The Impact of HSAs on Health Care Reform: Preliminary Results After One Year

Abstract:     
Over one year having passed since Congress authorized the creation of the first individual Health Savings Account (HSA), this article reviews the context, structure, promise, and impact of this new type of tax-advantaged accounts. Proponents of these accounts claim that, coupled with high-deductible health insurance policies, HSAs can increase access to and decrease cost of health care. Opponents counter that HSAs could decrease access and raise cost for some. The article begins by summarizing current trends in health-care access and cost. It then analyzes the HSA legislation itself, H.R. 2596 (2003), and how HSAs operate. After reviewed the claims made for HSAs when H.R. 2596 passed, the article takes a preliminary look at the impact of HSAs one year after their creation.

The enactment of H.R. 2596 may benefit some individuals and families by providing an additional tax-subsidized health-insurance option that may better fit their needs than other options. For some, it may make the difference between having health insurance and not having health insurance. For others, it may result in lower costs or better quality. Despite the claims of proponents, however, the record so far suggests that HSAs will have little overall impact on rising health-care costs or on shrinking health-care access. Fundamental health-care reform will not be so easily or painlessly implemented.

Number of Pages in PDF File: 32

Keywords: Health Savings Accounts, Health Care Benefits

JEL Classification: I18, J32, H20

Accepted Paper Series