Consumer-Friendly Health Care Reform

Published January 1, 2003

While the media attention has been focused on Medicare reform and a prescription drug benefit, little attention has been paid to the most consumer-friendly section of the new law, which has nothing to do with Medicare.

It’s called the health savings account–HSA–the tax-free health insurance plan. Here are some highlights:

  • Health Savings Accounts operate a lot like IRAs and are now available for 250 million Americans under the age of 65.
  • HSAs are a spending account paired with a health insurance policy that has a deductible of at least $1,000.
  • Employers and employees can contribute to the HSA, up to a total of $2,600 a year for a single person and $5,150 for a family.
  • HSA contributions are made from pre-tax dollars, and the earned interest goes untaxed.
  • Anyone with an HSA can withdraw money to pay insurance premiums, medical care below the deductible, and other health care expenses, such as long-term care.
  • Unused HSA balances can be rolled over from year to year, with the accumulated funds available for use in retirement or gifted to beneficiaries.

Instead of giving all your money to Blue Cross or other insurance companies, you are now going to be able to control the money yourself. Better yet, you are able to directly negotiate the cost of medical care.

Medical expenses over the deductible amount are paid for by the traditional insurance feature of health insurance.

IT’S YOUR HEALTH is written by Conrad Meier, senior fellow in health policy at The Heartland Institute. This program is produced as a public service by Radio America. Meier passed away unexpectedly on March 18, 2005.