Update on Health Savings Accounts (HSAs)

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: G-politik in Industrieländern 7/8

Abstract

Health Savings Accounts (HSAs), coupled with High Deductible Health Plans (HDHPs), allow individuals to save money tax-free to use on out-of-pocket medical expenses. Enrollment has remained low as only 1-3 million people with employer coverage are estimated to have these plans. (Kaiser/HRET 2006) Evidence is emerging as to the composition of enrollees and their satisfaction with the plans. Their effect on costs are yet to be seen.

Neue Entwicklungen

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral
current    previous

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Initiators of idea/main actors

• Regierung

• Leistungserbringer

• Kostenträger

• Patienten, Verbraucher

• Privatwirtschaft, privater Sektor

• Andere

• Politische Parteien

Stakeholder positions

Stakeholder positions towards HSAs have remained largely constant. The President, the Republican Party, health insurance representatives and business/ employer representatives continue to promote HSAs as a way to reduce costs via increased consumerism in health care. Leadership in moving the policies forward has come from the President, as well as insurers, financial institutions and empoyers (Wall Street Journal, Feb 3 2006). Those opposing HDHPs with HSAs include Democrats, safety net providers and organizations representing the interests of those with low incomes and the uninsured. A detailed description of stakeholder positions follows below.

Opponents raise several arguments:

1. HSAs could lead to increasingly costly traditional insurance where healthier workers migrate to high deductible plans; 
2. They question the effectiveness of the plans in reducing costs given the unevenness of health spending, with families spending less than the HSA deductible accounting for less than 4% of families' medical expenditures (Davis et al 2005); and 
3. They claim patients aren't in a position to make the choices that would drive down costs as proponents argue. (Collins 2006) Only 12-16% of working age adults in any health plan have information on cost and quality provided to them by their health plans (Fronstin & Collins, 2005).

Government: President Bush has been a strong proponent of HSAs and they have been on his agenda since beginning his first term in office.

Providers: Provider organisations worry that HDHPs and HSAs will mean that medical fees will be paid increasingly by individuals either from their HSAs or out-of-pocket. Net collection rates from patients' obligations have historically been low (37% according to Carrol 2005) and many providers are not currently set up to bill patients directly. This is changing (see below) but the transition will be costly and take some time. According to industry analysts, providers fear that their bad debt will rise as an increased proportion of the care they provide is not paid for. (Carrol 2005)  

There is some evidence that suggests doctors are unhappy with HSAs and the wider policy of consumer-directed health care. This is because they do not feel themselves equipped to advise patients on how to trade off costs and other factors in health care decision-making. For example, Thomas Lee, M.D., medical director of the not-for-profit Partners HealthCare, an integrated system of providers that includes Massechusetts General Hospital has said, "If high deductible plans were a drug, I don't think the FDA (Food and Drug Administration) would approve them, because there is a possibility of danger to patients and they haven't been tested." (Carroll 2005) 

The American Medical Association (AMA), however, is broadly supportive of HSAs and has produced a favorable policy report (AMA 2004). The biggest change to HSAs for which they are lobbying is to "embed" family deductibles, giving per person deductibles to individual family members at the same level as those for singles. Safety net provider representatives have voiced strong opposition to the HSA with HDHP policy. In a testimonial to the House Committee on Ways and Means, numerous problems were describted with the plans, especially for those with low incomes who are unable to contribute to an HSA. (Therrien 2006)

Insurance carriers: Insurance carriers could stand to suffer a loss of income from premiums as they are diverted to HSA savings; however, higher deductibles and increased cost sharing should compensate for this. It has been argued that high deductible insurance is in fact priced too high considering the amount of the deductible, meaning that the plans are currently more profitable than non-HSA plans. (GAO 2006)

Large insurance carriers have been moving into the high deductible health plan market. For example, UnitedHealth is estimated to have spent $1 billion on market development and has purchased consumer-directed vendor Definity Health and Golden Rule Financial which offers HSAs. (Herzlinger quoted in Cross 2005) 

Employers: Employers have been finding increasing health insurance costs difficult to cover. High deductible insurance coupled with HSAs are seen by some as a way to maintain some level of health insurance while cutting costs. This is because premiums for the insurance plans are lower than traditional premiums and savings may be made, even where part of the difference is paid into an employee's HSA. Payments into HSAs are not mandatory and further savings may be made by leaving it to individuals to make contributions, which will benefit from tax exemption.

Private sector: Technology vendors have seized the opportunity posed by HSAs, as providers require new systems for billing individuals and account holders require convenient methods such as HSA-specific debit cards with which to pay for care.

