Health Savings Accounts: Early experience shows broad appeal

The study released June 21 by Assurant Health, a national health insurance carrier that focuses on individual and small group policies, shows that the new accounts are appealing to those who previously were shut out of the insurance market, to families, to older Americans, and to workers of all income levels.

The findings provide real data to prove critics wrong when they claim that the new consumer-directed health care products are only for the ?healthy and wealthy.?

Other findings from the Assurant study:

? 77% of those purchasing HSAs are families with children

? 70% of HSA purchasers are over age 40

? 29% of purchasers have family incomes of less than $50,000 per year; and 19% of purchasers have family incomes of less than $40,000 per year.

The new study is supported by others in showing that HSAs and their sister product, Health Reimbursement Arrangements, are providing new options for Americans seeking affordable health insurance.

Here are some of the charges that the critics level, followed by actual data from the experience of companies offering the accounts:

• ?HSAs are only for the young...? Reinforcing the Assurant findings, an Aetna study also showed that more than 70% of purchasers of its consumer-directed plans are over age 40. In a study Aetna conducted earlier this year, it found that the age and family status of customers enrolled in the plans, sold mainly to larger employers, reflected the demographics of the general population.
• ?HSAs are only for the wealthy...? Data from the on-line brokerage company eHealthInsurance shows that nearly half of HSA purchasers make less than $50,000 a year.
• ?HSAs are only for the healthy...? Wrong again. Only a small percentage ? 6.1% in Assurant?s study ? weren?t able to buy coverage, meaning that 94% were.
• ?People won?t go to the doctor...? Assurant found that preventive care office visits were up by 31% with consumer-directed accounts, consistent with earlier findings by Aetna.
• ?HSAs mean more people won?t have health insurance...? eHealthInsurance found that 56% of those purchasing HSAs with incomes under $15,000 were previously uninsured, and 46% of those earning $15,001 to $35,000 didn?t have previous coverage.

Finally, eHealthInsurance found that 71% of those purchasing HSAs paid less than $100 a month for their insurance premiums.

But the critics persist. Robert Greenstein, executive director of the Center on Budget and Policy Priorities, cited in a recent congressional testimony a study by MIT economist Jonathan Gruber showing that enhancing HSAs would actually increase the number of uninsured.

Greenstein was criticizing a Bush administration proposal that would allow HSA purchasers to take a tax deduction for the cost of the health insurance that they must purchase in order to open an HSA account, with Gruber saying 350,000 more people would lose coverage if the new tax deduction were enacted.

How can adding a new incentive for people to purchase insurance mean that more people would lose their coverage? Because, Gruber?s thinking goes, employers will quickly dump their current health insurance if their workers have another option.

Kate Sullivan of the U.S. Chamber of Commerce set the record straight at the hearing, arguing that HSAs and tax incentives will augment, not undermine, employer coverage.

Aetna President Ron Williams said that employers are welcoming HSAs and other consumer-directed plans because they provide a new, lower-cost option that incorporates incentives for employees to be better informed about their health and their health spending. ?Ultimately, we believe this engagement will also have a positive effect on both health status and quality of care,? he said.

Health Savings Accounts were enacted as part of the Medicare bill signed into law by President Bush December 8, 2003. They allow anyone under age 65 to put aside money tax free for health care expenses. The only consideration is that the accounts must be accompanied by a high-deductible health insurance policy.

Individuals, employers, or employees can make a pre-tax annual contribution of $2,600, and families can make an annual contribution of up to $5,150 into an HSA. Interest earned on HSA funds is tax-free, and funds for qualified medical expenses can be withdrawn tax-free.

For more information on how consumers and companies are responding to new opportunities in consumer driven health care, go to http://www.galen.org/ccbdocs.asp?docID=601.