[PBzeer]

No, it wouldn't replace insurance. It would be the source of paying for common routine health expenses. You would still carry catastrophic insurance for coverage beyond the routine.

You would be paying cash for things like doctor visits, eye exams, minor injuries, etc. from your HSA. Because you would then be sensitive to the price of those services directly, cost would be a factor in your choices. Under insurance, you don't actually worry about the cost, but about whether you're covered or not ...... regardless of the price. Medical care is a service, just like a plumber or electrician, and is sensitive to consumer demand, which is what sets prices. (Any provider of a service will charge as much as they can, but not more than people will pay. That's how markets work.)

What happens is that as price pressures come to bear on the services, there is a direct incentive to the provider of them to not only contain costs, but to lower them if possible, so as to gain more of the market share. This, in turn, works to bring down the overall cost of healthcare, while the broader pool of insured helps to bring down the cost of insurance, along with the price sensitivity of a competitive market.

Somebody like windy or sway can probably detail the economic incentives better than I, but for example, look at the cost of phone service now, and prior to deregulation.