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Policy: Bringing Individual Responsibility Back to Health Care |
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Written On: March 2006 |
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Written By: |
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Health savings accounts are an intriguing response to rising health care costs. While they're not for everyone, many consumers are discovering their usefulness.
HSAs have only been around since 2004, one year after they were first authorized by the U.S. Congress as part of a Medicare reform package. Each HSA has a high deductible health plan and a tax-exempt account with a financial institution that allows you to save for health care expenses. Much like an individual retirement account, contributions to and income earned in an HSA are 100 percent tax free. HSA holders get tax reductions while paying affordable premiums. Thus HSAs provide reliable insurance protection while decreasing out-of-pocket expenses. Also, like an IRA, you can withdraw unused funds from an HSA for non-medical reasons without penalty when you turn 65, although you will be liable for income tax.
HSAs have real benefits if you find yourself unemployed or temporarily laid off. The money you put into an HSA remains there until you spend it, may be used to pay COBRA or other medical insurance premiums or rolled over to the next year if it is not used within a one year period.
While HSAs have much to recommend them, they are not a panacea for all health care needs.
"People with a high utilization of medical services—for example, a parent of an epileptic child and Dilantin expenses—and those who are not in a position to fund the deductible with tax free cash probably should not look at an HSA," Jim McGregor, of McGregor Insurance in Anacortes, said.
Otherwise, HSAs are a viable health care option for many consumers. In addition, this innovative approach to health care shows great promise in lowering health care costs. Because HSAs have high deductibles, people on these plans tend to spend their medical dollars more carefully than those on traditional, employer-paid medical plans with low deductibles, thus helping to lower demand on medical services and bringing down expenses.
"When we buy car insurance, we don't buy it expecting it to pay for an oil change or tire rotation, but when it comes to medical plans, all that thinking goes out the window," McGregor added. "When it's an employee benefit, you want the best plan you can get, but when you add employee cost-share into the premium, all of a sudden you want to make sure what you’re spending is cost effective."
Currently, HSA costs are decreasing at a rate of 4 percent per year while standard health insurance plans have been increasing by 7 to 9 percent per year. Oddly, in view of these cost savings, Washington state employees are still unable to open health savings accounts.
"State employees are the only group in the state who can't have an HSA, and the time has come for them to be given this opportunity," remarked Rep. Cary Condotta, R-East Wenatchee, who introduced a bill during the 2006 legislative session to allow state employees to utilize the HSA option. Despite the support of Washington's Health Care Authority, this measure was not approved by the Legislature.
This issue, however, will not go away.
"We have gone from personal responsibility to employer responsibility to state responsibility in health care," Rep. Barbara Bailey, R-Oak Harbor, another key supporter of HSAs, said. "We have to get back to individual responsibility."
Interested in learning more about HSAs? AWB's Debra Brown will be happy to give you the details on an HSA that is available for AWB members.Contact her at (360) 943-1600 or DebraB@awb.org.
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