For the lucky among us with at least a bit of money to spare, however, the biggest problem with these accounts is their maddening complexity. Even people who have followed personal finance for a while confuse them with the more popular health care flexible spending account, which — unlike an H.S.A. — does not allow you to invest the money and spend decades watching the earnings compound.
H.S.A.s and the campaign to goad more of us into them represent yet another step in the decades-long fetishization of private accounts in general. The big idea here is to shift more of the responsibility for our financial well-being away from employers and the government and directly toward us, whether we know a lot about money or not.
These “account-based solutions,” as government enthusiasts like to refer to them (sounds innocuous, right?) have been proposed so often — over the past 30 years or so — that we have wound up with a big bowl of alphabet soup. There are 401(k)’s, I.R.A.s, Roths, 529s, F.S.A.s, D.C.A.s and T.R.A.s — and that’s before you start filling out your annual Fafsa (student financial aid application) and 1040 (you know this one) to track all this stuff. None of it goes down easy, and it’s probably going to get worse.
To prepare yourself, begin with a quick review session on H.S.A.s. To qualify, you must be enrolled in a high-deductible health plan. This year, that deductible has to be at least $1,300 for individual coverage and $2,600 for family coverage. As for the health savings account itself, individuals can drop in as much as $3,400 (including any employer contribution), and families can deposit $6,750.
You can use that money in the current year for nearly any health care expense, which helps since you have that high deductible to cover. But again, the real win here comes from letting that money ride for a very long time in the account (and in whatever investments your H.S.A. administrator makes available to you). As always with alphabet soup accounts, there are quirks, exceptions and footnotes to the footnotes, so consult Internal Revenue Service Publication 969 for all the fine print.
So who benefits from H.S.A.s? Lorens A. Helmchen at George Washington University and three colleagues used federal tax data from 2004 to 2012 to figure it out. Their study, which appeared in 2015 in the journal Health Affairs, found that across all age groups, people with the highest incomes (over $100,000 or so) were several times as likely both to have H.S.A.s and to max out their contributions as people from low-income households.
Meanwhile, new data from Devenir, a company that helps administrators pick and carry out investment options for H.S.A.s, shows that people with older accounts do indeed have larger balances that seem to grow incrementally over time, suggesting that at least some actual saving is going on here. Devenir estimates there are about 20 million H.S.A.s today.
Now, enter our elected representatives, with three major plans. Speaker Paul D. Ryan, Republican of Wisconsin, has been promoting a plan that would raise H.S.A. contribution limits to what in 2017 would be $6,550 for individuals and $13,100 for families. More tax breaks for everyone!
Two other Republicans in Congress, Senator Rand Paul of Kentucky and Representative Mark Sanford of South Carolina, go further. They would remove the requirement to have a high-deductible health plan before someone could contribute to an account. And just to keep things interesting, they have tossed in a requirement that an H.S.A. could not be used to pay for an elective abortion.
Finally, there is the proposal from Senator Susan Collins, Republican of Maine, and four other senators. It wins the complexity award, in that it combines Roth I.R.A.s (which people already have trouble distinguishing from their regular I.R.A. cousins) and H.S.A.s (confusing on their own) into a whole new thing called Roth H.S.A.s. Grants or tax credits would land directly in individual accounts, and people would use the money to purchase insurance.
Let’s step into a cold bath of realism before we go too much further here. The criticisms of the Affordable Care Act are overwrought. Of course anything that big and complicated would not be perfect — or anything close to it — for many years. Nor should we expect the Republicans who are in power now to have a quick and easy blueprint for the necessary repair work. It’s just too complex, and every proposal above is merely a starting point for negotiation. We will be at this for a very long time.
Still, one clear pattern is emerging. Rather than just letting the government directly buy and pay for the thing that we all seem to want more of — good, affordable health insurance — the politicians in power want to push us toward a system that uses the levers of the tax system and individual accounts to make this happen instead. It is not simple, and complexity usually adds costs. It also leaves the less educated and overly busy behind and tends to produce other consequences that we cannot predict and do not intend.
Decades into our 401(k) account-based experiments with people’s life savings and ability to retire one day (or not), we learned the following this week from a couple of United States Census Bureau researchers: Two-thirds of Americans are not saving money for retirement in their workplace plans at all. They are not eligible, do not have enough money, or are confused by — or unaware of — their options.
We shouldn’t expect things to work out any differently with H.S.A.s unless large piles of money go into them automatically, as they might under some of the proposed plans. If free money does show up through some kind of tax break, they’ll at least be difficult for people to ignore.
So as you watch and listen and wonder how the health insurance debates will unfold, consider the following as you decide if it’s worthwhile to lobby your elected representatives: Health savings accounts today are most useful for the affluent, who earn the most, have the most left over and have the most to gain by avoiding income taxes, given that they pay them at higher rates.
Is that something we wish to cement and perpetuate? Because if we do, our health care system will start to resemble a wealth care system, too.