Harry Reid’s Health-Care Bill Attacks HSAs – WSJ.com

Posted by Jason | Posted in Health Care | Posted on 21-11-2009


If you don’t think this health care bill is all about government control, you are very, very naive. The only head way that has been made on addressing rising cost has been the HSA and it’s brethren. These plans have brought the consumer back into the spending decision and allowed the price signals of the free market to work. We should be expanding and encouraging these plans, but low and behold, Harry Reid is trying to destroy them.

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.

So let’s cap them because they don’t roll over? What if someone needs them for a child with special needs, and they have $5,000 in yearly expenses. I guess screw you, you greedy parent. If Reid was so worried about wasteful spending because it doesn’t roll over, they are the ones who set that rule. Change the rule so they can roll over.

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.

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.

HSAs work best because they  focus on catastrophic health expenses, instead of routine procedures. That is what will help drive costs down. They operate the way insurance is supposed to operate.

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.

So as we now see, this isn’t about fixing health costs at all. It’s about creating a common pool. People’s freedom shouldn’t get in the way of creating a “common pool”. You shouldn’t have a right to decide what is best for you and your family. Government should decide. “Oh, come on ProudProf! This is just another example of the rich trying not to give their fair share.”

In fact, about 40% of tax filers with HSAs earn under $60,000, according to the IRS. The Employee Benefit Research Institute reports that 4% of adults with private insurance have an HSA this year—up from 1% in 2006—and about 9% are enrolled in some form of consumer-directed health plan. It also found that beneficiaries are evenly split between those with health problems and those without.

So 40% earn less than $60k, and HSAs allow the middle class to stretch their money further. They aren’t rich, and cannot afford an expensive health insurance plan to cover some other person’s daily doctor visit. As usual, the middle class is going to be the group who takes the hit, and what will the end result be? The result will be the exact thing Democrats claim to abhor, the spread between the haves and have nots.

The Blue Cross Blue Shield Association, whose members dominate the HSA market, says that enrollees are more likely than those with traditional insurance to be better consumers. They’re more likely to track expenses (63% to 43%), save for the future (47% to 18%), and search for information on physician quality (20% to 14%). They’re also more likely to participate and see results from wellness programs like weight loss, fitness and smoking cessation. This makes intuitive sense: They’ve got skin directly in the game.

David Goldhill, a media executive, recently wrote in the Atlantic Monthly that if a 22-year-old starts at his company today earning $30,000 and health costs grow at 3%, by the time he retires he’ll have paid out $1.77 million in premiums, lower wages, out-of-pocket costs and both sides of the Medicare payroll tax.

via Harry Reid’s Health-Care Bill Attacks HSAs – WSJ.com.

As with all government, the plan does nothing but destroy wealth and create waste. Young people will spend more on health insurance than they will ever use. Sounds like social security, which no young person believes they will even get.

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