The Medicare Modernization Act of 2003 included a provision to allow individuals to create a new tax-favored account - commonly referred to as a Health Savings Account (HSA) - to pay for medical expenses. The account can only be created when the individual or the individual's employer purchases a health plan with a higher deductible - a minimum $1,100 for individuals and $2,200 for family coverage.
Traditional managed care companies are restricted from selling these higher deductible policies and therefore thousands of New Yorkers can not start a HSA.
Some employees have access to high deductible health insurance plans (HDHP). Large employers that are subject to ERISA and not New York State Insurance Law, can purchase them. Employers who purchase indemnity coverage or preferred provider organization coverage can buy them. But the vast majority of employers who purchase traditional managed care coverage are restricted from purchasing them because Insurance Law considers the deductible to be too high.
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The ability for individuals to create their own health savings account can quietly transform the health care system. Until recently, consumers have had little direct knowledge of the totality of the costs of health-care and have not been prudent in how they use the health care system. Many people spend far more time researching the costs and quality of a big screen television than they do learning where to go for surgery and finding out how many times a particular surgeon has performed the procedure.
When employees are spending their own funds there will be a greater incentive to use services more prudently. The HSAs also allow the employee to carry-over their accounts from year to year, thus building up more substantial funds to use at a time when they are more likely to need more services. The HSA is also portable for the employee, allowing them to take the money with them if they change employment.
New York needs to authorize higher deductible health insurance plans to complement health savings accounts.
It should also be noted that an additional benefit of HSAs is that a worker's employer is also authorized to put money into an employee's HSA. For instance, if an employer wanted to purchase a $2200 deductible family policy they could also put $750, for example, into the employee's HSA. The employee could use this money to pay for medical expenses.
Health care costs are continuing to rise higher than the inflation rate, driving insurance premiums higher and making health coverage less affordable for New Yorkers. By authorizing managed care companies and insurers to offer HDHPs coupled with HSAs would add another health coverage option for employers and individuals.