April 5, 2006
My name is Al Hubbard and I am Director of the National Economic Council. It is great to be with you all today.
Mark, from Woodbridge, NJ
I work full time at a fortune 500 company and do not receive medical
insurance through my employer. Will the Health Savings Plan be a viable
option for me?
Mark, thanks for joining us. A high-deductible plan with a health savings account is indeed a good option for you. Individuals who do not receive insurance through their employers can sign up on their own for a high-deductible plan with an HSA. The premiums in most cases are significantly lower than those for other individual insurance plans, and you can make contributions to your account tax-free. We are seeing that one third of the new users of HSAs were previously uninsured, so this is also a viable option for those with no insurance or with insurance that is increasingly unaffordable.
Don, from Wallingford, CT writes:
I watched the President today on our local news talk about health
savings accounts. I am self employed and not a member of the local
Chamber of Commerce. Where would be the best place to start to get more
information on the health savings accounts and to start one. Thank you.
Glad to hear from someone in Connecticut. I appreciate you tuning in to the Presidents panel on health savings accounts today. HSAs can be a great alternative for small businesses and self-employed individuals who face rapidly increasing insurance costs. To get more information, you can start by checking out two fact sheets that were put out by the White House in conjunction with the Presidents panel today. Go to /news/ and look under April 4, 2006. Another good website is http://www.hsainsider.com/ which has complete information on HSAs and how to go about purchasing an eligible insurance plan and opening an account. Also, detailed information is available on the Treasury departments website at http://www.treas.gov/offices/public-affairs/hsa/faq.shtml
Dave, from Palm Beach County, FL
What is a Health Savings Account? Who does it apply to and when should
they use it? Thank you for your time.
President Bush signed a new Medicare bill into law in 2003. This bill established health savings accounts, which allow people to save tax-free dollars in accounts designed to pay for health-related expenses. These accounts must be accompanied by high-deductible insurance policies that cover preventive care and provide catastrophic coverage in the event of larger medical bills. New studies estimate that more than 3 million Americans are now enrolled in HSAs and the related high-deductible insurance plans. Roughly one third of these people are newly insured, which is very significant.
HSAs play into what is called consumer-driven health care. This means that consumers are put in greater charge of their health care decisions. As health care costs continue to increase sharply in the United States, we must empower consumers to play a bigger role in their health care decisions and stem the tide of rising costs. We must create a more market-oriented health care system that engages consumers. This is one way we can control the rising costs and make health care more affordable and accessible for all Americans.
Anybody can take advantage of HSAs as long as they have high-deductible health plans. The President has made several new proposals which would add to the existing tax advantages of HSAs. With these changes, the number of Americans covered by HSAs is projected to increase to 29 million by 2010.
Kim, from Kentucky writes:
Hi Mr. Hubbard, Health Savings Accounts, discussed by Pres. Bush, are a
new concept for me, but I think the idea of it is fantastic. What would
a person have to pay in regards for a deductable for this account? Also,
could contributions to this account, either by the employer or the
consumer, accrue interest over time--almost like a savings account that
could then be applied toward medical expenses? Thank You
In order to qualify for an HSA, you need to be enrolled in a high-deductible insurance plan. These deductibles start at $1050 for an individual and $2100 for a family plan. And yes, the accounts would absolutely accrue interest over time. You can save money in an HSA tax-free, and the funds roll over from year to year, gaining interest all the while. Depending on the bank or credit union that administers your account, you will have several options for how that money will be invested and how it will grow. The earlier people begin saving and the more they contribute to their accounts, the larger it will grow as it becomes a separate nest egg for health-related expenses later in life.
Freddy, from Louisville, Kentucky
Sharp tie. Thanks for taking the time to answer our questions. HSA's
seem like a smart move for American families, but I worry about how I
will be able to access the dollars in my account. Will I be promptly
reimbursed for legitimate health expenses, or do claims go through a
lengthy bureaucratic approval process? Thank you, Sir.
