NCPA - National Center for Policy Analysis

REASON TO CHANGE

May 11, 2005

A year ago, health savings account owners were about as common as sasquatch sightings. Today, thanks to federal legislation signed in late 2003, the accounts are gaining popularity as a sensible option, says Investor's Business Daily (IBD).

America's Health Insurance Plans, an association of companies that provide health insurance, has found that, as of March 2005, 1.03 million Americans were covered by HSAs, says IBD:

  • Of course, this 1.03 million represents less than 1 percent of those covered by private health insurance; but moving up from nothing to more than 1 million in a year -- or from 438,000 in September to more than 1 million in six months -- is a rather remarkable rise.
  • Consider that only 40,000 medical savings accounts, the model for HSAs, were bought in their first year of existence; they've been around since 1997 and they never reached the numbers that HSAs are reaching right away.
  • HSAs are making their biggest gains in the individual market, where there are 556,000 HSA owners; that's roughly 5 percent of that market -- and growing fast.
  • There is something special about HSAs: 37 percent of the new individual HSA owners were previously uninsured.

HSAs won't entirely solve the problem of the uninsured. But it's impossible to think of any other public policy that could move so many out of the ranks of the uninsured so fast without adding substantially to government spending.

As more Americans opt for HSAs, the accounts' ability to keep costs down will become more apparent. Because each HSA -- $2,250 for an individual, $4,500 for a family --includes a catastrophic insurance plan, companies will pay out less in premiums, says IBD.

Source: Editorial, "Reason To Change," Investor's Business Daily, May 10, 2005.

 

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