NCPA - National Center for Policy Analysis


March 10, 2005

Health Savings Accounts (HSAs) would be more widely adopted by employees if employers offered matching contributions, say observers.

A Health Savings Account combines high-deductible, low premium health insurance with a savings account that allows employees to contribute tax-free funds up to a maximum amount for health insurance deductibles and out-of-pocket expenses. The HSA would act as an investment account similar to 401K, and employers could match contributions.

HSAs provide many benefits:

  • Healthy, young people who spend little on health care now will accumulate larger savings accounts through HSAs, which could be used for later health care expenditures.
  • HSAs allow consumers to carry over unused funds into the next year, unlike flexible spending accounts (FSAs), which require funds to be spent in the year they accumulate.
  • Price cuts of HSAs may attract those who can't afford traditional insurance plans.

In 2004, only 1 percent of consumers were enrolled in HSAs, but that number is expected to increase to 3 percent within the next 3 to 5 years. However, in order to expand coverage, employers need to get on board by making generous contributions to employee HSAs.

Furthermore, as companies become more aware of how HSAs work, many are considering them on their fall enrollment forms for 2006 employee benefits.

John Goodman, president of the National Center for Policy Analysis and the "father of HSAs," notes that HSAs take health care choices away from managed care and puts them into the hands of individuals.

Sources: Steve Quinn, "New Health Plan is More Than That," Dallas Morning News, March 7, 2005.


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