NCPA - National Center for Policy Analysis


February 16, 2005

Health savings accounts (HSAs) are turning patients into consumers by replacing one-size-fits-all insurance plans with individually owned tax-exempt savings accounts. With HSAs, more people can afford to be insured and portable private savings accounts lower costs and encourage preventive care, says Investor's Business Daily (IBD).

HSAs became available in December 2003 as part of a Medicare reform bill. So far, the results are encouraging:

  • One-third of HSA purchasers were previously uninsured, according to eHealthinsurance, an online insurance brokerage.
  • About 70 percent paid less than $100 a month for coverage.
  • High-deductible policies are 15 to 40 percent less expensive than comprehensive policies and HSA savings greatly exceed deductibles.

HSAs handle routine medical expenses and allow patients to avoid dealing with insurance company and HMO bureaucracies. HSAs can also be used towards drugs, dental care, and eyeglasses. Patients are able to seek out the best service at the lowest cost since there are no restrictions on choices for doctors, specialists, hospitals or tests.

When paired with a high-deductible catastrophic insurance policy, HSAs lower overall costs and increase overall care, says IBD. If money is left over at the end of the year, it simply accumulates in HSA and earns interest. By creating a nest egg of savings, people are more prepared for future health expenses, from major illnesses and long-term care to paying insurance premiums during job transitions.

Source: Editorial, "Patients Should Also Be Consumers," Investor's Business Daily, February 8, 2005.


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