CATO on HSA's: Bigger = Better

The Cato Institute (yes, we're familiar with it), a well-known libertarian think-tank, has proposed some sweeping changes to Health Savings Accounts.

And we do mean "sweeping;" frequent Cavalcade of Risk and Health Wonk Review contributor Michael Canon suggests:

■Increasing the allowable HSA contribution limits dramatically, to $8000 for individuals and $16,000 for families. That's about triple current levels.

■ Removing the requirement that HSA holders be required to own HDHP's (High Deductible Health Plans); anyone could own an HSA, regardless of coverage configuration.

■ Allowing HSA holders to purchase health insurance of any type from any source, tax-free with HSA funds. This is a dramatic change: currently, only long term care (and COBRA) premiums can be paid tax-free from HSA accounts.

These are some aggressive changes, not all (or maybe any) of which will be welcome by the pundit and political classes. Frankly, I'm not sure that the first one is really necessary: there are precious few plans even available with such high deductibles; how many folks are going to be opting for those? Right or wrong, that's bound to upset the class-warriors.

The second one is intriguing: my first reaction was negative, but I couldn't figure out why. It occurred to me that it was visceral: I've been promoting and defending HDHP's for so long, I think I took that personally. Bad idea.

The final suggestion seems pretty innocuous: what harm could that do? So many folks are already moving to "higher" deductible plans (e.g. $1,000/person) that this would seem to be pretty easy to justify.

Michael is always forward-thinking, and he may be on to something here.