FSA, HSA, HRA … AFT! LOL.
We’ve been very proud at the Show-Me Institute to be at the forefront of HSA reform in Missouri. The “new rules” of health care necessitate a more personal approach, one in which individuals manage their own health care needs directly.
But it’s not just SMI that believes in the market approach to health insurance. An article on CNN Money this morning is waving the HSA banner too. And really, when you think about it, how strange is it that the country has been so slow to embrace an open-market approach to health insurance in the first place? What continues to amaze me is that we as a nation continue to view health insurance premiums and coverage as “one size fits all.” How alien that would seem to us for any other type of insurance policy. Just think how much consumers have benefited as insurance has been deregulated in other markets.
In part, the CNN Money article chronicles Jason Jeffords of Bedford, NH. Jason pays $240/month for a high-deductible comprehensive health insurance plan for his entire family. His premium is determined by his own health risk and that of his family.
The catch is that Jason’s deductible is $10,000, meaning that all costs below that level are paid out of pocket. But that’s where HSAs come in. Similar to a 401k, Jason opened an HSA account through his employer, allowing him to contribute tax-free earnings each month. His employer ups the ante by contributing $5,800 annually. These funds can be withdrawn at any time to cover medical expenses that fall below Jason’s annual deductible (again, tax free). And the interest on Jason’s HSA earnings grows tax-free. If funds remain when he retires, they can be withdrawn exactly like in a 401k. They’re also portable, so Jason can change employers and still retain his benefits.
HSAs are the model for the future of health care. Employers are much better off contributing funds to their employees’ plans indirectly than financing their employee’s health care costs directly. And the portability and choice aspects allow families to better manage their health care as new needs arise. This solves the problem of the nation’s current uninsured (who generally must live sans insurance if their employer doesn’t provide it) while keeping costs under control. In other words, the nation’s current insured will no longer be able to abuse the system by having their costs subsidized through a diffusion of responsibility. It is this system that has priced so many people out of the insurance market to begin with.
Anyway, the article is a great read and I’ve rambled on long enough. The point is that a health care revolution is coming and people who choose to manage their own health care today are poised to be much more financially secure than those who wait until change is thrust upon them. Which group do you want to be in?