Despite the promises of the health care reform law by President Obama of reducing the number of people without health care coverage and decreasing health care spending, it still does not change one thing. Premiums and health care costs still escalate for both employers and individuals. Because of the increasing cost of health care, we see a steady stream of consumers switching from traditional health insurance policies to consumer-directed health plans (CDHP).
Individuals and businesses have turned toward high-deductible health insurance plans combined with a Health Savings Account (HSA) in an attempt to control the high cost of health care coverage and reduce health care spending. Under the health care reform law, businesses will be required to provide health care benefits to their employees or pay a penalty per employee without coverage. Qualified consumers will also be required to get health insurance by 2014. Failure to get a plan in place would mean paying a tax penalty that increases annually.
According to the latest data from AHIP (America’s Health Insurance Plans), 13.5 million people are enrolled in Health Savings Accounts as of January 2012 compared to the 11.4 million enrollees last January 2011. That’s an 18 percent increase. So why are CDHPs attracting more consumers?
Individuals, especially small business owners are attracted to consumer-directed health plans because it empowers consumers to manage their own health care dollars and save with tax-free interest. Both employer and plan holder can contribute to an HSA. The contributions placed in the account are tax-deductible so you get to save on taxes every year by just placing money in your HSA. For individuals, that’s a maximum contribution of $3,100 for 2012. Families can deduct as much as $6,250 this year if they have an HSA.
The great thing about Health Savings Accounts is their portability. If you quit your job or retire, you will still have the plan and the money. Whatever amount is left in your account at the end of the year, it simply rolls over with tax-deferred interest. You can use it anytime or in the future to pay for your health care needs. If the government wants to effectively reduce the health care spending of the nation, they should look into Health Savings Accounts.