As the legislature meets to tackle the looming budget deficit, Washington Policy Center recommends allowing state workers to opt for personal health savings accounts (HSAs) as a way to help get the soaring cost of government under control. (State revenues will increase an estimated $1.5 billion over the next two years, yet state officials plan to increase spending even faster – by $3.3 billion – resulting in a “deficit.”)

Buying health coverage is one of the biggest cost drivers for government. Allowing workers to choose an HSA would give them control over their health care dollars, bring consumer choice and price competition to the health care market, and thus overall reduce costs.

More importantly, HSAs would add a major financial benefit for state workers. Right now every dollar the state spends on health coverage goes to insurance carriers, whether it is actually used to buy health services or not. With HSAs, state workers could choose to keep a good portion of that money. Any money not spent on needed health services would stay in the worker’s personal account, 100% tax free, and could be rolled over to the next year. The worker would keep all investment earnings that build up in the account, also tax free.

The following article by Sally Pipes uses examples from the private sector to explain how giving employees control over their health care improves benefits for workers and reduces costs for employers.

Read the full Policy Note here