With President Obama demanding that conservatives come up with a plan that would provide an alternative to Obamacare and with many Republicans suddenly developing a case of laryngitis when it comes to healthcare alternatives, Devon Herrick offers a short history of what The Motley Monk believes are two excellent alternatives, Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs).
Nearly one decade ago, 250M non-elderly Americans were able to access HSAs, in principle, allowing them to self-insure for some medical needs and manage some of their healthcare dollars. In concept, HSAs are similar to IRAs but are focused upon health savings (hence they are called "medical IRAs") rather than retirement savings.
HSAs date back several decades, to the years of the Reagan administration when it was thought individually-owned "medical IRAs" could solve Medicare's long-term problems. Singapore already had a mandatory "Medisave" program in place that provided direction about how best to approach the HSAs in the United States.
By the early 1990s, the concept was renamed "medical savings accounts" (MSAs). Individuals would self-insure for small medical bills and purchase insurance for larger medical bills and catastrophic coverage. The private sector liked the MSAs:
- MSAs were so popular at Golden Rule Insurance Company, it began selling MSA plans in the marketplace.
- Forbes magazine publisher Steve Forbes created a variant for his employees while Quaker Oats and Dominion Resources implemented their own versions.
- The United Mine Workers agreed to a $1k annual deductible as an alternative to first-dollar coverage in return for a $1k annual check from management for each employee.
Tax laws put MSAs at a disadvantage, however. Deposits were subject to income and payroll taxes. Unspent funds could not be rolled over to accumulate and earn tax-free interest. However, Congress created a pilot project in 1996 allowing tax-free MSAs for the self-employed and small businesses.
In 2002, the U.S. Treasury Department ruled that unused funds in Health Reimbursement Arrangements (HRAs)--employer-funded HSAs--could be rolled over from year to year tax free.
Today, 30M+ people control some of their healthcare dollars through an HSA or HRS. Forget that HSAs and HRAs might revolutionize the medical marketplace, as they allow freedom of choice in the insurance marketplace.
"What about all of those people who can't purchase healthcare insurance?" Obamacare supporters protest.
The response is pretty obvious: Each could be provided adequate healthcare (what President Obama calls "standard" healthcare) for a whole lot less than the cost of Obamacare.
So, how about it Speaker Boehner?
Let's get serious and stop the pandering for the votes of those who aren't ever going to pay for healthcare insurance. HSAs and HRAs have demonstrated success and are worth replicating across the United States.
Then, too, how about allowing healthcare insurance companies to compete across state lines?
Let the discussion begin...
To read Devon Herrick's brief history of HSAs and HRAs, click on the following link:
"A Brief History of Health Savings Accounts."