NCPA - National Center for Policy Analysis


November 24, 2009

Harry Reid wants to kill consumer-driven health care -- the kind that give individuals more control over their health dollars and insurance choices.  The 2,074-page bill crushes them with malice-aforethought, says the Wall Street Journal.

Start with its attack on flexible spending accounts that are an important part of many employer plans:

  • Flex accounts let employees set aside some portion of their pre-tax pay for out-of-pocket costs or medical services that their insurance plan doesn't cover, such as a child's orthodontics or testing supplies for diabetics.
  • The Reid bill caps these now-unlimited accounts at $2,500 per year and imposes new restrictions on qualifying medical expenses, raising some $5 billion by exposing income above the non-indexed cap to taxes.

Democrats say flex accounts encourage wasteful spending, because an arbitrary "use it or lose it" rule doesn't allow balances to roll over year to year.  But they really hate them because they give consumers a more active role in managing spending, instead of having the government decide, says the Journal.

The Reid bill also assaults health savings accounts, or HSAs, which allow individuals to accumulate tax-free funds for future medical expenses when coupled with low-premium, high-deductible insurance.  The Reid bill changes tax provisions to make HSAs less attractive, but the real threat comes via increased regulation, explains the Journal:

  • These insurance products will likely be barred from the insurance "exchanges" that will demolish and supplant today's individual market.
  • Employers will also find them more difficult if not illegal to offer once the government has new powers to "define the essential health benefits" that all plans must eventually offer.
  • Plans that focus mainly on catastrophic health expenses, instead of routine procedures, aren't generous enough for Democrats.

Liberals claim people who choose these options aren't helping as much to finance a common pool and may encourage adverse selection if too many young or healthy people opt out.  While all insurance involves some degree of risk-sharing, Democrats want to impose true social insurance a la Europe by obliterating the flexibility of insurers to design products that are tailored to suit different individual needs, says the Journal.

Source: Editorial, "The End of HSAs; Harry Reid wants to kill consumer-driven health care," Wall Street Journal, November 23, 2009.

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