Thanks Freddy. Good question. The way HSAs are set up, it is very easy to access the funds. I have an HSA from Aetna through my government insurance plan, and it works very well. I have two easy options for paying routine medical expense out of my account. I have an Aetna debit card that was sent to me and can be used any place that accepts credit cards to pay for medical expenses. I can also use the card to withdraw cash from an ATM to cover qualified health expenses. If I dont want to use the card, I have the option of getting a separate checkbook that is tied to the money in my HSA. In either case there is no need to wait for reimbursement funds because the money is coming right out of the account that you own. Your mileage may vary, since the specific features of the Health Savings Account depend on who is offering it.
Steven, from Winchester, VA
HSAs: Why not empower the consumer with annual flexibility of a FSA but
include the rollover and ownership characteristics for the HSA? It would
make the viability of the HSA a no-brainer, such that the average
employer would insist on making a HDHPHSA the core of their health
benefit plan. Please remove the annual contribution limit being tied to
the arbitrary deductible that is so limited in scope to a person's
actual health care spending. This would make the HSA more attractive and
therefore popular to the average consumer. Plus, combining the FSA and
HSA would reduce the administration fees that are burdensome to the
Steven, you make some good points. We believe that HSAs are a significant improvement over FSAs because they do include the rollover provision and all the money put in the account stays with you from year to year. HSAs were established specifically to go with high-deductible health insurance plans. Also, we are working to expand tax-free contributions above the deductible limit. The administration has proposed in its 2007 budget to raise the contribution limits to the plans out-of-pocket maximum (which currently cannot exceed $5,250 for singles or $10,500 for families). This would allow spending above the deductible to receive the same tax preferences as spending below the deductible and on insurance premiums.
Craig, from Illinois writes:
Mr. Hubbard, We are farmers and have always had to provide our own
insurance, with high deductable, of course. We've have a HSA and are
very pleased with it. The tax incentive of an HSA as well as the money
in the account for unexpected doctor visits and medical expenses has
worked very well for us. Since we already had a high deductable, we
didn't need to get a different insurance policy, our local bank is
providing the service for us and it is working out great Some people are
confused in thinking that they have to get a different insurance policy
or go through your insurance company for this service, which we found
isn't necessarily the case. We suggest people to see if their local bank
is providing this service. Thanks for your time.
Craig, I am pleased to hear that you have an HSA and it is working well. Farmers and other Americans who provide their own insurance are a key group who can benefit from HSAs, but you seem to have already figured that out. Thank you for your advice that people should talk with their existing insurance companies and local banks. Many banks and credit unions offer HSAs as long as you have a high-deductible insurance plan, so you are right that people may not have to switch their insurance company. Great suggestions.
Allan, from Cherry Hill, N.J.
What do you consider to be affordable health care because as far as I
can see it's not very affordable at all expecaily when you are young and
working to pay off debts that you owe and that takes almost your whole
pay, what do you plan to do about this kind of situation?
You are right that insurance is becoming increasingly unaffordable in this country. It is a big problem and one that we are working to address. We think HSA insurance policies offer a great way for young people to acquire catastrophic health insurance at a relatively low cost. These are high-deductible plans that provide protection against large medical bills and also cover preventive care.
It is also important to note that with the Presidents proposals, you would be allowed to save tax-free into your HSA, which you would own and could be used to pay your medical costs. Unused money in the account carries over to future years, which means it could grow tax-free and provide you with a solid base to pay any future health-related costs.
Robert, from Tennessee writes:
Pres. Bush said this will bring down cost of health care, we can shop
for cheaper doctors. When you have an emergency are you going to shop
around. I can see a heart attack patient looking for lower costs. ????
What safe guards are in place . I believe this will open up a new
underground medical profession.
