HSAs Are NOT the Answer to America’s Health Insurance Problems

In my opinion, expanding the availability of HSAs to more Americans is not going to solve the problem of providing health insurance to all Americans. Here is why I believe that statement.

IRA accounts were established by ERISA in 1974. Today, anyone with earned income can contribute up to $5,500 a year, $6,500 a year if you are 50 or older during the year, to an IRA account as long as you do not turn 70 or older during the year. Yet, the majority of working Americans do not contribute anything to an IRA. Many working Americans also have the ability to contribute to a Roth IRA, as long as they meet the income restrictions.

The following comes from ICI:

“Although most US households were eligible to make IRA contributions, few did so. Only 11 percent of US households contributed to traditional or Roth IRAs in tax year 2015, and very few eligible households made catch-up contributions to traditional IRAs or Roth IRAs.” https://www.ici.org/pdf/per23-01.pdf

11%. That is an astoundingly low number.

Now let’s look at some employer plan statistics. Only 66% of employers offer some type of retirement plan to their employees. Only 75% of the employees eligible to participant take advantage of the employer plan opportunity. These statistics come from the Department of Labor..


Why is it that so many do not take advantage of these savings opportunities? The answer; because they cannot afford to.

Many years ago, at a former employer, I had access to a flexible spending account. Deferrals from my salary went into a spending account that I could use for medical co-pays, prescriptions, and even over-the-counter medicines such as cough syrup and aspirin. The deferrals were on a pre-tax basis so I was paying my out-of-pocket medical expenses with pre-tax money which meant that I was reducing the income tax I had to pay each year.

I had a co-worker who was not funding her flexible spending account. She was a single parent with two teenage children who lived in public housing. One day we had a conversation about the flexible spending account and I asked her why she did not participate. She had medical expenses and could clearly benefit from the flexible spending account offered by the employer. Her response – I cannot afford to. She said she needed every penny of her take-home pay to pay the rent, buy food, pay the utilities, and put gas in her car.

What would be different with an HSA?

In the Senate confirmation hearings for Tom Price, Bernie Sanders had this to say about access for all to health care coverage; “I have access to buying a $10,000,000 home but I don’t have the money to do that.”

Access is not the answer. Affordability is.