’m not 100% certain about the efficacy of HSA plans to make us better consumers of healthcare, but I have one because of the tax breaks it offers. Call it a gift from President Bush to guys like me.
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wow. I’m shocked by that last paragraph. This author is way out of touch. The prolific increase in high deductable HSA eligible plans has spurred a level jumping in consumer understanding and choice around how they spend their healthcare dollars. It’s their money, coming out of their accounts and consumers are absolutely spending more wisely because of it.
Well, Tom, that’s certainly the theory. But there are a lot of questions. A big percentage of people with high-deductible health plans never open or fund an HSA. Many that do use it as another form of tax-deferred savings.
Among the rest, you really have to ask yourself two questions. 1. Do people have the healthcare quality and cost data needed to make informed buying decisions? I say they don’t. 2. Even when they have the information, do they use it? I haven’t seen credible data yet that healthcare quality and cost information moves market share for provider services in a meaningful way.
Finally, some contrarian analysis suggests that the incentives to watch your spending are actually greater in more traditional lower-deductible plans with co-insurance than in HSA plans (see Health Affairs, July/August 2006).
I’m not saying the HSA concept is a bust. There’s a lot to be said for low-premium catastrophic coverage with a front-end savings vehicle to ease the pain of the high deductible. But it’s hardly the slam-dunk you suggest it is.