Healthcare Reform Already at Hand

Despite all the talk coming out of Washington for the need to radically reform healthcare, news continues to trickle to the surface about the success of consumer-driven health plans, especially those that utilize Health Savings Accounts (HSAs).

A report released this week by Canopy Financial, a company that supplies healthcare banking technology, said that account balances in HSAs continued to grow in 2008, despite the downturn in the economy. The report also noted that employee contributions to HSAs significantly outpaced employer contributions.

“What we’ve seen throughout 2008 is that consumers who select HSAs to manage their healthcare spending are not simply using these accounts to pay for their immediate healthcare needs. They are also funding their HSAs above and beyond their employer contributions and using them as long term savings and investment vehicles,” said Vik Kashyap, CEO of Canopy.

The report indicates that individual HSA balances increased 33%, and family HSA balances increased about 12% between the first quarter and fourth quarters of 2008.

In the fourth quarter, employees contributed an average monthly payment of $206 for a family account, while employers contributed $133.

Individual accounts fared similarly; Employees contributed $111 on average, while employers contributed $69.

Another article appearing in The Wall Street Journal warned that if you’ve lost your job, or think you’re at risk of that happening, you need to pay attention to any money you’ve been stashing away in a flexible spending account for medical expenses.

The article notes that workers who think there’s a risk of job loss, should take steps to spend the money they have already set aside on qualified medical expenses. Otherwise, they could lose those dollars if a lay-off occurs.

The article was quick to note that a job loss doesn’t have that same impact on money in a health savings account, a separate type of tax-advantaged savings account that is typically used in conjunction with a high-deductible insurance plan.

“HSAs are more like 401(k) retirement plans in that if people lose their jobs, they get to keep the assets in these accounts when they leave. There’s no annual requirement to “use it or lose it,” as with the money in an FSA.”

Perhaps we need to take a close look at what is already working before we charge off to fix what might not be broken.

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