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Problem With Health Savings Account
Can Health Savings Accounts Bring Down High Healthcare Costs?
By Writer2
More and more people now have the opportunity to choose Health Savings
Accounts (HSAs) over other, more traditional, health insurance
coverage - more companies and financial institutions offer this
option than ever before. For the healthcare consumer, this is good
news. When the community as a whole is given more choice when it
comes to healthcare options, everyone benefits. HSAs let you decide
how to manage your own medical needs and work out a financial plan
that works best for your specific circumstances.
An added advantage of Health Savings Accounts is the prospect of
lowering the nation's rising healthcare costs, and making the price
of medical care more affordable for everyone. But how can revamping
the current health insurance system affect healthcare from a
financial standpoint? More to the point, how can a different kind of
health insurance make it easier for most people to pay for required
medical expenses?
In 2003 the Medicare Modernization Act introduced the concept of
HSAs to the American public for the first time. A Health Savings
Account is meant to encourage people to invest in their own
healthcare through personal savings, and reduce health care costs at
the same time; a revolutionary idea that has the potential to be the
starting point for positive changes in healthcare. Health Savings
Accounts have sparked a lot of debate amongst those who believe in
the idea and those who are wary of its ability to change the face of
healthcare as we know it.
When you get down to the fundamentals, HSAs are truly designed to
improve healthcare and make it accessible to the vast majority of
people. For the individual, HSAs make it easier to pay for medical
expenses when they arise. Coupled with a high-deductible health
insurance policy, a Health Savings Account allows you to save
pre-tax money and earn interest tax-free. This allows you to have
money set aside to cover a whole host of medical bills, including
items that aren't necessarily covered by traditional insurance
plans, such as dental expenses or alternative treatments.
Individuals and employers can deposit up to $2700 per person and up
to $5450 for a family, and any time you need to withdraw any amount
to pay for qualified healthcare costs, you can do so tax-free. In
addition, premiums for high-deductible insurance policies can be as
little as half the amount of traditional PPO policies.
And because a Health Savings Account is tied to an insurance
policy, more expensive treatments are covered, usually 100%, after
you've met your deductible. When you turn 65, any savings remaining
in the account can be withdrawn tax-free to be used for medical
expenses you incur in your senior years. In addition, the savings
you accumulate in a HSA work like a retirement fund. The money grows
tax-deferred like an IRA, and you can withdraw the money after age
65 to pay for non-medical expenses without penalty, although you
will be required to pay taxes. It is important to note, however,
that amounts withdrawn prior to age 65 are subject to penalties and
taxes.
Giving the individual more consumer power when making healthcare
decisions not only helps you and your family save money, but also
creates an environment in which healthcare costs in general become
more reasonably priced. Essentially, the price of healthcare is so
high because free market forces have little sway in the realm of
healthcare products and services. Insurance coverage causes a
disconnection between the consumer and the item purchased. When you
visit the doctor or purchase a prescription from the pharmacist, you
don't know the real price tag. All you see is your insurance payment
and the price you pay at the cash register, after your insurance
company pays the balance.
This lack of price transparency has led to less competition
within the marketplace. People have traditionally chosen their
doctors, health products, and other medical items based on location,
convenience, or other factors not related to price. When people have
the choice to compare different health care providers based on
quality of service and price, soon overpriced healthcare will become
a thing of the past. People will shop around and force providers to
price healthcare more competitively.
As more and more people turn to Health Savings Accounts, medical
providers will feel the pressure to post their prices and compete
for the consumer's business. Armed with the knowledge of what
healthcare actually costs, individuals and families will be less
willing to overuse the system, which also drives up prices. (When
healthcare appears to cost little or nothing, most people are prone
to make use of services even though it may be unnecessary).
At the same time, HSAs naturally promote the use of preventive
care. When people understand the true costs associated with
healthcare, they will be willing to pay a little more up front to
keep their engine running smoothly rather than pay a lot more at a
later date to fix a problem they could have avoided.
Health Savings Accounts have also put affordable healthcare
within reach for more people, who were previously paying medical
expenses out-of-pocket due to inadequate or non-existent insurance
coverage. The low premiums of a high-deductible HSA plan together
with the option of putting your money in a savings account that
earns interest has already encouraged large numbers of people who
previously went without coverage to purchase a health insurance
plan.
Only time will tell whether or not Health Savings Accounts can
drive down skyrocketing healthcare costs, but the system created by
such accounts, which affords the individual more freedom to control
his or her own financial and medical destiny, bodes well for the
future of healthcare in America.
About the Author
Article was written by Wiley Long, President of HSA for America
http://www.health--savings--accounts.com/. HSA for America makes
it easy for people to learn about and set up health savings accounts
that best meet their needs at the lowest premiums available.
Reproductions of this article must a link to
http://www.health--savings--accounts.com/.
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