Could HSAs Be Part Of The ACA Fix?

With all the talk of possible “repeal and replace” scenarios of the Affordable Care Act over the past week or so, it could be a good time to consider a greater role for health savings accounts.

That was the word from a health insurance analyst, who said he believes HSAs provide a solution for consumers who want to maintain control over their health care costs.

Michael Trilli, health insurance analyst with Aite Group, has been studying HSAs and the place they could occupy in a post-ACA world. He believes that the election of a new administration – along with the related discussion on changing the ACA - present a good opportunity to “take HSAs to the mainstream market.”

“I think this is an opportunity to be able to cater to some of the needs of the individual market – whether on a spending basis or a saving basis,” Trilli told InsuranceNewsNet. “The challenge is, how do you create a communication and marketing plan to educate people on the benefits of a health savings account, and what it means to put a dollar in that account and what it means relative to the type of products you’re buying?”

The HSA industry, as a whole, “has done really well,” Trilli said. “We’re seeing high growth in this area.”

HSAs often have been compared with 401(k) accounts in that both are savings vehicles. But Trilli said many consumers don’t understand that the HSA also has a spending component.

“This is an account that individuals can use to spend on health care or save on health care. You can withdraw those funds for medical expenses. And you have a purse dedicated to health care to help you manage those expenses.”

One issue that would need to be determined in ACA reform, Trilli said, is how a revised health care law could provide incentives for consumers to contribute to an HSA. If ACA reform leads to the end of subsidies for purchasing health insurance, “one area of potential compromise across the aisle is thinking about government subsidies for individual HSA accounts, in order to get consumers over the hump and start contributing their own funds and gaining the tax incentives in order to pay and save for the future,” he said.

Trilli is not alone in advocating a greater role for HSAs. President-Elect Donald Trump, in his transition policy paper on greatagain.gov, calls for replacing the ACA with a solution that includes HSAs. In addition, House Republicans, in their policy paper “A Better Way,” support what they described as “a health care backpack” that would give every American financial support for an insurance plan they chose and could take with them from job to job, to start a business or become a stay-at-home parent, and even into retirement. Trilli described this as “a well-thought-out way to address using a refundable tax credit for an HSA-like purse.”

The plan described in “A Better Way” proposes a refundable tax credit that would be portable, age-adjusted and would grow over time. Americans could spend this money to help offset the cost of purchasing a health plan of their choice. If the plan they select is less expensive than the value of the tax credit, the difference would be deposited into an HSA-like account and could be used toward other health care expenses, such as dental or vision care or over-the-counter medications. It also could be used to save for future medical expenses or to fund out-of-pocket costs.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].