History of Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) were approved by Congress in 2003—part of the largest expansion of government intervention in medicine in 40 years—and became law in January 2004.
HSAs were preceded by Medical Savings Accounts (MSAs), or Archer MSAs (named after longtime proponent, Rep. Bill Archer, (R, TX), which were also created under a major expansion of government intervention in the medical profession.
The Clinton Health Care Plan
The idea first gained serious attention during the 1993–1994 debate over President Clinton's health care plan, which was total government control of medicine. Those opposed to the Clinton plan countered with MSAs as an alternative. Several sources claim credit for creating the MSA concept.
The national debate over the Clinton health care plan culminated in a public outcry against socialized medicine; doctors, insurance companies, pharmaceutical firms, and many other Americans, including patients, mobilized against the administration's planned government takeover of the medical profession. The Clinton plan, which was supported by key congressional Republicans, never came to a vote in Congress. It never even made it to a congressional committee. The plan had been conceived—and abandoned—behind Washington's closed doors.
But, philosophically, the socialist approach to the nation's health care policy had never been challenged—not on principle. Only Americans for Free Choice in Medicine (AFCM), founded by three medical doctors (an ophthalmologist, an internist and a surgeon) in private practice, would oppose the plan on moral grounds. AFCM asserted that socialized medicine is a fundamental violation of individual rights.
Leonard Peikoff's Health Care Is Not a Right
In a stirring, memorable address to the public at AFCM's Town Hall Meeting in Costa Mesa, California, on December 11, 1993, philosopher Leonard Peikoff (author, Objectivism: The Philosophy of Ayn Rand, Medicine: The Death of a Profession) made the moral case against the Clinton plan in a talk titled Health Care Is Not a Right. Dr. Peikoff received a standing ovation. AFCM promptly produced a pamphlet of the lecture and distributed thousands through its membership.
Health Care Is Not a Right became available across the nation, from doctor's offices along the East coast of the United States to a gasoline station in the state of Washington. One member, a doctor in the Show Me state of Missouri, sent a pamphlet to every member of the state's medical association.
America's first proposal for totalitarian control of medicine had been stopped. In the aftermath, MSAs gained a following.
Medical Savings Accounts (MSAs)
In 1996, the Medical Savings Account (MSA) was authorized by the Health Insurance Portability and Accountability Act of 1996, known as the Kassebaum-Kennedy health insurance reform bill. The massive bill was a major advancement of socialism in the health insurance industry. The act passed with overwhelming support by the Republican-controlled Congress and it was signed by President Clinton.
The law created what Congress called a demonstration project on MSAs, restricting the number of accounts and refusing eligibility to anyone except those without health insurance, self-employed individuals and small employers with 2 to 50 employees. The contradictory regulations on MSAs inhibited growth.
Nevertheless, MSAs gained support. By the beginning of the 21st century, MSAs were relatively popular, gaining attention in the business press, such as Kiplinger's Personal Finance and Forbes, and, by the time George W. Bush ran for president in 2000, he promised to expand MSAs to almost every American.
Bush, like his opponent, Vice-President Al Gore, also promised a massive expansion of Medicare—socialized medicine for those over age 65—with a pledge to add prescription drug coverage to Medicare, which would cost billions of dollars.
Health Savings Accounts (HSAs)
After Bush was elected, he proposed expansion of MSAs as part of the plan to expand Medicare, which was rushed through the Republican—controlled Congress by the President.
Changing the name Medical Savings Accounts to Health Savings Accounts, he also mandated that HSAs be linked to High Deductible Health Insurance. Like their predecessor, MSAs, HSAs were born of mixed premises: a small step toward capitalism—contained in a giant leap toward socialism.
The Advantages of HSAs
Health Savings Accounts (HSAs) offer real advantages to the individual. Both employer and employee can make contributions to the account, there is no minimum contribution required, contributions by an employer are not taxable to the employee, employee contributions may be made on a pre-tax basis, through a cafeteria plan, individuals may contribute additional funds at any time during the year up to the government-imposed caps and—unlike the 401(k)—the account is owned by the individual, not by the employer.
The HSA is portable from job to job, remaining cash balances roll over to the next year, and earned interest may be tax-free.
Additionally, the account owner may use the funds to pay for qualified medical expenses, as determined by the government, but the account owner is not required to spend the money. Currently eligible expenses for tax-free reimbursement from the account under the IRS code include: doctors visits, hospital expenses, lab, x-ray, and diagnostic services, prescription drugs, dental care, vision care, and hearing aids. Funds used for other purposes are regarded by the government as taxable income, and there is an additional 10 percent penalty for what the state defines as non-medical expenditures.
Today, banks, insurance companies and other businesses offer HSAs and related products and services. According to April 2007 health insurance industry estimates, 4.5 million Americans own Health Savings Accounts.