By Janet Trautwein
Over 20 million Americans may soon pay less in taxes and medical bills. Lawmakers recently introduced a bipartisan bill that would expand “health savings accounts.” HSAs allow people to save money for future medical expenses tax-free. And they incentivize people to secure care from the healthcare providers that give them the biggest bang for their buck. The bill would expand HSAs so that they cover more medical expenses, such as chronic and preventative care.
This common-sense bill — the Bipartisan HSA Improvement Act — deserves the support of Congress. Advancing these important reforms into law will save patients and the nation’s healthcare system a significant amount of money.
HSAs are “triple tax-advantaged” — contributions are tax-deductible, the accounts accrue interest, dividends, and capital gains tax-free, and withdrawals are not taxed as long as they’re spent on health care. Individuals can put away up to $3,450 per year tax-free; for families, the contribution cap is $6,850.
Unlike flexible spending accounts, there’s no “use-it-or-lose-it” requirement or limits on rollovers, and money in an HSA stays with the account-holder even if she gets a new health plan or job.
These advantages have made HSAs popular. In 2018, HSA assets will likely exceed $53 billion.
One issue that some healthcare consumers take with HSAs is the fact that you can only open an HSA after enrolling in a high-deductible health insurance plan. High-deductible plans feature lower premiums. But individuals must cover the first $1,350 of their healthcare expenses out-of-pocket. Families must pay $2,700 before insurance kicks in.
Some individuals aren’t used to assuming responsibility for a few thousand dollars in health costs.
But high deductibles are a powerful way to battle America’s health cost crisis. Since patients have to spend their own money — typically, from their HSA — on care, they’re more likely to shop around for better prices on procedures or to insist upon cheaper generic drugs instead of expensive brand-name ones. Consumers who switch from traditional plans to HSA-eligible plans spend 21 percent less, according to a RAND study.
In other words, patients stopped visiting overpriced healthcare providers and opted instead for those that offered better value.
A separate study found no evidence that these savings stemmed from HSA patients deferring needed or preventive care.
The Bipartisan HSA Improvement Act would enable more people to share in these savings. The bill would allow high-deductible plans to cover the cost of routine primary care check-ups, medications for chronic conditions, and preventive tests before enrollees hit their deductibles. It also would allow people to use HSA funds to cover gym memberships and various fitness classes and sports programs.
The bill also would amend the definition of dependent in the tax code to mean children through age 26. That would allow parents to use their HSA funds to pay medical expenses for their older children.
These changes would make high-deductible HSA plans more consumer friendly — and more attractive. That means more savings for consumers and downward pressure on prices as more people shop around for high-value care.
The bill would offer millions more families the benefits of HSAs. It’s time for both parties to support it.
Janet Trautwein is the CEO of the National Association of Health Underwriters.