Setting the Record Straight: The Washington Post's Sebastian Mallaby on Health Savings Accounts

Setting The Record Straight On The Benefits Of Health Savings Accounts (HSAs).

Mallaby Claims That HSAs Are For "Rich People" And "Healthy People." "The administration is proposing a new kind of 401(k), and using it as an inducement to quit low-deductible insurance. Rich people, who gain most from the tax breaks on saving, will be first to sign on; healthy people, who subsidize sicker people in company health plans, will be right behind them." (Sebastian Mallaby, Op-Ed, "Ownership Society Redux," The Washington Post, 2/13/06)

But Studies Have Shown That HSAs Have Broad Appeal.

• Enrollment In HSAs Has Tripled Since March 2005. " At least three million consumers currently receive health coverage through high-deductible health insurance plans offered in conjunction with health saving accounts (HSAs), according to preliminary results of a new study by America's Health Insurance Plans (AHIP). According to the study, enrollment in the new insurance policies eligible for HSAs has roughly tripled since last March when a similar AHIP survey found that 1,031,000 people were covered by HSA-compatible insurance policies." (America's Health Insurance Plans, "HSAs Triple in 10 Months," Press Release, 1/26/06)

• Studies Show That Low-Income And Previously Uninsured Americans Are Signing Up For HSAs." These lower-premium plans are an important option, especially for those who might not otherwise be able to afford coverage, Ignagni said, noting that among the companies tracking the information, previously uninsured people purchased 37% of the individual policies. Twenty-seven percent of the policies in the small group market have been sold to employers who did not previously offer coverage to their employees. Shattering the myth that these new products only attract young and healthy individuals, the census indicates that nearly half of people covered by HSA-eligible insurance are over the age of 40." (America's Health Insurance Plans, "HSAs More Than Double In Six Months, New AHIP Study Shows," Press Release, 5/4/05)

• Survey Finds More Previously Uninsured Americans Enrolled In HSA Programs Than Traditional Health Plans. "The survey found that HSA-eligible enrollees are of all ages and of no different health status than people enrolled in traditional coverage. 'This survey finding dispels the myth that HSAs are only for the young and healthy,' said Sullivan. 'In addition, we are also bolstered by the finding that the number of previously uninsured currently enrolled in a HSA-eligible product is double that of enrollees in traditional insurance products (12 percent to 6 percent).'" (Blue Cross And Blue Shield, "BCBSA Consumer Survey Shows High Rate Of Satisfaction With HSAs," Press Release, 9/28/05)

• Nearly Half Of HSA Enrollees Are At Least 40 Years Old. "Other key findings of the report on HSA-eligible health plan purchasers include: Nearly half are at least 40 years old; More than one-third are families with children; 40 percent have incomes under $50,000 a year; One-third were previously uninsured; and Of those in the $15,000 to $35,000 income bracket, there was a 161 percent increase of previously uninsured purchasers during all of 2004 compared to the first six months of the year." (eHealthInsurance, "Prescription Drug Benefits Included In 99.4% Of HSA Health Plans," Press Release, 2/15/05)

• The President Proposes Extra Financial Help For The Poor And The Sick. "A family of four making $25,000 or less will be able to get a refundable tax credit of $3,000 from the Federal government to help buy an HSA-compatible policy that covers them for major medical expenses. These families will have the flexibility to put up to $1,000 of the money directly into an HSA to pay for routine medical expenses. What the family does not spend can be saved in the account and carried over to the next year, earning interest tax-free." (The White House, "State Of The Union: Affordable And Accessible Health Care," Press Release, 1/31/06)

• The President's Budget Proposes Allowing Employers To Contribute More To The HSAs Of Chronically-Ill Employees Or Their Dependents. "The 2007 Budget proposes to change 'comparability' rules to allow employers to contribute additional amounts to the HSAs of chronically-ill employees or their dependents." (Office Of Management And Budget, "Health," Press Release, 2/6/06)

Mallaby Claims That HSA High-Deductible Insurance Policies Do Not Provide Comprehensive Care. "In practice, probably less than half of all health spending outside Medicaid and Medicare would be affected by the new consumer-driven discipline. Many hospital stays cost more than any deductible, so consumers would have no incentive to bargain; emergency-room patients aren't in a fit state to negotiate prices with their doctors." (Sebastian Mallaby, Op-Ed, "Ownership Society Redux," The Washington Post, 2/13/06)

But Studies Have Shown That HSAs Provide Comprehensive Care At Lower Premiums.

