Million eligible for HSA’s; Legislation may soon make them available in Rhode Island
More than a million Americans now have lower-premium, high-deductible health insurance plans eligible for health savings accounts (HSAs), up from 438,000 last September, a new study by America’s Health Insurance Plans shows.
HSA-eligible plans are unavailable to most Rhode Islanders because they conflict with a coverage mandate created last year, but legislation to change that has already been approved by the state House of Representatives and is expected to be approved by the Senate within days.
Nationally, the AHIP study shows, 1,031,000 people were covered by HSA-eligible health plans as of March, more than half of them individuals buying their own policies. Two-thirds of the HSA market’s growth, however, came from employer-sponsored plans, especially among large groups, where enrollment increased twelvefold, to 162,000 people.
“HSAs are steadily gaining momentum in the marketplace,” AHIP president and CEO Karen Ignagni said in a news release. “HSA-eligible policies now fill an important niche for employers and individual purchasers, and America’s health insurance plans continue to make them a valuable part of the suite of products they offer.”
The study, which AHIP described as “the most comprehensive census” of HSAs’ prevalence available, is based on a survey of 99 member companies offering eligible health plans. Six months earlier, only 29 AHIP members had offered HSA-eligible plans, the group noted.
HSAs are tax-exempt accounts offered in conjunction with health plans that, under U.S. Treasury rules, must include a large deductible – the minimum for 2005 is $1,000 for individuals or $2,000 for families – for everything but preventive care.
Both workers and their employers can contribute to the HSA, up to a cap. As health expenses come up, they’re paid for out of the account. Anything left at year’s end is rolled over into the next year; over time, for a thrifty consumer, it can turn into a small tax-free retirement fund.
Signed into law by President Bush in December 2003, HSAs are considered the epitome of “consumer-driven health care,” a major national trend built on the notion that if consumers have an incentive to spend their health dollars wisely – and sparingly – costs will go down.
For employers, consumer-driven plans are also cheaper than almost anything else available: A study by Mercer Human Resource Consulting found, on average, they cost $5,233 per covered employee in 2004, compared with $5,827 for HMO plans and $6,095 for PPOs, the most popular plan type (PPOs with deductibles of $1,000 or more, however, averaged $4,801 per employee).
Because of the lower cost, HSA advocates say they can make health coverage affordable for many uninsured Americans, including employees of small businesses. Nationwide, only 44.5 percent of small businesses offered health insurance as of 2002, according to the Kaiser Family Foundation; in Rhode Island, it was 52.7 percent.
But critics say that consumer-driven plans only shift health costs from employers to workers, who can face thousands of dollars’ worth of out-of-pocket expenses. Many have also expressed concern that HSA-eligible plans will draw the healthiest people out of traditional plans, skewing the risk pool and raising premiums for the rest of the population.
HSAs are too new, and too small a part of the market (health plans cover nearly 170 million Americans, according to the Kaiser Family Foundation), for anyone to know for sure whether critics or advocates are right. But there is mounting evidence that, as AHIP says, HSAs are booming, and they are making at least some impact on the uninsured.
The AHIP study shows 37 percent of individual policies were bought by people who were previously uninsured, and 27 percent of small-group policies were sold to employers who hadn’t been offering health insurance. AHIP’s survey found lower premiums for HSA-eligible plans than Mercer had encountered: an average of $1,204 for a single person and $2,772 for a family, with the best-selling plan, for people age 20 to 29 in the individual market; $2,792 and $7,471, respectively, in the small-group market, and $3,607 and $6,839, respectively, in the large-group market.
But the average deductibles, AHIP found, were also much higher than the federally required minimums: $2,790 for singles and $5,230 for families in the individual market; $1,850 and $4,007, respectively, in the small-group market, and $1,607 and $3,000, respectively, in the large-group market.
Consider that for 2005, U.S. Treasury guidelines cap HSA contributions at $2,650 for single coverage and $5,250 for families, and it’s evident that many people’s accounts, even if they and/or their employers pay in the maximum, won’t fully cover their potential exposure.
In a newsletter item on the AHIP study, Greg Scandlen, director of the Center for Consumer Driven Health Care at the Galen Institute, a think tank in Alexandria, Va., that promotes free-market approaches to health policy, raised another concern: Many employers, he wrote, aren’t contributing to their workers’ HSAs at all.
In an interview, Scandlen said he hasn’t seen any data documenting this, but in his research and conversations on the subject, he has heard that “as many as half of employers” aren’t putting any money into HSAs, “which I think is a big mistake.”
