Government
Health savings accounts gaining as coverage option
■ The federal government is encouraging the success of HSAs, which some say will save the health care system and others say will hurt it.
By Joel B. Finkelstein — Posted April 26, 2004
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Washington -- With a nudge from federal regulators, health savings accounts are proving even more attractive than expected. But some experts fear what that might mean for the health care system.
Health savings accounts were added to last year's Medicare reform act and became available as of Jan. 1. Combined with a high-deductible health insurance policy, they create a new option for purchasing health insurance, one that seems to be catching on quickly.
"We've been very pleased with the market response," said Scott Krinke, vice president of Assurant Health, formerly Fortis Health, a national seller of medical savings account and HSA products.
In January, the company received 2,500 applications from new customers wanting to set up health savings accounts, he said. That number has steadily increased, reaching more than 4,000 in March.
Also last month, the Treasury Dept. published rules clarifying that high-deductible health insurance offered with HSAs can include first-dollar coverage for several categories of preventive care, including periodic health examinations, routine prenatal and well-child care, immunizations, tobacco cessation programs, obesity weight-loss programs and screening services.
The rules also allow people who had already bought high-deductible plans that include prescription drug coverage to keep that add-on benefit until Jan. 1, 2006, even though the statute doesn't really allow for the benefit under HSAs.
Many groups see the new accounts as a pivotal step toward a consumer-directed health system, in which patients take greater responsibility for the costs of their care.
"Health savings accounts, which empower patients to have greater control over their health care decision-making, will become a more attractive option for covering health care needs," said AMA President Donald J. Palmisano, MD.
Building on the success of passing the HSA measure, President Bush has proposed allowing individuals to write off the high-deductible policies purchased in conjunction with HSAs. Legislation based on that proposal was recently introduced in Congress.
But some groups look at potential growth in HSAs as a problem.
"Supporters of HSAs are always coming up with new wrinkles," said Gail Shearer, director of health policy analysis for Consumers Union. "This is just another stage in the erosion of employer-based coverage."
Opponents argue that HSAs have the potential to undermine the current system of health care financing in two ways.
According to their theory, companies that offer both high-deductible and low-deductible health insurance would see their employees split into two groups. There would be the healthy and wealthy workers, who could afford the trade-off of lower initial cost for greater risk of out-of-pocket expenses. And then there would be the older and sicker employees, who favor the security of more comprehensive benefits. Ultimately, premiums for the low-deductible insurance would grow faster, eventually becoming unaffordable for many.
Opponents also believe availability of HSAs would encourage young and healthy individuals to drop out of employer-based coverage if their company didn't offer a high-deductible plan. This, too, would split the risk pool and destabilize the market.
The Bush administration's high-deductible insurance tax-break plan, if passed, would exacerbate the problem, said Edwin Park, a senior health policy analyst with the Center on Budget and Policy Priorities.
HSA proponents disagree.
"Those concerns are not borne out by the facts," said Krinke. Data from his and other companies suggest that the accounts are just as attractive to older and low-income people as they are to young and wealthy ones, he said.
However, both supporters and opponents say it is still too early to know what impact HSAs will have on the market.
"It will take some time; it won't be immediate," said Park. The effects won't be apparent until there is significant market penetration of the accounts, he added.