Health Savings Accounts Become Less Attractive After Reform

span>Share:Healthcare reform seeks to increase Americans' access to insurance and reliable health care. Eventually, it is also attempting to decrease the cost of medical care--which is currently one-sixth of the nation's GDP and climbing. In that case, why does it put new limitations on health savings accounts?

A health savings account (HSA) is usually partnered a high-deductible health insurance plan. Instead of co-payments, patients are responsible for the full cost of doctor visits and prescriptions. This is meant to encourage consumers to shop around for care, therefore lowering claim costs.

The benefits to health insurance companies are obvious, but such coverage is also appealing to many consumers. Since fewer claims are generally filed, premiums are less expensive. HSAs and FSAs (flexible spending accounts) are an especially good deal for younger, healthier individuals; they are less likely to use large amounts of care. Moreover, the amounts deposited in the health savings accounts have been exempt from income and other taxes.

About eight million consumers have already taken advantage of these health insurance plans. Unfortunately, the health insurance reform legislation cuts some of those benefits to save money. In January, eligible spending will be limited. People will no longer be allowed to buy non-prescription over-the-counter medications with their health savings accounts.

The maximum annual contribution will also be limited. Beginning in 2013, only $2,500 can be deposited into a health savings account each year. Such limitations make HSAs less appealing as a method of parking funds tax-free.

In addition, the bill reduces the appeal of withdrawing HSA funds for non-medical purposes. People under the age of 65 are subject to penalties on those withdrawals. The penalty will be increased from 10% to 20% as of 2011.

Many believe that expanding, rather than discouraging, the use of health savings accounts would make health insurance less expensive. Their opinion is that greater transparency regarding the cost of health care will reduce the overuse of care.

by: Yamileth Medina

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