The banking sector has also seen an opportunity with HSAs. As a new tax-favored savings vehicle, they will collect money that once went into insurance premiums. Aamer Blag, partner and HSA analyst with consultants DiamondCluster estimates that $140 billion will be moved into HSAs over the four years 2005 to 2009. This is appealing to the banking sector for which transaction fee income is estimated to grow to $1.2 billion annually by 2010. (Carroll 2006)

Political parties: The Democratic party has shown opposition to HSAs. Democrat representatives on the House Committee on Ways and Means have said they fear HSAs could hurt the current system of employer-provided health care. "The expansion of HSAs is yet another step toward the Republican goal of dismantling employer-provided health and pension benefits," said Representative Charles B. Rangel, the panel's ranking Democrat.

The Republican party is generally supportive of the move toward consumer-directed health care. Republicans on the House Committee on Ways and Means said the accounts were helping millions of Americans find affordable health care coverage they could tailor to their particular needs. Representative Eric Cantor, Republican-Virginia, said HSAs were simply "one more option in the buffet of health care options being chosen by employers." It is not certain, however, that the new tax benefits for HSAs which have been proposed in the 2007 Federal Budget will gain enough votes to pass. (Grassley Republican-Iowa quoted by Reichard 2006)

Patients / consumers: In a survey of early HDHP and HSA users, lower levels of satisfaction were found when compared with more comprehensive insurance. A lower proportion of those surveyed would recommend the plans to a friend than with other plans and a higher proportion would switch if it were possible. (Fronstin & Collins 2005) HSAs are promoted alongside HDHPs as a policy solution to the problem of increasing costs in healthcare; however, many HDHP consumers do not hold an HSA and pay out-of-pocket up to the deductible. This places a heavy burden on individuals with low incomes, many of whom must choose between healthcare and basic necessities and therefore forego or delay needed medical care (Therrien 2006). Fronstin and Collins (2005) found that "despite similar rates of health care use, those with HDHPs are significantly more likely to spend a large share of their income on out-of-pocket health care expenses than those in comprehensive plans. 42 percent of those in HDHPs and 31 percent of those in CDHPs spent 5 percent or more of their income on out-of-pocket costs and premiums in the last year, compared with 12 percent of those in more comprehensive plans."

Consumer Directed Health Plans (CDHPs) include HDHPs with an HSA or with an HRA. HRAs (Health Reimbursement Arrangements) are similar to HSAs but are not portable between employers. Though HRAs have dominated in the past, numbers are currently even while HSA numbers are growing and HRA numbers are steady (GAO 2006). Claxton et al., however, showed that enrollment is not growing quickly and not many employers plan to offer HDHPs/HSAs in 2007 (Claxton et al., 2006).

Actors and positions

Regierung
Bush Administration	sehr unterstützend		stark dagegen
U.S. Department of Health and Human Services	sehr unterstützend		stark dagegen
Leistungserbringer
Provider Organisations	sehr unterstützend		stark dagegen
American Medical Association (representing doctors)	sehr unterstützend		stark dagegen
Safety net providers	sehr unterstützend		stark dagegen
Kostenträger
Employers	sehr unterstützend		stark dagegen
Patienten, Verbraucher
Patients using HSAs	sehr unterstützend		stark dagegen
Patients paying out of pocket	sehr unterstützend		stark dagegen
Privatwirtschaft, privater Sektor
Technology sector	sehr unterstützend		stark dagegen
Banking sector	sehr unterstützend		stark dagegen
Andere
Insurance carriers	sehr unterstützend		stark dagegen
Politische Parteien
Democratic Party	sehr unterstützend		stark dagegen
Republican Party	sehr unterstützend		stark dagegen
current    previous

Influences in policy making and legislation

The U.S. 2007 Federal Budget includes provisions to extend tax incentives for HSAs. These would create tax parity between employer-sponsored and non-group market high deductible insurance. The Budget also proposes increased HSA maximum contributions, a refundable tax credit for those purchasing an HSA-compatible HDHP and enhanced HSA portability between employers.  The proposals, which are estimated to cost over $125 Billion in lost tax receipts between 2007 and 2016 (Office of Management and Budget 2006), are opposed by Democrats and support from moderate Republicans is limited. According to Republican Senator Chuck Grassley, it is not certain that the proposals will gain enough votes to pass. (Reichard 2006)

Legislative outcome

Enactment

Actors and influence

Regierung
Bush Administration	sehr groß		kein
U.S. Department of Health and Human Services	sehr groß		kein
Leistungserbringer
Provider Organisations	sehr groß		kein
American Medical Association (representing doctors)	sehr groß		kein
Safety net providers	sehr groß		kein
Kostenträger
Employers	sehr groß		kein
Patienten, Verbraucher
Patients using HSAs	sehr groß		kein
Patients paying out of pocket	sehr groß		kein
Privatwirtschaft, privater Sektor
Technology sector	sehr groß		kein
Banking sector	sehr groß		kein
Andere
Insurance carriers	sehr groß		kein
Politische Parteien
Democratic Party	sehr groß		kein
Republican Party	sehr groß		kein
current    previous

