Opinion

Expanding HSAs Could Help Fix America's Broken Health Insurance Model

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Posted: Jun 07, 2019 12:01 AM
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Expanding HSAs Could Help Fix America's Broken Health Insurance Model

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A recent survey revealed only one in five people currently enrolled in an employer-sponsored health plan have a health savings account (HSA). More unsettling, few use them to save money for future health expenses.

There could be a variety of reasons why people don’t use HSAs, but lack of a tax perks can’t be one of them. Unlike 401ks, Roths or traditional IRA’s, HSA’s offer a double savings bonus.  They are pre-tax, meaning contributions from salary or wages are exempt from income and social security tax and money in the account grows tax-free. There is no timetable for withdrawals.

One can only suspect the reason consumers aren’t saving money in their HSAs is because health care costs are so high that HSA accounts are depleted almost as quickly as they are funded. Employees are now paying a higher share of their premiums, and premiums have skyrocketed in the years following the passage of the Affordable Care Act (ACA). The average annual premium for a family plan is now $19,616. Deductibles and co-pays regularly exceed $5,500.

This problem is even worse in the individual marketplace, where an unsubsidized Obamacare plan can cost a family nearly $20,000 before health insurance actually starts making significant contributions toward paying for health care costs. 

Fortunately, there are ways to reduce health care costs using HSAs. First, instead of restricting HSAs to “high-deductible” insurance plans—as defined by the government—lawmakers should broaden HSA rules so consumers can take advantage of HSAs while enrolling in a plan that offers the biggest bang for their buck. Additionally, Americans should be empowered to use their HSA accounts for a wider variety of health-care-related expenses.

A good place for lawmakers to start would be to pass the Primary Care Enhancement Act, which would allow consumers to use HSAs to pay membership fees to a direct primary care (DPC) practice, helping them to save money over the long term.

Increasingly more people are signing up for DPC agreements because they offer a low-cost way of accessing high-quality, primary care for a flat fee. DPCs are fee-for-service agreements between doctors and their patients. In exchange for a monthly fee, DPCs provide patients with access to a list of primary care services. (Some agreements even provide limited specialty care benefits and discounts.)

DPCs work outside the third-party health insurance payment system, allowing doctors to save a bundle of money that’s usually wasted on administrative functions such as coding and filing insurance claims. Doctors are then able to pass along some of these savings to their patients in a win-win for all.

DPC monthly fees usually cost $100 per month or less. When coupled with a low-cost catastrophic health insurance plan, DPCs provide excellent coverage for consumers at a fraction of the cost of the traditional model.

Additionally, because of the low overhead, doctors can spend more time with patients, improving consumers’ primary care experience and enhancing care.

Currently, DPC fees are not a qualifying HSA health care expense. The terrain is tricky to navigate but all roads lead to the Internal Revenue Service (IRS), which views these models as a form of “gap” insurance, rather than as fees paid to a provider—even though 26 states have already determined DPCs are “not insurance” and language in the Affordable Care Act states DPCs are not insurance plans.

Enhancing DPCs isn’t the only answer to America’s health care problems, but it would go a long way toward giving consumers more control over their health care costs and encouraging savings. If patients choose a lower cost option like DPCs, they should be rewarded with the opportunity to save money in an HSA account.

If lawmakers want to go the extra mile, they should increase ways consumers save money for hospitalization and specialty care coverage. Short-term insurance and association health plans would give consumers more options than the high-cost ACA-compliant plans. While we’re at it, maybe employers should give the money they spend on health insurance directly to employees, so they can choose to spend these funds as they see fit.

The Primary Care Enhancement Act would provide significantly more options for consumers while helping them save for future health care expenses. Lawmakers shouldn’t let this important opportunity pass them by.

AnneMarie Schieber (amschieber@heartland.org) is managing editor of Health Care News.