Why HSAs are Not the Solution

Meaningful health care must address cost, quality, and access.  Health care must be patient driven, not consumer paid!

Among the solutions being considered are so-called “consumer-paid” or "market-driven" health initiatives like Health Savings Accounts (HSAs), and tax breaks paired with low-cost/less coverage plans. The low-cost plans sound good at first, especially when proponents say that the tax breaks and HSAs put people in control of their own health care dollars. Unfortunately, having an HSA, getting a tax break, and joining a cheaper plan won’t give patients the comprehensive coverage they need. Unlike traditional health insurance plans, consumer-driven health care puts the burden of rising health care costs squarely onto the shoulders of patients.

Consider this: When you’re sick, pregnant, have sick children, or have a chronic health problem like diabetes—tax breaks and HSAs run out quickly. And the new low-cost plans might pay for doctor visits and other small expenses at first, but then coverage stops. And it doesn’t kick in again until you’ve paid thousands of dollars in deductibles, have a life-threatening illness, or a catastrophic accident. That leaves you with an awful choice: risk financial disaster by paying for your own care, or risk your health—or your children’s—by skimping on treatment, or foregoing it altogether.

HSAs, tax breaks and low-cost plans might be part of the solution, but they place too high a financial burden on patients, especially when facing major illness or unexpected injuries. Ultimately, people will be on their own when it comes to getting and paying for health care.

The bottom line is that HSAs will end up costing consumers more money while providing less health care:

• HSAs require high out-of-pocket expenses—a minimum of a $2,000 deductible for a family, but as high as $10,000 in some cases—before workers’ coverage actually kicks in. As a result, many workers and their families are likely to go without critical health care or delay seeking needed care.
  
  
• HSAs encourage employers to abandon health benefits, so cost-shifting will grow. They do nothing to solve the huge problem of cost-shifting from such irresponsible employers as Wal-Mart to employers that do fund health care for working families.
  
  
• HSA plans will discourage preventive care, ultimately increasing the cost of health care in the United States.
  
  
• Workers who remain in more comprehensive coverage plans will see their premiums increase as younger and healthier workers opt for the high-deductible HSAs. Under the HSA plan, older and less healthy employees would be pooled together in a higher-risk group and insurers would raise premiums. As employers face higher premiums for traditional employer group health plans, employers would be more likely to shift even more costs to workers or drop traditional health coverage all together in favor of high-deductible HSAs.
  
  
• Most uninsured Americans could not save large amounts of money to put into HSAs. Because most low-income people have little disposable income after paying for housing, food and other necessities, it is unlikely they could manage to spare $1,000 (or much more, in some cases) to put into an HSA. And many uninsured don’t even have enough income to see any benefits from the tax breaks.
  
  
• Racial and ethnic minorities suffer disproportionately from chronic conditions and are so less likely to benefit from HSAs. For example, African Americans and Latinos are twice as likely to suffer from diabetes as whites. Because racial and ethnic minorities are more likely to have acute or chronic conditions and are more likely to be low income, they are far less likely to benefit from HSAs and far more likely to be harmed by high deductibles.
  
  
• Bush’s HSA plan actually could increase the number of Americans without health insurance. A recent analysis by Massachusetts Institute of Technology economist Jonathan Gruber estimated as many as 350,000 people currently insured at work would lose their coverage as employers used the new accounts as reasons to op coverage.
  
  
• HSAs would undermine employer-sponsored group insurance—the backbone of health care financing in the United States.