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Replacing ObamaCare: Health Savings Accounts

On June 28th, the Supreme Court released its ruling on the constitutionality of ObamaCare. The 5-4 majority, led by Chief Justice John Roberts, ruled that the individual mandate was unconstitutional according to the Obama administration’s justification of its constitutionality under the commerce clause, but decided to uphold the mandate as an exercise of Congress’s taxing power regardless.

After an initial wave of shock and disappointment, the ruling has proven to be a unifying call to action amongst conservatives. The phrase “full repeal” is on everyone’s lips, and we at FreedomWorks have a simple and straightforward 5-point plan to accomplish just that.

As originally planned, the repeal movement will continue to steam along through Congress. After conservatives take back the Senate and replace President Obama this November, we should be able to pass a full repeal law early next year. No matter what, as long as conservatives remain committed and engaged, ObamaCare will eventually be repealed.

But as we all know, that’s not enough. Health care costs are still skyrocketing, and our heath care system is still flawed. We need to replace as well as repeal ObamaCare. FreedomWorks has detailed several conservative solutions for replacing ObamaCare, and here’s another: expanding and strengthening Health Savings Accounts, or HSAs.

Health savings accounts are pretty simple, really. It’s a savings account for your medical expenses. Deposits made to your HSA aren’t hit with an income tax at the time of deposit, and the money in your HSA can be used tax-free at any time to pay for qualified medical expenses. Similarly to individual retirement accounts (IRAs), the tax treatment of HSA withdrawals for non-medical expenses differs according to the time of withdrawal. Health savings account funds can also be invested, just like IRAs. Money saved in an HSA rolls over from year-to-year, and can be passed on to a beneficiary after death.

HSAs encourage people to save for their future medical expenses. They also provide an incentive for people to take more care in making medical decisions, instead of agreeing to any and all proposed tests and treatments regardless of their medical benefit, since it’s their money on the line. This will help to reduce health care cost inflation. In addition, they expand patient freedom and choice by providing more flexibility, allowing patients to make health care decisions without government bureaucrats or insurance providers always acting as a gatekeeper.

As of now, only Americans with high-deductible insurance plans are allowed to start an HSA. If you’re unfamiliar with high-deductible insurance plans, they’re just health plans with low monthly premiums and high deductibles. Even if you’re on such a plan, the current law caps your total annual contributions to your health savings account.

The law also prohibits you from rolling your HSA funds into your IRA or 401(k), or from rolling 401(k) funds into your HSA. One time only, you may roll a capped amount from your IRA into your HSA. Furthermore, ObamaCare placed a new restriction on HSAs by mandating that only over-the-counter medications purchased with a prescription may be paid for with HSA funds, with insulin as the sole exception.

We need to expand and strengthen patient-friendly HSAs in order to allow more Americans to save money for their own health care and to continue driving down costs. Representative Bill Huizenga’s (R-MI) Health Freedom for Seniors Act and Representative Paul Broun’s (R-GA) Patient OPTION Act are two great, conservative bills that would do just that.

The Health Freedom for Seniors Act would allow seniors to roll their required minimum distributions from their retirement accounts (IRAs, 401(k)s, etc.) into their health savings accounts, tax-free. Current law prohibits those eligible for Medicare from establishing HSAs, thereby limiting the freedom of seniors to make their own health care decisions. Rep. Huizenga’s bill would put seniors in control, give them more options, and expand patient freedom.

The Patient OPTION Act takes a more comprehensive approach to reforming health savings accounts. First and foremost, the bill removes the high-deductible insurance plan requirement from HSAs, thereby allowing all Americans to start their own HSA. It substantially raises the cap on annual HSA contributions, and allows Medicare beneficiaries to contribute to HSAs as well.

The bill allows HSA funds to be rolled over into Medicare Advantage Medical Savings Accounts, or MSAs. Finally, the bill repeals a tax code provision that heaps an additional 20% tax on HSA withdrawals for non-medical expenses.

Together, these two bills provide a great framework for how to improve patient-friendly health savings accounts. Everyone knows that we must address the spiking costs of health care. Expanding and strengthening HSAs alone isn’t enough to do it, but it’s an important element in the conservative plan to repeal and replace ObamaCare with affordable, patient-centered health care.

We the People Declare Our Independence from ObamaCare

TAKE ACTION: Urge your Members of Congress to cosponsor the Patient OPTION Act!

TAKE ACTION: Urge your Members of Congress to cosponsor the Health Freedom for Seniors Act!

Mike Hellyar Sr

The left claims by twisted socialist thought that anything that is not taxed is a cost to the government ( isn't paid for). Sadly I hear even Republicans in Congress adopt the same language. This is how they argue against HSA's. How do we educate those who can be educated ? How do we measure the "phantom" cost to Government coffers and compare it to the savings from the efficiency of patient-centered HSA's ? Has there been any consideration for Government to match and/or seed HSA's ?