TL/DR –
The article criticizes Health Savings Accounts (HSAs) and high deductible health plans, arguing they provide little benefit to those with lower incomes or chronic healthcare needs. The author, a former communications chief for Cigna, notes that while industry sales pitches promise consumers the ability to make prudent healthcare decisions, the reality is people with chronic conditions often delay care due to high deductible costs, resulting in more desperate patients. The article also highlights that HSAs are more beneficial for higher-income households due to tax advantages, with the money saved by these households representing funds that could go towards Medicaid or premium tax credits for lower-income families.
High-Deductible Health Plans and Health Savings Accounts: A Reality Check
As the former communications chief at Cigna, I was tasked with selling the concept that high-deductible health plans (HDHPs) tied to health savings accounts (HSAs) would be a panacea for the U.S. healthcare system. The idea was that by making Americans pay a significant portion of healthcare costs, they would become informed “consumers” and “shoppers” of healthcare, leading to market discipline of costs and fostering innovation.
However, the practical implications of HDHPs were detrimental for working families. People with chronic conditions found it impractical and unfeasible to shop around for cheaper healthcare. Furthermore, when deductibles reached $3,000 or $5,000 or more, they began to delay care and skip medications.
HDHPs coupled with HSAs have not helped most Americans manage their healthcare expenses. As we have seen, most people with HDHPs have minimal funds in their HSAs. This results in many Americans resorting to charity care at Remote Area Medical clinics. High-deductible plans don’t make people better consumers, they create more desperate patients.
Healthcare Information and Tools: An Empty Promise
The industry’s assurance that people would have access to the information and tools they needed to make wise healthcare decisions was misleading. The promised transparency and resources never materialized.
HSAs were frequently touted as a solution for offsetting high deductibles, suggesting that workers could save enough pre-tax dollars to handle their out-of-pocket costs. However, they didn’t solve the affordability issue. Rather, they essentially shifted funds from the lower-income groups to the wealthy.
It’s important to note that the tax advantage of HSAs is income-dependent. For example, someone in the 37% tax bracket saves 37 cents for every dollar contributed to an HSA — more than three times the 12 cents saved by a family making $30,000. The more you earn, the more the government subsidizes your account.
HSAs also function as a tax shelter and investment vehicle for higher-income households, while lower-income families are left struggling to afford their medical bills.
Federal Tax Exclusion for HSAs: Cost and Impact
The federal tax exclusion for HSAs is predicted to cost the government about $180 billion over the next ten years. This is money that could potentially be used to offer ACA premium tax credits to working families or for Medicaid. Instead, it’s being transferred to wealthy investors’ HSA portfolios, leaving millions of low-income Americans uninsured.
Industry Advocacy Group, GAHA
A group of HSA companies and industry organizations have formed a nonprofit called the Great American Health Alliance (GAHA), which can lobby without limit, support political candidates, and operate without disclosing its donors. This is not consumer advocacy but an industry effort to protect and expand a profit center.
UnitedHealth Group, through its division Optum Bank, manages over 27 million consumer accounts with $24 billion in HSA assets. This is the same company that has been scrutinized for using AI to deny claims on a large scale.
Realities of HSA Expansion
When Republican leaders propose HSA expansion as the answer to healthcare affordability, it echoes the same narrative developed two decades ago: Empower consumers. Give people choices. Trust the market.
HSAs primarily benefit high-income households, but they are presented as a lifeline for working families who can barely afford premiums and deductibles. The reality is, after covering these costs, most have no money left to contribute to any kind of savings account.
HSAs may seem like sound public policy, but they are nothing more than a scheme to transfer more tax dollars from working families to billionaires and force millions more Americans to seek care in charity clinics like RAM.
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