Last week liberal advocacy group Citizen Action Wisconsin voiced their opposition to Assembly Bill 2/Senate Bill 2 currently being debated in the Wisconsin state legislature. Yesterday, this Bill that makes contributions to Health Savings Accounts (HSAs) connected to high deductible health plans tax deducible passed through the Senate (21-12) and the Assembly (66-28) and awaits Governor Walker’s signature.
Citizen Action Wisconsin, a longtime advocate of universal healthcare, released a press release titled Health Savings Accounts are Bad Medicine for Wisconsin. Executive Director Robert Kraig is quoted saying that Governor Walker and the new Legislature are selling old snake oil to the sick today in reference to the proposal put forth, going so far as to say that HSAs will actually make the health care system even sicker.
Citizen Action Wisconsins claims about HSAs don’t stand up to scrutiny.
1.) HSAs primarily help wealthier individuals who already can afford health insurance, and will not help the uninsured.
FALSE: According to the comprehensive American Health Insurance Plans 2009 report titled Estimated Income Characteristics of HSA Accountholders in 2008, only 17% of HSAs were held by individuals making over $75,000. In fact, 49% of HSAs were held by individuals and families making less than $50,000. In fact, three separate insurance companies have reported that 33%-40% of those purchasing HSAs were previously uninsured.Sources: Estimated Income Characteristics of HSA Accountholders in 2008, American Health Insurance Plans Center for Policy and Research, May 2009
2.) If HSAs become commonplace, they will undermine traditional employer based comprehensive health insurance, which is still the bedrock of our health care system.
FALSE: If HSAs become commonplace, the result will be that more individuals will possess flexible health care plans, tailored to their own individual lifestyle and health choices, and not tied to their employer. Health policy should encourage healthy living. HSAs encourage healthy lifestyle choices as individuals possess the choice about how to best use their healthcare dollars. In a comprehensive employer based health insurance, plans are not flexible, not tailored to individual lifestyle and are tied to ones employment, which given the recent economy, is precarious at best.
3.) HSAs shift healthcare costs to working families…HSAs shift a greater proportion of the costs of health insurance from firms to working families
FALSE: HSAs come in all different shapes and sizes. It’s not necessarily true that employees will pay more for their healthcare if HSAs become more common. HSAs shift the burden of responsibility for health decisions from insurance companies to the individual. It empowers individuals to make decisions based on what drugs and services cost. The result of this will be competition that inevitably drives down costs.
4.) High-deductible HSA policies actually discourage seeking care for people who cannot afford out-of-pocket expenses…HSAs could result in increases in health care costs over time for such individuals.
FALSE: HSAs only discourage people from seeking care if we believe individuals aren’t responsible to make health decisions and unable to evaluate how to most effectively spend the money in their HSA accounts. HSAs encourage responsibility, healthy lifestyles, competition and provide consumers with defined out-of-pocket costs.
5.) The only demonstrated benefit of HSAs is the creation of yet another tax shelter for wealthier individuals.
FALSE: As defined by the IRS, the maximum contribution an individual can make to an HSA in 2010 was $3,050 and the maximum for a family was $6,050. HSAs can hardly be considered a scheme for the wealthy to invest money tax deductible.Source: http://www.irs.gov/pub/irs-drop/rp-09-29.pdf