Health Savings Accounts, Regular, and Lifetime
We explain the distinction between Health Savings Accounts, Flexible Spending Accounts, and Lifetime Health Savings Accounts. Sometimes abbreviated as HSA, FSA, and L-HSA. Congress should make it easier to switch between them. All three are superior to "pay as you go", health insurance now in common use, only slightly modified by Obamacare. It's like term life insurance compared to whole-life. (www.philadelphia-reflections.com/topic/262.htm)
Health Savings Plans were designed over thirty years ago, well before the Affordable Care Act. The ACA does include pure catastrophic coverage. But it inexplicably limits such coverage to persons under the age of 30, and over that age, only in hardship cases. The paradox exists: Obamacare in fact imposes high-deductible features to every one of its products but includes too much baggage. The catastrophic options are far overpriced for such limited use. The new regulations should be dropped to remedy that awkwardness. Later in the book, it is of central interest to see how lifetime coverage compares in cost, against a "naked" catastrophic policy costing about $1000 a year. (see below)
Proposal (K): Congress should permit the sale of excess ("Catastrophic") indemnity health insurance, without any specified service benefit provisions or age limitations, with a deductible approximated to exclude most outpatient costs while including most inpatient ones. If future medical science should evolve to exclude an unmanageable proportion of outpatient procedures, the line may be adjusted. If inpatient and outpatient costs fail to segregate roughly around the deductible, a numerical deductible should be abandoned, and wording should be substituted which has that general effect. The designation of payment for emergency care should depend on whether the patient is admitted afterward. Reasonable limits may be negotiated on ambulance costs and other outriders such as expensive drugs and equipment use.Furthermore, the ACA introduces the interesting concept of an upper limit to cash out-of-pocket costs, which creates a quasi re-insurance effect. That seems like a useful innovation, which mitigates the need to design a special re-insurance program for Health Savings Accounts. The unknown person who devised this idea is to be congratulated for simplifying the problem. Commercial catastrophic insurers are urged to take a look at imitating it, and the Secretary is urged to write regulations which permit the use of it, at the option of the insurer in consideration of the required flexibility of Catastrophic insurance regulation. This is an area where the use of dollar limits (indemnity) is clearly preferable to enumerated service benefits. When bills are large enough to exceed the deductible threshold, they are likely to be paid to institutions, where subsequent non-medical use is comparatively easy to identify.
None of the Obamacare "metal" options is entirely suitable for a Health Savings Account.
But, the bronze plan currently has the highest deductible and the lowest premium.
The higher the deductible, the lower the premium.
|The Iron Law of Insurance.|
If your Health Savings Account contains a $10,000 special-purpose fund for unexpected medical costs, compound investment income will make it grow considerably faster when you are young. That's a time when mathematics will make it grow fastest in the long run. Remember, you aren't required to do this, but take my word for it; it will make for much easier lifetime health financing if you can spare the funds.
And by the way, if you can think of any legitimate reason why we should forbid the sale of this type of insurance for any age group whatever, I wish you would come forward and explain it.
Originally published: Friday, August 01, 2014; most-recently modified: Sunday, July 21, 2019