Federal Lawmakers Seek to Expand Reach of HSAs

Lawmakers are looking for ways to boost the draw of health savings accounts, or HSAs, among health consumers, despite some reports that the high-deductible health insurance plans linked to the accounts have resulted in more uncompensated care.

HSAs are proving an attractive alternative to the comprehensive coverage traditionally offered by employers, particularly when the accounts are combined with high-deductible health insurance. At a hearing last month, members of the House Ways and Means Committee asked industry experts what lawmakers can do to make HSAs even more attractive to employers and employees alike. Recommendations included allowing other medical accounts, such as flexible spending accounts, to roll into HSAs; lifting restrictions on how much employers can add to workers' savings accounts; and enabling companies to carve out prescription drug coverage.

The lawmakers said they were hoping to build on what they already see as the success of HSAs, which as of January had been adopted by nearly 3.2 million Americans.

"This represents a strong start for a new health care option that was unknown to most Americans just a few years ago," testified Karen Ignagni, president and CEO of America’s Health Insurance Plans, referring to enrollment in HSAs, which tripled between March 2005 and January 2006.

That strong start is largely because companies large and small can realize as much as a 20 percent to 30 percent savings over the premiums they would pay for more traditional coverage, according to business leaders testifying at the hearing.

In 2005, the fast food chain Wendy’s International Inc. made a wholesale switch to an HSA plan, said Jeff Cava, executive vice president of the company's human resources and administration department. With 10,200 eligible employees, the company insures 7,000 of its workers and an additional 13,000 dependents, said Cava.

"In the first year of the plan, Wendy’s health care claims decreased by 14 percent. If you include company contributions to employee health savings accounts, our costs increased by 1 percent in 2005 over 2004," he testified. By comparison, the price of health insurance overall rose by 9.2 percent between 2004 and 2005, according to an annual Kaiser Family Foundation employer health benefits survey (PDF file: 8 pages / 374 KB. More about PDFs.) from 2005.

Small businesses also are finding the accounts financially attractive.

"My employees and I are delighted with the concept of health savings accounts that allow us to benefit from our health care spending decisions with the use of pretax dollars. This type of health plan puts the consumer in charge of how he or she may elect to spend (his or her) health care dollars," said Harold Jackson, president of Buffalo Supply Inc., a 20-employee medical equipment and supply company in Lafayette, Colo.

However, a strong start for HSAs also has raised some concerns about the new out-of-pocket costs for which employees now will be responsible.

"While it is comforting to believe that such a simple idea could help solve our health care problems, nearly all evidence gathered to date about HSAs and (high-deductible health plans) points to the contrary," the Commonwealth Fund’s Sara Collins, Ph.D., told the committee. "Indeed, there is evidence that encouraging people to join such health plans might act as salt on a wound, exacerbating some of the very maladies that undermine our health care system’s ability to perform at its highest level."

Namely, the absence of first-dollar coverage for checkups and other preventive visits to physicians discourages patients from seeking medical services early, said Collins, who is assistant vice president for the Commonwealth Fund's Program on the Future of Health Insurance.

Low-income HSA enrollees often cannot pay the up-front fees that formerly were covered by their health insurance plans, said Jean Therrien, executive director of Neighborhood Family Practice in Cleveland, speaking to the committee.

"The patients who seek care at our health center who are enrolled in high-deductible plans and those who are uninsured are indistinguishable from one another in their inability to pay for needed services. They do not have first-dollar coverage for preventive care, office visits, lab testing and prescription drugs," she said.

Too few HSA health plans currently include preventive benefits, said AAFP President Larry Fields, M.D., of Ashland, Ky., in an interview after the event.

"Health savings accounts in general are part of the solution. There is no question that they help people stay in touch with the cost of health care," Fields said. But, he added, any expansion of the plans should take into account the need for incentives to encourage patients to seek out regular doctor’s visits and other preventive medical services.