NCPA - National Center for Policy Analysis


May 25, 2010

ObamaCare's price controls threaten the continued existence of health savings accounts (HSAs), says Michael F. Cannon, director of Health Policy Studies with the Cato Institute. 

The new law requires insurers to charge enrollees of the same age the same average premium, regardless of health status.   That's a price control, and it will cause premiums for healthy people to rise dramatically and thus lead to massive adverse selection. 

According to Cannon: 

  • Healthy people will gravitate to less comprehensive insurance -- in particular, HSA compatible high deductible plans -- where the implicit tax is smaller.
  • As premiums for comprehensive plans spiral upward (ultimately causing comprehensive plans to disappear) and as ObamaCare proves more costly than projected, supporters will be desperate for new revenue.
  • They will call for the elimination of both HSAs and high-deductible health plans on the grounds that those products -- not the price controls, mind you -- are causing the market to unravel. 

HSAs allow young and healthy consumers to avoid the raw deal that ObamaCare offers them.  And that's precisely why ObamaCare's supporters will try to kill HSAs.  We will end up repealing one or the other, says Cannon. 

Source: Michael F. Cannon, "ObamaCare's Price Controls Threaten HSAs," Cato Institute, May 24, 2010. 

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