According to Ron Bachman, principal in PricewaterhouseCoopers Human Resource Services group, “Consumer-driven health care could transform the structure of the health insurance industry by shifting health insurance from employers to individuals and providing lower-cost options and coverage for many of the 44 million American without health insurance.”
One such plan is the Health Savings Account.
The HSA is a tax-favored savings account combined with a qualifying high-deductible ($1,000 for single and $2,000 for family) health policy. HSAs allow employees to deposit tax-deductible funds into an account that can be used to cover medical costs. The value of this plan to an employer is that it encourages employees to take control of their own health care decisions.
Joe Martingale, national leader for health care strategy at Watson Wyatt, predicts that President Bush’s second administration will work to make HSAs more compatible with health reimbursement arrangements and flexible spending accounts. Congress and the Treasury Department might even allow employees to roll over balances from FSAs into HSAs.
The administration is also proposing tax subsidies to encourage HSA adoption. Families that earn less than $25,000 a year would receive $1,000 to fund the account and a $2,000 refundable tax credit to help pay for premiums. There is also a proposal that would help small businesses with tax credits for contributing to employee HSAs. These plans would lead to the coverage of 8t million uninsured.
There are many benefits for the individual in an HSA account, including:
* The individual decides how much to contribute, how much to use for medical expenses and which expenses to pay from the account.
* The account is transferable when changing jobs.
* The account is transferable to another state.
* Funds in the account are not lost at the end of the year.
* Money can be used at any point in time.
* Money left in the account will earn interest.
HSA accounts can be used to pay for other qualified expenses that may not otherwise be covered by the traditional health plan. These include:
* Dental expenses
* Mental health therapy
* Physical therapy
* Alternative treatments such as aromatherapy and accupunture
* Transportation and lodging expenses related to health care
* Preventive health programs such as vaccines
* Nonprescription medications such as aspirin or cough syrup
* Maternity expenses
* Insurance premiums
A particularly appealing aspect of the HSA is that it encourages participants to stay healthy. Any money that is not used for medical expenses is the employee’s to keep. And because all deposits that are not used to pay medical expenses grow tax-deferred, the investment opportunities are tremendous.
Overall impact of HSAs
HSAs let consumers choose how to spend their own health care dollars. Costs have soared when most first dollar medical expenses have been paid by third-party insurance companies. Consumers are far better able to decide how and where to spend their health care dollars than insurance companies.
The premise is that individuals who use HSAs will shop around for the best value, which will encourage competitive pricing among providers. The focus will shift from serving the insurance companies back to where their focus should be — on their patients.
Making many preventive expenses eligible for coverage through these accounts allows people to keep money they don’t use. This can be a powerful incentive to improve population health and result in a reduction in the incidence of diabetes, heart disease and degenerative diseases.
Only by giving individuals the freedom to make their own health care choices can we get a handle on the health care crisis. By allowing consumers to use HSA funds to pay for alternative, holistic and preventive treatments, innovation can be encouraged in areas where the current system has failed to find solutions.
Sally L. Stephens, R.N., is president of Spectrum Health Systems. Stephens founded Spectrum Health Systems, an independent health management company, in 1997 to provide Fortune 100 quality health risk management programs to middle-market employers. Reach her at (317) 573-7600 or [email protected].
