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HSAs Launch a Consumer Revolution

by Representative Paul Ryan (R-WI), Health Insurance Underwriter
February 27, 2006

The skyrocketing cost of health insurance is the biggest domestic crisis facing us. It affects our jobs, our economy and our families' way of life. That's why I worked to pass Health Savings Accounts into law. Today, HSAs are already providing more Americans with access to affordable health care.

Critics claimed HSAs would appeal only to the young, healthy and wealthy. But, so far, the demographics of those opting for HSAs tell a different story. The average HSA owner is 40 years old with one or more children. Forty percent of all HSA purchasers have incomes below $50,000, and more than one-third of HSA purchasers were previously uninsured. And 18% of all HSA purchasers have at least one pre-existing health condition.

When HSAs took effect on January 1, 2004, consumers were ready. Since their introduction, well over a million individuals and thousands of small businesses have found relief from soaring health care costs through these tax-free savings accounts. These accounts, which were a key component of the new Medicare law, are a landmark victory on the road to consumer-driven health care.

Americans spend $1.7 trillion annually on health care. That money is primarily spent by large employers through full-coverage health insurance plans. HSAs have been able to redirect control of health care dollars to individuals. Even if a business contributes to an employee's HSA, the individual makes the decision about how and where to spend that money. The accounts have empowered patients to be more cost-conscious and judicious in their use of medical services, thus helping to reign in out-of-control health care costs. Furthermore, HSAs create a new dynamic in which health care providers compete to earn individuals' business.

Many Americans are already finding that HSAs help them afford quality coverage for themselves, their families and - in the case of small-business owners - their employees. There are, however, ways to expand on this progress and broaden HSAs' reach.

Specifically, I support allowing an individual who purchases a high-deductible health plan combined with an HSA to deduct from his or her taxable income the amount of the premium. Tax credits should also be offered to small businesses that contribute to their employees' Health Savings Accounts. Moreover, Congress ought to assist low-income individuals by providing a tax credit for the purchase of health insurance. Finally, we must find ways to make HSAs more accessible in the large-employer market.

When it comes to the success of the consumer revolution, information is power. Price transparency and quality information are the keys to a successful transition to a consumer-based health care system and, ultimately, will bring down the cost of quality health care. Health care providers must concentrate on publishing price and quality data that allows patients to make better-informed decisions about the health care they receive. Through price transparency and improved quality information, we will promote healthy competition within the medical community, which will ultimately lead to better-quality health care for patients.

The next challenge for consumer-driven health care is to introduce price transparency in the health care market. HSAs can be doubly effective if consumers are fully aware what doctors and hospitals in their area charge for various medical procedures.

Though still in their infancy, HSAs' potential impact is clear. The numbers show that Americans are ready to regain control of managing their health care. Of the many reasons that health care costs escalate annually, the fact that consumers have been left on the sidelines while insurance companies and providers direct health care trends has been a driving force.

As HSAs give choices and influence back to individuals, it is only a matter of time before they begin - loudly - demanding price and quality data to make informed decisions. When Americans begin acting like true consumers, it will transform the health care landscape to improve quality, access and affordability. The early findings on how HSAs are performing in the marketplace are the first signs that this consumer revolution is on track.

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HSA Contribution Limits

Please be aware of the 2016 annual HSA contribution limits listed below.

  • $3,350* - Maximum HSA Annual Contribution Limit (Self-only)
  • $6,650* - Maximum HSA Annual Contribution Limit (Family)
  • $1,000 - HSA Catch-up Contribution Limit
  • $1,300 - Minimum HDHP Annual Deductible (Self-only)
  • $2,600 - Minimum HDHP Annual Deductible (Family)
  • $6,450 - Maximum HDHP Annual Out-of-pocket (Self-only)
  • $12,900 - Maximum HDHP Annual Out-of-pocket (Family)
  • *For purposes of the full contribution rule an employee is treated as being eligible for the entire calendar year as long as he or she is eligible as of December 1 of that calendar year and continues eligibility throughout the following year. However, failure to maintain eligibility during the "testing period" will result in adverse tax consequences (including an additional excise tax). The testing period begins in December of the year in which the employee becomes eligible and ends the last day of December of the following year.

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