Health Savings Accounts can be a scam for the consumer and a boon to the bankers.
Under the new GOP presidency and congress Obamacare looks to be repealed and the replacement to emphasize Health Savings Accounts. The economic rationale for Health Savings Accounts (HSAs) is that when consumers pay for their health care out of the accounts, they will drive down the cost of health care by favoring the least cost procedures. Unfortunately, HSAs without price transparency for the consumer does nothing to bring lower prices or efficiency to the market place. HSAs in our current market place are just scams.
Consumers forced into Health Savings Accounts
A recent article in by CNBC touts how HSAs may flourish under a Trump presidency when Obamacare is repealed. The story highlights how many HSAs have been opened and how much money is pouring into them. This leads to the erroneous conclusion that people are voluntarily going into H.S.A health plans also known as HDHPs (High Deductible Health Plans).
Americans had opened 18.2 million HSAs as of June 30, up 25 percent from a year earlier, according to Devenir. Assets had grown to an estimated $34.7 billion by June, up 22 percent year over year. -These could be the bigger winner if Obamacare changes cnbc.com http://www.cnbc.com/2016/11/16/health-savings-accounts-may-flourish-under-trump.html?__source=newsletter%7Ceveningbrief
Employer Groups Driving HSA Expansion
The vast majority of the new HSAs are from employees in employer group plans that are being forced to open the accounts. The employers are offering to partially fund the HSAs and they are the least expensive health plan being offered by the employer. The increase in HSAs is not an indicator that the market place prefers the HDHP, it’s what people have to enroll into to control their health care insurance costs.
HSAs Don’t Drive Down Costs
The promise that HSAs will drive down health care costs is an illusion. Good consumer information drives down costs. Currently, there is no price transparency in the marketplace. Health care consumers cannot get honest answers to the cost of voluntary procedures. Even though the health plans are trying to make health care cost estimators available the large range of the estimated prices make them virtually useless. Confidentiality agreements between the health plans and providers (doctors and hospitals) prevent the health plans from informing consumers exactly what the negotiated rates for each service might be.
Consumers Can’t Shop
Consequently, with no consumer information and doctors who do not encourage doing any shopping, most patients have their procedures done at the highest priced facilities which are usually the large metropolitan hospitals. If the consumer is paying out of their Health Savings Account, they may have just over paid for the procedure. So what good is a Health Savings Account? It saves the health plans paying on claims. They make consumers shoulder more of the health care expenses, but they do nothing to drive down the costs of health care.
Employees who have HSAs through their employer get some tax benefits. Their contributions into the Health Savings Accounts are tax deductible. The health insurance premiums they have deducted from their paychecks are pre-tax, lowering their overall adjusted gross income on their federal tax return. These savings translate over into the individual and family market for households who are self-employed and can deduct the cost of their health insurance.
Obamacare Families Can’t Fund an HSA
HSAs center around the individual or family funding the health savings account. It is laughable to think that the majority of families on Obamacare have thousands of dollars at their disposal to fund a Health Savings Account. How many families have $6,700 sitting in a bank that they can lock up in a health savings account? Most of the Obamacare families are getting the monthly tax credit because they aren’t making very much money to begin with. No family is going to roll $6,700 into a health savings account to save a few dollars per month on their health insurance premium. Plus, if the Obamacare tax credits go away, 80% of the current families receiving the tax credits will drop health insurance all together.
HSAs Are A Wall Street Scam
The push for HSAs is a big Wall Street investment scam. There are Health Savings Account administrators that are offering to put the money into higher yielding investments like mutual funds. Nobody wants to have $20,000 sitting in a bank making less than 1% interest. However, it is unethical to promote that a consumer invest money, specifically designated to pay for health care expenses, in any vehicle that could lose money. Does no one remember the Great Recession of 2008? Do we not remember how the stock market, and mutual funds, tanked and lost a tremendous amount of their value?
Unethical To Promote Investment HSAs
The GOP wants to promote HSAs because their investment banker friends and campaign contributors will make money. Who cares if another recession hits and the value of some poor chaps Health Savings Account drops by half right when he needs the money for open heart surgery. The main thing is that the health plans saved money and the investment bankers made money.
Until there is some serious price transparency in the market place, Health Savings Accounts don’t make sense for most individuals and families. HSAs under the current market place will not drive down health care costs and may be putting people at risk of losing equity and needed funds when a health care crisis strikes.
The Health Care Transparency Project is one place to start if you think consumers should have access to accurate quotes for health care procedures.
National Public Radio If Republicans Repeal Obamacare, Ryan Has Replacement Blueprint which highlights the GOPs move to HSAs.