The Premature Reports of HSAs' Demise
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15 March 2009
With the election of Barack Obama, there was much discussion about the overhaul of the U.S. healthcare system, a conversation which continues in earnest today and will likely go on for months, if not years. Many policy and industry analysts stated that under the Obama administration, the U.S. would move to a European-style single-payer system and that we would see the end of consumer-directed healthcare (CDH) plans (i.e., higher deductible plans coupled with tax-advantaged medical spending accounts). As a result, some declared, health savings accounts (HSAs) would soon go the way of the dodo bird. As a healthcare banking analyst, I watch healthcare policy from the sidelines, not from the middle of the playing field. However, I must say that in my research of President Obama's policies as well as of state (e.g., Massachusetts) health care reform, I have never come across any indication that CDH plans are off the table. Furthermore, there does not appear to be any serious discussion about moving to a single-payer system anytime soon. Importantly, there are rumblings in Washington that health care benefits should be taxed to help pay for health care reform. This means that your employer's health care subsidies (e.g., the portion of your health insurance premium paid by your employer) may begin to be taxed. Such a move would certainly drive more consumers to adopt CDH plans, as such plans have lower premiums and thus would be subject to less tax. More CDH plans = more HSAs, and the dodo bird analogy becomes untenable. However, all is not 100% rosy for HSAs. Many employers contribute to their employees' HSAs; as health care benefit taxation details are still sketchy, it's hard to say if such contributions would be taxed too. If so, this would mean very bad news for health reimbursement arrangements (HRAs), which are medical spending accounts that consist solely of employer-provided funds.