Positions and Influences at a glance

Adoption and implementation

The Government Accountability Office estimates that the number of enrollees and dependents covered by HAS-eligible high deductible health insurance plans has reached 2-3 million (GAO 2006). This represents an increase from a base of around 600,000 in January 2005. The number of insurance carriers offering HSA-eligible high deductible health insurance has increased; however, few employers expect to offer an HSA-eligible or HRA based plan in 2007. (Claxton et al 2006) 

Several major employers such as fast food chain Wendy's have promoted the adoption of HSAs by fully replacing their traditional plans.  Growth in employers offering HSA-eligible plans has increased from 1% in 2004 to 4% in 2005 (Kaiser 2005), but remains constant at about 4% according to the 2006 Kaiser/HRET survey. Employers save money by switching to high deductible health insurance plans coupled with HSAs. Premiums for the insurance plans are lower than traditional premiums and savings may be made even where part of the difference is paid into an employee's HSA. (Claxton et al 2006) 

Tax benefits greatly benefit those with high incomes. For example, under current rules the same $1,000 medical bill paid from an HSA by a high earner effectively costs $600 in after tax dollars where for a low earner it costs $900 because the marginal tax they pay is significantly lower (Reinhardt 2006). If the proposals in the 2007 Federal budget are enacted, families with incomes over $180,000 could receive tax subsidies of up to $4,547. (Furman 2006) 

HSA balances may accrue from year to year and may be put toward some health insurance premiums. They may be withdrawn at retirement to supplement regular income on payment of ordinary income tax on withdrawals (American Medical Association 2004). HSAs therefore provide a highly lucrative tax shelter for high-income families. Low incomes enrollees who are unable to make contributions to an HSA, in particular those forced to switch to HSA-eligible plans by their employers are likely to be most adversely affected by the plans (Therrien 2006). The GAO estimates that 50-60% of HSA-eligible plan holders do not have an HSA. For these enrollees, health care, often including preventive care, must be funded out-of-pocket up to the high deductibles which average $2,011 for an individual and $4,008 for family coverage. (Claxton et al 2006) 

The GAO have identified several obstacles to the implementation of HSAs which include Federal and state requirements, inadequate consumer tools, lack of appeal to certain segments of the population such as the aged or sick, and the complexity of plans. (GAO 2006)

Monitoring and evaluation

Monitoring the number of insurance carriers offering these plans, the number of employers offering them to employees and uptake by individuals is taking place (figures given in section 4.4). Analysts at Forrester Research predict that consumer-directed health plans, which include HSAs, will garner 24% of the health insurance market by 2010 (Cross 2005). The U.S. Treasury estimates only 14% by 2010, which is a small share of the privately insured population of 177 million. 

The composition of those enrolling in the plans by age and previous insurance status is being examined by researchers. The GAO shows that enrollees are disproportionately younger and wealthier. (GAO 2006) Fronstin and Collins find enrollees also tend to be in better health (Fronstin 2005). Remler and Glied estimate that less than one million of the 45 million currently uninsured people would gain coverage as a result of HSAs (Remler 2006).

Expected outcome

In the original report on this topic we highlighted the potential for HSAs to promote risk segmentation, increasing the financial burden on those in poor health. In addition we pointed out how cost sharing has been shown to decrease use of necessary services. These arguments have not been contradicted by early evidence from HSA implementation, despite what proponents may argue.

For example, administration officials have cited statistics which show that 40% of HSA-eligible HDHPs are bought by those with incomes under $50,000. This figure comes from a study, however, which looked at only those in the individual insurance markets, of whom 52% have incomes lower than $50,000 (2004 census data quoted by Park & Greenstein 2006). Other studies have shown that HSA users tend to have disproportionately higher incomes.  A GAO survey found that Federal employees who receive insurance through the Federal Employee Health Benefits Program (FEHBP) and are enrolled in an HSA are twice as likely to have incomes over $75,000 as enrollees in other FEHBP plans (GAO 2005). Evidence also suggests that although HDHP consumers may be similar in age and education to other privately insured consumers, HDHP consumers with HSAs are more likely to be younger (under 50) and better educated. Studies of employer plans (GAO) find that those selecting the plans are younger on average, while the individual insurance market has historically been "older." Individuals with HDHPs also have been found to be more likely to avoid, skip or delay necessary care because of costs than those with more comprehensive health insurance, with difficulties particularly pronounced among those with health problems or incomes under $50,000. (Fronstin & Collins 2005)

