HSAs And The Rich: A Perfect Combination
President-Elect Donald Trump’s plans for the fate of our healthcare remains a work in progress. During the 2016 election, Trump stated that he fully intended to repeal Obama’s Affordable Care Act, yet as of late appears to have changed his tune. It’s a matter that begs a “wait and see” response. However, one major aspect of Trump’s own healthcare reform is that of Health Savings Accounts or HSAs.
These tax-free accounts allow for individuals to pay for parts of their healthcare using money that they have saved. It seems like an easy enough way to pay for healthcare by saving for expenditures, though the practicality of it drums up some questions, and according to the Los Angeles Times, it may only benefit the wealthy.
In a column titled Health savings accounts: Another conservative ‘reform’ nostrum that chiefly benefits the rich, writer Michael Hiltzik discusses whether or not HSAs are for anyone but the rich. “They sound good,” he writes, “tax-exempt personal slush funds that can be used to pay out-of-pocket medical expenses, but for the average person they’re almost useless and for the healthcare system they’re potentially disastrous.”
According to Hiltzik, HSAs were first brought to our frame of references in the ‘90s under somewhat suspect conditions. House Speaker at the time Newt Gingrich was far from silent in his displeasure for Medicare and that the concept of HSAs as not only helping healthcare providers, but monopolizing the market with boosted profits. Despite early efforts to incorporate HSAs into the Medicare platform, it was a failed initiative because many seniors lacked the funds for the accounts and the scope of spending on specific healthcare items was limited.
Now they’re seemingly making a comeback as the framework for Trump’s vague healthcare plans. While the Affordable Care Act purports to be the arch nemesis for some health providers—primarily UnitedHealth—making HSAs a focal point would make a surplus of profit. According to Hiltzik, UnitedHealth’s HSA-leaning subsidiary Optum Bank earned UnitedHealth $33 million in 2008, with $600 million in deposits from Health Savings Accounts. As $37 million in service charges for Optum were reported in 2015 with $4.2 billion in assets, UnitedHealth’s profits were staggering. Imagine if HSAs were their focal point going forward?
While Conservatives boast the popularity of HSAs, the question is where does that popularity reside? With the richer? With pretax HSAs, the higher the income, the greater the savings account and the resulting bigger break in taxes by year’s end. According to Hiltzik, nine years ago the adjusted gross income of those with HSA accounts were almost three times that of the average American who pays taxes.
Thus, this structure is unrealistic for the average individual, when healthcare plan premiums often leave little or nothing left for the average individual to sock away pre-tax dollars into an HSA to cover out of pocket expenses.
To read the LA Times column, click here.
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