Good news about HSAs (and how to make them more effective)

Shows HSA and medical items with money

Good news about HSAs (and how to make them more effective)

By Grant Dattilo

The IRS has released the Health Savings Account (HSA) contribution limits for 2022. This is good news, but it doesn’t tell the entire story.

For calendar year 2022, individuals who own a qualified High Deductible Health Plan (HDHP),[1] will be able to deposit up to $3,650 in their HSA for self-only coverage. For family coverage, the maximum HSA contribution will be $7,300.[2]

HSA plans continue to grow more popular with employers and employees.

Access to HSAs increased from 14 percent in 2010 to 30 percent in 2019 for private industry workers. In 2010, 7 percent of workers in small establishments (fewer than 50 workers) had access to HSAs, increasing to 18 percent in 2019. In 2019, 47 percent of workers in the largest establishments (more than 500 workers) had access to HSAs.[3]

But are HSA owners in the dark?

Health Savings Accounts (HSAs) are meant to provide a pathway for individuals to have greater control over their health care choices. An HSA creates an incentive for individuals to be concerned about health care prices and spending. Since it is the HSA owner’s money, he or she will try to preserve as much of it as possible. Spending more wisely should reduce health care prices and insurance premiums over time, but it hasn’t.

With the average annual premium for employer-provided family health insurance at $21,532,[4] it seems clear that HSAs and HDHPs alone are not enough.

The missing element? Easily understood health care prices. Hence, governments across the country have begun to require health care providers to disclose their charges. This is a great trend, and we strongly support it. Since 80 percent of health spending is shoppable (an individual has time to price shop), this trend needs to grow. Without it, health care consumerism with its HSAs and HDHPs cannot function correctly.

The problem with health care price transparency, however, is that it is incredibly complex. How can any individual be expected to figure out how to ask for the price of a complicated medical procedure ahead of time? How can a provider know with certainty the price to quote a prospective patient—unexpected events happen in medical care all the time.

Under “What’s Your Number?” on our blog, we offer a solution—The Medicare-Percent Disclosure. Each provider can be compelled to disclose the percent of Medicare it will accept as full payment for all its services.  This single piece of information—knowing the provider’s Medicare-Percent—can make an HSA with an HDHP a powerful tool to help individuals shop for medical care. It can create provider competition, and over time, reduce the unrelenting increases in health care prices and insurance premiums.

For additional information about the Medicare-Percent idea, see The Manual – Health Care 2020: Connecting the Dots.

[1] In 2022, a qualified HDHP must have a minimum deductible of $1,400 for a single person, or $2,800 for a family. A qualified HDHP has a maximum out-of-pocket limit of $7,050 single, and $14,100 for a family.

[2] IRS (2021) 26 CFR 601.602: Tax Forms and Insturctions” Rev. Proc. 2021-25. Internal Revenue Service., accessed June 7, 2021.

[3] Staff (2021) High Deductible Health Plans and Health Savings Accounts. U.S. Bureau of Labor Statistics., accessed June 7, 2021.

[4] Kaiser Family Foundation, 2021.

Grant Dattilo