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
current    previous

References

Sources of Information

American Medical Association 2004: Health Savings Accounts At a Glance. www.ama-assn.org/ama1/pub/upload/mm/363/hsabrochure.pdf  

American Medical Association, Policy H-165.852: Health Savings Accounts 

Carroll, John. HSAs: Early Returns are in Managed Care. March 2005. www.managedcaremag.com/archives/0503/0503.HSAs.html

Carroll, John. Banks Give Insurers an Offer Most of Them Cannot Refuse. Managed Care, July 2006. www.managedcaremag.com/archives/0607/0607.banks.html  

Claxton, Gary, Gabel, Jon, Gil, Isadora, Pickreign, Jeremy, Whitore, Heidi, Finder, Benjamin, Rouhani, Shada, Hawkins, Samantha and Rowland, Diane. What High Deductible Plans Look Like: Findings From a National Survey of Employers, 2005. Health Affairs web exclusive, posting date: September 14, 2005. 

Claxton, G., Gabel, J., Gil, I., Pickreign, J., Whitmore, H., Finder, B., DiJulio, B., and Hawkins, S. Health Benefits in 2006: Premium Increases Moderate, Enrollment In Consumer-Directed Health Plans Remains Modest. Health Affairs web exclusive, posting date: September 26, 2006. 

Collins, Sara. Testimony before the House Committee on Ways and Means, June 28, 2006.

Cross, Margaret Ann. Momentum Shifts Toward Consumer-Directed Plans Managed Care, July 2005. www.managedcaremag.com/archives/0507/0507.landscape.html  

Davis, Karen, Doty, Michelle M. and Ho, Alice. How High Is Too High? Implications of High-Deductible Health Plans. The Commonwealth Fund, April 2005. 

Fronstin, Paul, Collins, Sara. Early Experience With High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey. The Commonwealth Fund, December 2005. 

Furman, Jason. Expansion in HSA Tax Breaks is Larger - and More Problematic - than Previously Understood. Center on Budget and Policy Priorities, February 4, 2006. 

Government Accountability Office. Consumer-Directed Health Plans: Report to the Chairman, Committee on the Budget, House of Representatives, April 2006. 

Government Accountability Office, Federal Employees Health Benefits Program Early Experience with a Consumer-Directed Health Plan. Report to the Ranking Minority Member, Committee on Finance, U.S. Senate, November 2005. 

Gruber, Jonathan. The cost and Coverage Impact of the President's Health Insurance Budget Proposals. Center on Budget and Policy Priorities, February 15, 2006. 

Kaiser Family Foundation. Employer Health Benefits Annual Survey 2005. 

Office of Management and Budget (2006). U.S. Government Fiscal Year 2007 Federal Budget. Available at www.whitehouse.gov/omb/budget/ 

Office of Management and Budget (2006), U.S. Analytical Perspectives, Budget of the United States Government, Fiscal Year 2007. Available at www.whitehouse.gov/omb/budget/fy2007/pdf/spec.pdf 

Park, Edwin, and Greenstein, Robert. Administration Defense of Health Savings Accounts Rests on Misleading Use of Statistics. Center on Budget and Policy Priorities, February 16, 2006. 

Reichard, John. Medicare to Post Price Data on June 1st under Transparency Plan, May 2, 2006. http://communityoncology.org/Default.aspx?tabid=82&ctl=Details&mid=404&ItemID=570 

Remler, Dahlia, and Glied, Sherry. How Much More Cost Sharing Will Health Savings Accounts Bring? Health Affairs, 25, no. 4 (2006): 1070-1078. 

Therrien, Jean. Testimony Before the House Committee on Ways and Means, June 28, 2006. 

Reinhardt, Uwe. Transcript from Where are HSAs and High-Deductible Health Plans Headed? Alliance For Health Reform and Kaiser Family Foundation. March 10, 2006. www.kaisernetwork.org/health_cast/uploaded_files/031006_alliance_HSA_transcript.pdf 

The Kaiser Family Foundation/Health Research and Educational Trust 2006 Annual Employer Health Benefits Survey.

Wall Street Journal, Health Accounts Benefit Employers, Feb 3, 2006.

Reform formerly reported in

Health Savings Accounts (HSAs) Process Stages: Umsetzung, Evaluation, Strategiepapier, Gesetzgebung, Idee, Pilotprojekt

Author/s and/or contributors to this survey

Emmi Poteliakhoff

Reviewed by Sara R. Collins, Ph.D., The Commonwealth Fund

Empfohlene Zitierweise für diesen Online-Artikel:

Emmi Poteliakhoff. "Update on Health Savings Accounts (HSAs)". Health Policy Monitor, October 2006. Available at http://www.hpm.org/survey/us/c8/4