Health Savings Accounts were created by the Medicare bill signed into law in 2003. The U.S. Treasury Department says HSAs are intended to help people save for qualified medical and retiree health expenses on a tax-exempt basis. To take part in Health Savings Account programs, you must be insured by a high-heductible health plan. Since a high-deductible plan is typically less costly than conventional health insurance, the money you save on premiums can be deposited into an HSA. The AFL-CIO--the voluntary federation of America's labor unions--is among the critics of HSAs. It says health care savings plans "undermine employer-sponsored group insurance," which it calls the backbone of health care financing in America.
Weakens Employer-Sponsored Plans
High-deductible health care savings plans may lower costs for employers but place an added burden on employees and their families, according to the AFL-CIO. In addition, the Bank of America says small business owners who require their employees to switch from more conventional health coverage to an HSA/HDHP without sharing the premium payment may be accused of cost shifting. This could hurt company morale, B of A says.
Unrealistic Option for Many
The U.S. Treasury Department said in 2008 that in order to open a Health Savings Account, you must have a high-deductible health plan with a minimum deductible of $1,100 for single coverage or $2,200 for a family plan. These costs may not be affordable for many people.
For example, the AFL-CIO says, since the majority of lower-income people have little disposable income after paying for food, clothing and shelter, it's unrealistic to think they could spare additional funds for an HSA and the higher deductibles required.
Ineffective for Chronically Sick
The Georgia Budget and Policy Institute, in a March 2006 analysis, said people with high-cost medical conditions, such as those who are disabled or suffer from chronic illnesses, would be less likely to sign on for HSAs and high-deductible plans. This is because people with more frequent and higher medical bills would be more apt to deplete their HSAs every year. The institute says this would place higher-risk individuals at a disadvantage if high-deductible plans were the only health care option offered by an employer.
Cap on Contributions
The federal government has placed a limit on HSA contributions that's near the low end of the allowable deductible range for high-deductible plans. Bank of America says this cap is another disadvantage of HSAs because it could lead to higher out-of-pocket health care expenses.
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