Every time I take my children to the doctor, I’m reminded of the ridiculous restrictions around health savings accounts (HSAs). With four kids, I quickly run out of money in my HSA if any of them need non-routine care. It doesn’t need to be this way.
Created in 2003, HSAs allow people to save money on a pre-tax basis to use for medical expenses. Unlike flexible spending accounts (FSAs), which expire at the end of the year, funds in HSAs rollover year to year. In theory, this would allow families to save money in low-expense years to use in high-expense years. HSAs could have revolutionized health care financing in the U.S., but the current restrictions stifle the impact of the accounts.
Sen. Ted Cruz (R-TX) and Rep. Chip Roy (R-TX) have introduced the Personalized Care Act of 2021, which would remedy many of these limitations and help HSAs live up to their promise.
To start with, only people covered by specific high deductible insurance plans are currently eligible for HSAs. So, while I get frustrated by a lack of money in my HSA, I have friends who can’t even use one at all. That’s much worse. And there is no rational reason for this limitation.
Rather than trying to micromanage our health care from Washington, D.C., lawmakers need to empower people to manage their own affairs. The Personalized Care Act would be a step in the right direction as it would expand HSA eligibility to include individuals covered under any health plan or health insurance. Moreover, allowable expenses would be expanded to include the fees for coverage under these plans, such as insurance premiums.
Expanded HSAs would drive cost-containment and innovation—the one-two punch we need to improve health care affordability. For example, recent years have seen a growth of health care plans like direct primary care (DPC) practices that don’t rely on typical health insurance. With DPC, patients pay a flat monthly or yearly membership fee that covers primary care needs and preventative services. This makes health care costs more predictable and transparent. It also improves efficiency by removing the middleman (insurance companies). By allowing HSA funds to pay DPC membership fees, more people will be able to take advantage of these options.
Consolidation in the healthcare industry has accelerated in recent years. By 2018, around half of all physicians and 72 percent of hospitals were affiliated with hospital systems. This trend, driven in large part by government policies, is likely to continue—especially in the wake of COVID. Direct primary care can reduce the power of regional health care monopolies by giving consumers more alternatives.
Of course, expanded uses aren’t very useful if contribution limits are unreasonably low. Current limits are $3,600 for individuals and $7,200 for families. With four kids, these limits pretty much guarantee there will be eligible expenses I won’t be able to cover with my HSA. Sometimes this means paying more out of pocket; other times it means delaying care. And it typically means no rolling over funds for future expenses.
Fortunately, the Personalized Care Act recognizes these limits are too low. The legislation would increase contribution limits to $10,800 for individuals and $29,500 for families. While I’d recommend an allowance for additional dependents, these contribution limit increases would be a tremendous improvement.
Expanding HSA access could have another important impact: reduced reliance on employer-sponsored health insurance. Current tax rules give preferential treatment to employer-based plans, which has led to nearly 90 percent of Americans with private health insurance receiving it through their employers. With people changing jobs more often than in the past and with technology fueling the growth of independent contractors, employment-based health insurance is becoming less attractive. As HSA usage expands, more insurance options will become available outside of the workplace. This will provide the flexibility modern life demands.
With some sensible reforms like the ones proposed in the Personalized Care Act, HSAs could bring an entirely new patient-centered focus to health care financing. This would give individuals greater autonomy over their health care spending and lessen the control of insurance and government bureaucrats. The ability to rollover funds for future expenses would give people the incentive to shop around for non-emergency care. Over time, this would force providers to be more transparent in their pricing. Bit by bit, expanded HSAs would bring market forces to bear in the health care sector.
For families like mine, the bill would give us peace of mind knowing we’re building a cushion to help deal with unexpected medical expenses. This cushion will enable more people to make healthcare decisions based on medical—not just financial—concerns.
The Personalized Care Act won’t solve every problem we face when it comes to health care access. But it would go a long way toward putting individuals in the driver’s seat when it comes to their health care. And that’s a change that’s long overdue.