Thanks for your question, Robert. I was born and raised in Tennessee, so Im happy to see we have some people there participating in this session today. We believe that HSAs will significantly bring down the costs of health care as they put more Americans in charge of their health spending decisions. American consumers have the ability to shop around for just about every product they purchase except health care. Certainly when a person needs emergency care (such as with a heart attack), he or she will not have time to make these decisions and should seek immediate treatment. But for most routine and non-emergency care, people should be able to decide what doctor to see based on available price and quality information. It is unlikely that an underground medical profession will open up, as you suggest, because a market-based system featuring HSAs relies on greater information and transparency. When prices and quality statistics are available for consumers to use, this will push costs lower and ensure higher quality in our system.
Fred, from Irvine, CA
Hi, Mr. Hubbard:We often hear that the our government is out of touch
with average Americans. I wanted to ask you if Health Savings Accounts
is really something an average person can achieve. You know that
America's savings rate is dropping, and thinking that a person can start
an HSA which requires that you buy a policy with a high $5k deductible
is really not something people with money problems can do. I wonder how
you can expect people to buy in when they can't pay the deductible.
Thanks for your government service. Fred
Thanks Fred. You raise an important point about deductibles. Most Americans who have health insurance have low deductibles and high monthly premiums. As a result, they often seek care without knowing the true price because once they reach the deductible limit they do not owe much more than the co-pay. However, this contributes to a more inefficient system that drives up costs for everyone. This has made health insurance unaffordable for many individuals and businesses. With higher deductible insurance (starting as low as $1050), premiums are much lower, so instantly Americans would save money on their fixed costs. Most employers offering high-deductible plans contribute significant amounts to the employees HSAs, and then individuals may put in money tax-free to cover the remainder of the deductible limit. Most HSA plans also cover preventive care outright, so the money in the HSA will be available for additional out-of-pocket costs. Studies of HSA plans indicate that a large majority of people end the year with money left over in their accounts, and this carries over to the next year where it will continue to grow and serve as the pot from which funds can be withdrawn to cover future expenses.
John, from Texas writes:
Does it make economic sense to have public health initiatives that
encourage preventive medicine instead of waiting for people to get sick
and subsequently require expensive medical care?
John, you are on to something here. It does make economic sense to encourage people to seek preventive medical care. Having routine screenings and understanding steps that can be taken to increase your health and wellness are key to staying healthy. When more people make decisions that keep them healthy or help them discover problems early on, they avoid illnesses and conditions that can be very serious as well as costly to them and to the entire health system. Most high-deductible insurance plans with HSAs allow for routine preventive medical care without a deductible or copayment, and by their design encourage Americans to make healthy choices and be smart about their care because they are choosing how to spend the money in their own account. The President also applauds people who exercise and make other commitments to healthy living and encourages all Americans to take steps in this direction.
Leah, from Meridian, MS
My Husband and I both work full time and have 2 children we can barely
make it paycheck to paycheck, how are we suppose to put money into a
I recognize that it is hard for many people to put aside money for health costs. However, HSAs can help virtually any individual or family with medical expenses. Either you have no insurance and are paying your health care expenses out-of-pocket with after-tax dollars, or you have traditional insurance that likely has high premiums. Since HSAs require high-deductible insurance, your premiums will likely go down significantly. These plans are usually quite inexpensive compared to traditional coverage. In both cases the new plan would save you money that could be contributed to your HSA.
The President has proposed additional tax incentives to help. Right now, the money you put in an HSA can be deducted from your income tax. Under the Presidents proposals, you could also deduct the cost of your premiums and there would be additional tax credits to offset your payroll taxes on both HSA contributions and premiums. Finally, the President proposed a refundable tax credit for low-income families, and this would allow them to purchase the high-deductible plan that goes with an HSA.
Steve, from Maryland writes:
I found a qualified health plan on HSADecisions last year and have an
HSA. Can you tell me if there are plans to increase the allowable
contrubutions and when this might happen.
