A Capitol Hill briefing yesterday featured bicameral legislation that calls for expanding the use of health savings accounts (HSAs). HSAs let consumers under the age of 65 build up savings for certain medical expenses, all tax-free.

The Health Savings Account Expansion Act, sponsored by US Senator Jeff Flake (R-Ariz) and Congressman Dave Brat (R-VA), would make HSAs even more consumer-driven compared to current HSA law. Some highlights:

  •  Current HSAs contribution limits would be able to triple in size ($9,000 for individuals, $18,000 for families).
  •  HSAs could be paired with any type of health plan. Under current law, HSAs can only be linked with high-deductile health plans.
  •  HSA funds could pay for health plan premiums.
  • Employers could deposit the cash equivalent of the tax-advantaged health benefits they offer their workers into a worker’s HSA; that employee would then no longer be tied to their employer’s plan (According to Kaiser Family Foundation, 83% of firms offer one health plan option, 13% offer two, and 3% offer three or more). He has the choice to use those funds to pay for his job’s health plan, or shop for other plan option in the non-group market. He has more control over allocating how much he wants to save (self-insure) and spend on a health insurance product.

If Congress were to enact large HSAs, health care would be more affordable for more people.   Consumers would wield more power over their health care purses, meaning that health insurance companies, medical providers, and other suppliers in the health care industry would have no choice but to chase their preferences and to be price transparent. David Goldhill, authorof “Catastrophic Care: Why Everything We Think We Know About Health Care Is Wrong,” extrapolates how consumer-driven health care is, for the most part, a void in the health care sector.

“Almost all of our interactions with the health care system occur through insurers, Medicare, government agencies – the intermediaries I call the Surrogates. On our behalf, they negotiate prices, agree on appropriate procedures and treatments, and oversee results.”

And…

“In every other business, companies chase us…. Not in healthcare…This is why our health care industry does not bother to meet our demands for lower prices, higher quality, less waste, or greater safety. They are too busy serving the quite different interests of their real customers: the Surrogates.” 

Overall, large HSAs would reduce asymmetrical information between patients and providers. They are the vehicles to what our health reform should be measured against: reducing health care costs, not solely on reducing the number of uninsured.

You can read the bill here.