This article examines the recent enactment of Health Savings Accounts (HSA) as they might affect how Americans obtain coverage for their health care expenses and the role that personal responsibility will play in that process. It explains the historical development of this country's tying health insurance to current employment status and especially the role of tax policy in that phenomenon. After considering the advantages and disadvantages of this approach, the article analyzes the key elements of the 2003 legislation that created HSAs. This part examines the "high deductible" insurance plan that must accompany an HSA, including its limit on out-of-pocket expenditures and the scope of additional insurance permitted. The operation of the HSA itself is then addressed, including the relationship of employer and employee contributions into such accounts, the tax treatment of distributions from these accounts, and what happens to unused balances. The article then assesses the likely impact of HSAs according to five C's: complexity of possible configurations, confusion over self-administration, choice of alternative arrangements, control, and cost of health care. The article concludes that HSAs represent a potentially paradigmatic shift in how Americans view health care costs and align a growing appetite for individual control over this critical employee benefit with today's workplace realities.
Law and Economics
Date of this Version
Richard L. Kaplan, "Who's Afraid of Personal Responsibility? Health Savings Accounts and the Future of American Health Care" (October 2005). University of Illinois Law and Economics Working Papers. Working Paper 40.