Colorado Poised to Take Advantage of New Health Insurance Option

A nationwide survey found that HSAs are particularly attractive to the uninsured, with one-third of HSA purchasers reporting they didn?t previously have health coverage.

And with an uninsured rate in the state of 17% -- higher than the national average -- anything that can help Colorado?s 770,000 uninsured residents get health insurance must be a good thing.

But there is a huge debate being waged over the value or danger of Health Savings Accounts.

President Bush has made HSAs the centerpiece of his health policy agenda, offering new tax incentives for more people to sign up for the savings accounts and to purchase portable health insurance.

But opponents say these new health care financing options are dangerous because they will destabilize the health insurance marketplace and make coverage even more expensive for sicker Americans.

Who is right?

First, it would be helpful to sort out a few facts: Health Savings Accounts are simply a new way to put a limited amount of money aside tax free to pay for routine health care expenses. What you don't spend in one year rolls over to the next, and the earnings also grow tax free.

But you can only open an HSA if you have health insurance with a relatively high annual deductible - at least $1,050 for individuals and $2,100 for families this year. The policies also can cover preventive care, including screenings and medicines, so these costs don't have to come out of your HSA.

These higher deductible health policies generally are less expensive than traditional insurance - just like having a higher deductible on your car insurance means your premiums are generally lower.

It's hard to understand what all the fuss is about. The real point of HSAs is to offer people a new incentive -- a tax-free carrot -- to purchase health insurance. Consumers can purchase health insurance that protects them against major medical expenses, and, if they choose, can put the savings from the lower premiums into their HSA for routine health expenses.

And it appears to be working: More than three million people have purchased HSA-qualifying health insurance, and early studies showed about one-third were previously uninsured.

Critics fear that HSAs will appeal only to the young, the healthy, and wealthy, but the evidence so far shows otherwise. Forty percent of HSA purchasers make less than $50,000 a year, about half are over age 40, and the biggest share of purchasers are middle-aged families with children.

Blue Cross Blue Shield found that those with HSAs follow the same bell curve in age and health status as those with traditional health insurance: As many are young and healthy in both types of plans as are older and sicker. Early evidence also shows that HSA-users are more likely to use preventive services and to comply with medical treatments.

And they are helping to solve one of the biggest problems in the health sector: high costs. One survey by Deloitte's Center for Health Solutions found that the cost of consumer-directed health plans increased by only 2.8% last year among the 152 major companies it surveyed.

Unless more people and businesses find ways to cut health costs, we will certainly see a further deterioration in the number of people with health coverage. HSAs and their accompanying higher deductible health coverage can keep individuals and small businesses in the game.

America?s Health Insurance plans, a trade association that has conducted the most thorough study of enrollment in HSAs, found that one-third of those signing up for the insurance coupled with HSAs were previously uninsured, as were 27% of the small businesses.

According to the U.S. Census Bureau, Colorado ranks 39th out of the 50 states when it comes to insurance coverage. Fortunately, there?s a silver lining here. Because Colorado is less encumbered by red tape, high-deductible insurance policies are affordable and readily available. That means Colorado is perfectly positioned to take advantage of Health Savings Accounts. HSAs may not be a panacea for our nation?s health care problems. But in Colorado, at least, they could make a difference in helping the uninsured get the coverage they need.

***********

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization that focuses on health policy research, and is an adjunct scholar with the Independence Institute in Golden. She can be reached at galen@galen.org or P.O. Box 19080, Alexandria, VA 22320.