• HSA Plans Provide Comprehensive Care At Reasonable Prices. "Premiums for health insurance plans sold to individuals and families as part of a Health Savings Account (HSA) program dropped an average of $29 per month, according to a semi-annual report released today by eHealthInsurance, the nation's leading source of health insurance for individuals and families." (eHealthInsurance, "Consumers Paying An Average Of $348 Less This Year For HSA-Eligible Health Insurance Plans Compared To 2004," Press Release, 7/27/05)

• HSA Plans Include Coverage For Prescription Drugs, Hospitalization, And Visits To The Doctor's Office. "In 2005, HSA-eligible health insurance plans continue to provide many of the benefits expected in comprehensive health insurance plans. For example, nearly 80% of the plans purchased had prescription drug coverage and more than 80% of the HSA-eligible plans purchased had comprehensive OB/GYN coverage at no cost to the plan holder. Also, all of the plans include emergency room, hospitalization and lab/X-ray services." (eHealthInsurance, "Consumers Paying An Average Of $348 Less This Year For HSA-Eligible Health Insurance Plans Compared To 2004," Press Release, 7/27/05)

• Many HSA Plans Will Provide Plenty Of Reason To Find Bargains On Health Care. Many HSA plans do not pay 100 percent after the deductible is met, charging typically 20 percent coinsurance until an out-of-pocket maximum is met. This definitely keeps the consumer engaged until their maximum is met. For example, under the Federal employees plans, one family plan has a $5,000 deductible but an $8,000 out-of-pocket maximum. This means the family is paying something on the first $20,000 of their care. The President's new proposals would help families pay for these expenses through their HSA. (FEHB handbook, available online http://www.opm.gov/insure/handbook/fehb00.asp)

Mallaby Says Americans Would Be Better Off In Traditional Corporate Health Plans. "And health savings accounts pose a more formidable threat to traditional corporate health plans than personal accounts posed to Social Security. Market forces are already dislodging company health plans; an extra shove could cause an avalanche." (Sebastian Mallaby, Op-Ed, "Ownership Society Redux," The Washington Post, 2/13/06)

But Studies Provide No Evidence That Employers Are Dropping Coverage.

• HSAs Make Coverage More Affordable For Business. "The cost of health plans that encourage members to be better health care consumers grew at a significantly slower rate in 2005 than other types of plans, U.S. employers reported in a survey released today by the Deloitte Center for Health Solutions. The cost of consumer-driven health plans – such as health savings accounts or health reimbursement arrangements – increased by an average of 2.8 percent from 2004 to 2005, according to the survey of 152 major U.S. employers. That compares to an 8 percent increase in total premiums for health maintenance organizations, an 8.5 percent increase for point-of-service plans and a 7.2 percent increase for preferred provider organizations. Traditional or indemnity plan costs increased 6.4 percent last year, according to the survey. The average for all types of plans was 7.3 percent." (Deloitte Services LP, "Survey: Consumer-Driven Health Plan Cost Growth Significantly Slower Than Other Plans," Press Release, 1/24/06)

• HSAs Are Part Of A Health Care System In Which Patients Are In Control. THE PRESIDENT: "An interesting product available is called health savings accounts. I strongly urge small business owner[s] here to look at them. It's an innovative product that enables the small business owner and the employee to combine, to work together to come up with a plan where the employee owns it. It provides for a high deductible catastrophic plan, coupled with tax-free contributions in the plan, basically gives the consumer control over his or her medical decisions. The plan can grow tax-free, which is an encouragement for people to make wise decisions about how they treat their body. If you have a catastrophic event, the insurance kicks in and covers it. It's portable. If you change jobs, you can take it with you. It's an interesting idea. It certainly stands in stark contrast with a system in which the federal government gets to make the consumers decisions, or tells the providers what they can charge. It's the opposite of federal control. It is patient control." (President Bush, Remarks On Small Business, Sterling, VA, 1/19/06)