Steve, its good to hear from another person who already has an HSA. I can tell you that there is a plan expand HSAs and increase the allowable contributions. The administration has proposed in its recent budget to raise the contribution limits to the plans out-of-pocket maximum (which currently cannot exceed $5,250 for singles or $10,500 for families). This would allow spending above the deductible to receive the same tax preferences as spending below the deductible and on insurance premiums. We are hopeful that Congress will pass legislation this year to increase these limits.
Cliff, from Brimfield, Ohio
Director Hubbard: How does the health care accounts work? If you are the
one putting the money into the account and then take it out to pay
health care expenses, its still your money. So what's up? Thank You
Cliff, health savings accounts allow Americans to save money tax-free in accounts established to pay for health care expenses. So immediately, this tax savings is different than if you just took money from your checking account and put it aside. These accounts must be accompanied by comprehensive, high-deductible insurance policies that cover preventive care and larger medical bills. HSAs are similar to IRAs in that you own your HSA and keep control over the money in the account. You have the option to invest the money in the HSA, and the earnings would also build up tax-free. When you have medical and other health expenses, you can take money from the account also tax-free and use it to cover those costs. Money that is not used in a given year will carry over to the next year and remain in your account.
Going forward, the President has proposed expanding HSAs to include greater tax advantages. Under his proposal, income tax credits would be given to individuals to offset payroll taxes paid on HSA contributions or on premiums for the high-deductible insurance policies. The President would like those same insurance premiums to also be deductible from your income tax.
Dan, from UK writes:
Thank you Mr Hubbard fir giving up your time today in order to answer
our questions. I was wondering in what light the US government saw a
national health service like the UK's.
Thank you for your question from all the way in the UK. Government-run health care is not the direction we think the U.S. should move. Like with Medicare and Medicaid in this country, the cost of universal care in other countries is skyrocketing. This has caused increased fees, reduced services, or greater taxpayer subsidies. Also, some people in the UK as well as Canada and elsewhere in Europe who, have the ability and resources, come to the United States for treatment. These individuals choose to come here for the care they need rather than wait months or years as their conditions worsen. Again, this administration does not think this is the way to solve the health care problems in America. In fact, it would only create more difficulties.
Surveys show that a majority of patients in the UK had to wait more than a month for an appointment with a specialist appointment, whereas this happens less than 25% of the time in the U.S. In our market-based system, competition works to create more and better choices for Americans, and new proposals like HSAs will help lower costs while keeping this same high degree of flexibility, as well as lower taxes than other countries.
It is important to provide a health care safety net for the poor and the elderly. In America we do this with programs like as Medicare, Medicaid, and SCHIP, and by funding community health centers. Individuals in the U.S. should have the freedom to choose which health insurance and medical services suit their needs. It should be the individuals choice, not the governments choice.
Patrick, from NY,Albany writes:
Is american economic falling down?Why is americajn dollarso weak?
The U.S. economy is actually in great shape. The economy actually grew 3.5% last year and has created almost 5 million jobs since August of 2003. Forecasters believe that this growth will continue in 2006. We have seen productivity continue to grow at a fast pace, which is an indicator that our standard of living is on the rise. The strong growth in the US economy has supported the strength of the dollar, which has actually risen again the Euro and other major currencies over the past year.
Despite economic shocks like last falls hurricanes, the economy has proven resilient. Continued solid growth is evidence that our economy is strong and flexible the result of low taxes and the entrepreneurial spirit and strong work ethic of the American people. Even so, we must keep policies in place that will continue this growth and create new opportunities for American families.
Garfield, from Brentwood writes:
Can i invest my HSA in the stock market like I do my 401K?
Yes, you can invest the funds in your HSA. As the account holder, you control all the decisions about how the money in your HSA is invested. Depending on the bank that administers your account, you will have multiple options available. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds, and certificates of deposit. You can also choose not to invest them money, in which case it will still grow over time like a normal savings account.
Thank you very much for all of these very interesting and perceptive questions. It has been a pleasure visiting with you.