Health Savings Accounts Continue To Grow
One of Donald Trump’s campaign promises is to make Health Savings Accounts more widely used. The purpose of HSAs is to give patients more directly control over health spending, and reducing the share of spending controlled by insurers. Unfortunately, the 2003 law which established HSAs requires they be linked with a highly regulated type of health insurance policy.
These policies, like all health insurance today, give insurers power to dictate prices instead of allowing prices to be formed through interactions between patients and providers (that is, a normal market process). So, these health insurance policies are not as popular as truly consumer-driven plans should be.
Nevertheless, HSAs (which are bank accounts, not health insurance policies) are growing like gangbusters, according to new research from the Employee Benefits Research Institute (EBRI). As I wrote previously, EBRI is a rock-solid member of the health-benefits establishment. If Trump wants to expand the use of HSAs, EBRI’s evidence suggests he is pushing on an open door.
EBRI indicates there were 20 million HSAs, with assets of about $30 billion, at the end of 2015. Over four in five HSAs were opened since the beginning of 2011. Indeed, over half of HSAs were opened in just 2014 and 2015.
Further, HSAs become quite valuable over time. The average balance in an HSA opened in 2004 or earlier (which includes rollovers from an earlier, much more limited type of account) was $33,888. This is because most account-holders are able to save money in them for future health spending (even though account-holders in the 2004 or earlier cohort spent an average of $2,595 from their HSA in 2015).
This is why it pays to open and HSA as soon as possible. Young people understand this: 29 percent of account-holders are under the age of 35. Expanding patients’ freedom to use HSAs to control health spending directly should be a high priority for the next Administration.
“Unfortunately, the 2003 law which established HSAs requires they be linked with a highly regulated type of health insurance policy.”
Even more unfortunately, no eligible policy is a Medicare policy.
In Medicare it is still called the MSA. Ask Lee, he enrolled Medicare’s 1st MSA.
John, you’re a hoot. So you think these people with tax-free HSAs should wheel and deal with these doctors over prices. I bet you think Burger King should bring down their stated prices and wheel and deal with each customer to finally establish a consumer-driven hamburger.
In America John we used to have insurance pay for UCR expenses before HMOs.
Doctor says, “I’ll let you pass this kidney stone for $17,000 but your next one is free. Sign here.”
We no longer bargain over fast-moving consumer goods because it is not worth our time or the vendors’ time. I am not certain what a fully consumer-driven medical market would look like. (If I did I would simply ask the government to impose it.) But I think there would be a mix of posted process plus services for which you would have to inquire, like in other professional services.
Comparing a Burger King hamburger pricing to health care pricing is not valid.
Burger King’s prices are already dictated by consumers – they have to be competitive
or people don’t eat there. Health care pricing is driven by a third party payer mentality. There are built in administrative costs the health care providers pass on when they have to deal with insurance companies. Prices can and are reduced when the insurance companies are not involved. I’ve experienced this firsthand when I paid cash for a test that was not covered; the price was reduced by about 25%.
Tying health insurance to employment and the 3rd party paying model contribute to the problems experienced all across the spectrum of health care costs.