A Health Savings Account (HSA) is a bank account whose annual contributions can only be used for paying medical expenses, such as out-patient testing, treatment, and medical visits – but not health insurance premiums. Contributions can be made by an employer, an individual, a relative or even an acquaintance. HSAs must be paired with a qualified high deductible insurance policy, which is much less expensive than low deductible insurance.
The annual allowable contribution to the HSA, the insurance policy minimum deductible, and the maximum out-of-pocket expense are defined by federal law, and the amounts change annually. Unspent funds roll over and gain compound interest annually. Contributions, compound interest, and withdrawals for medical care are all pre-tax. The insurance policy pays for expenses above the policy’s deductible. HSAs preserve patient’s choices and become part of a person’s estate.
HSAs passed into law in 2003, grew faster than IRAs, 401K plans, or managed care, and now cover more than 20 million people. However, ObamaCare exchange plans set “minimum deductibles” so high that only 1/5 of existing HSA plans can meet with exchange requirements. The same can be said of maximum out-of-pocket expenses.
Several studies show that HSAs change patients’ behavior and encourage better patient care through better compliance with outpatient testing, medication, and treatment programs. Resulting in decreased hospitalization then markedly reduces overall health care costs.
Congress should: allow HSA contributions to be doubled; allow HSAs to fund high deductible health insurance policies for both private and Medicaid patients; and modify federal requirements to allow more HSAs to be eligible for ObamaCare programs. These changes would also allow many, but not all, Medicaid patients to have HSA plans and private, primary care physicians, instead of inundating hospital emergency rooms with expensive care of minor illnesses.
Robert F. Hamilton, M.D., FACS
(This article first published in Advantage News)