Health Savings Accounts for the Private Sector

If it takes a village to raise a child, it takes a whole culture to ensure adequate health care for all. One Idaho obstetrician recently explained to his state’s legislators how he thinks it can be done.

Dr. Loel Fenwick, as reported by the Idaho Reporter, said in order to curb the rising cost of health care and address the U.S. propensity to overtreat, consumers must become more involved in health-care decisions. These aren’t new ideas, and readers of this blog will recognize the echoing refrain. The point is not only to lower costs, but improve outcomes.

Instead of the standard, but now diminishing, group health coverage by employers, Fenwick supports the idea of health savings accounts (HSAs) for private sector employees. HSAs are insurance plans with two basic elements:

  • a tax-preferred savings account where money is set aside by the consumer (employers may also contribute) to pay for medical expenses and prescription drugs;
  • a high-deductible health insurance plan.

According to Kaiser Health News, any adult with a high-deductible health plan and no other form of health care coverage may establish one of these accounts.

Fenwick’s idea is for the state to develop these accounts for private sector employees, and for insurance carriers to house the policies. Employers would deposit insurance premiums into the accounts, which could be tapped only for health-care expenditures.

Like all HSAs, the cash accounts are coupled with high-deductible insurance coverage for things beyond relatively modest procedures and treatments, such as vaccinations, and check-ups.

Fenwick’s plan would require doctors and hospitals to list the cost of treatments and procedures so that consumers could be informed about what stuff actually costs, instead of knowing only what is their share of an otherwise unknowable cost. Comparison shopping for medical needs! What a concept! This idea is gaining traction, and we wrote about one such program a few months ago.

Fenwick says Idaho would save as much as $1,350 per year, per resident in otherwise state-subsidized care.

One legislator expressed support for Fenwick’s idea, noting that the current health-care mind-set is to secure as many medical services-diagnosis, testing, treatment-as one’s insurance policy will permit, rather than to think about them as a commodity with resources that must be shared. “When something is free, people will take more than they need,” he said. “When you don’t have any skin in the game, you don’t care what it costs.”

To encourage participants to be careful medical consumers, the cash accounts permit withdrawals of a certain percentage of the funds each year. If you think there’s a financial reward for not using medical services you might not need, the thinking goes, chances are better that you won’t.

Fenwick’s plan isn’t a panacea for all the ills that render health care in the U.S. less than robust. But at least somebody on the front lines is proffering an alternative that people without high-maintenance and/or chronic health problems should be considering.

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