Health Care Solutions: 3 Benefits to Health Savings Accounts
HSAs, it seems, can improve health outcomes while simultaneously reducing health care expenditures, a feat once thought impossible. To understand why Health Savings Accounts (HSAs) are so effective, one must consider how health gains on the individual level translate into population level improvements. Additionally, the ways in which HSAs improve the financial characteristics of health care are counterintuitive, but legitimate. Read on to learn more.
Population Health
One of the benefits of an HSA is that it puts an individual in the driver’s seat when it comes to choosing how to manage his or her health. Consumers who are allowed to choose their physicians, choose what hospital they are treated in, and so forth, tend to take greater interest in the quality of care they are receiving and the cost of that care. The net result is improved health secondary to choosing better health care providers. The benefits of HSAs don’t end there though.
Because HSAs force individual’s to withdraw from a savings account to pay for a service, they have the effect of refocusing priorities. When individuals have to pay for their health care, they begin to put a monetary value to improving their health. That means that people exercise more, eat better, and adhere to medical regimens that, though somewhat costly in the short term, offer substantial savings over the long term.
There is yet another benefit of HSAs for population health, a benefit that results from competition. If health care organizations are forced to compete for customers, then they either have to lower their prices or improve the level of care they provide. Most will choose to do both, which means that consumers are getting better health care for less money in the market economy created by HSAs.
Lower Prices
Until 2005, health care expenditures were growing at a rate that varied between 6% and 10% per year. Starting in 2005, that rate dropped to an average of about 3.9% per year, which is much more in line with inflation seen in other industries. It was first thought that the recession was the cause of the decline in the rate of rise in health care spending, but it turns out that HSAs are more likely responsible. HSAs reduce health care expenditures by about 15-25% over traditional insurance. What is more, cost increases are 50% less per year with HSAs than with traditional plans. In other words, HSAs, like those offered by HSAforAmerica.com, are directly responsible for holding down health care costs. What makes this accomplishment even more impressive is the fact that HSAs account for a very small proportion of all health care plans in the United States.
Greater Satisfaction
Not to be overlooked in all of the statistics regarding finance and health outcomes is customer satisfaction. In any other industry, a product that delivers greater customer satisfaction at reduced costs would be a runaway success. HSAs are doing both of these things for health care and their popularity is growing.
People who have HSAs report being happier with their coverage. They appreciate the freedom of choice that an HSA offers and the financial incentives that go along with it. What is more, studies have shown that it takes only one year of good health to save enough through an HSA to cover the high deductibles of such plans. That means that after a single year, HSA holders can cover their deductible from their savings and are thus fully protected from health catastrophe.
The Future of Health Care
Some economists are saying that the Affordable Care Act (ACA) is damaging HSAs by making them too expensive and thus is removing the only tool that has ever been shown to reduce health care expenditures. Rather than see the ACA continue, these economists would prefer to see it repealed and replaced by legislation that strengthens HSAs. Who will win in the end remains to be seen, but HSAs are still considered to be a great option for those who are young, in good health, and ready to take care of their own medical care.
Ron Sheffer is passionate about smart money management. He enjoys blogging about the variety of options for using money wisely for the benefit of you and your family.
