Health savings accounts: An insurance reform success

These products combining savings accounts and high-deductible health plans are catching on, and even attracting some consumers and businesses that previously had no coverage.

Posted June 13, 2005.

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First the bad news. More than 20 million working adults are going without health coverage in this country, according to a recent analysis of Centers for Disease Control and Prevention data released by the Robert Wood Johnson Foundation. That's almost half of the estimated 45 million Americans who lack insurance.

These uninsured workers often are unable to see a doctor when needed, are less likely to have a medical home, and are more likely to say they are in poor or fair health, the report found.

Now the good news. A relatively new form of health coverage -- the health savings account -- is catching on and helping to expand coverage to people who were previously uninsured, including many working for small businesses.

The AMA fought for the saving accounts' passage as part of the 2003 Medicare reform bill. And last June, the House of Delegates directed the Association to "strongly encourage employers to consider offering HSAs as an option for their employees."

More than 1 million people now get their coverage through HSAs, according to a recent study by the trade group America's Health Insurance Plans. That's up from 438,000 people last September. Already these tax-exempt savings accounts coupled with high-deductible insurance plans have outshone their more restrictive predecessor, medical savings accounts, in popularity.

These new plans are proving their merit as a private market option that can help combat the health coverage access problem. Previously uninsured people bought 37% of the individual HSA policies, and 27% of the policies sold in the small group market were purchased by businesses that didn't offer coverage before, the AHIP study showed.

What's the draw? One is that the high-deductible health plans that accompany the savings accounts have cheaper premiums than traditional insurance, making them more affordable for those who couldn't afford insurance otherwise.

But HSAs hold attractions beyond lower premiums. Not only are the savings tax-exempt, but unspent account balances also accumulate and accrue interest from year to year. Both employers and individuals can make HSA contributions.

The savings accounts also give consumers control over their health care dollars and enable them to decide which physicians or other health professionals to see. Patient choice is one of the cornerstones of the AMA's health insurance reform proposal, which also advocates for health insurance tax credits and market reforms.

As reflected by the AMA's plan, solving the problem of the uninsured in this country is going to take a multipronged effort. HSAs are only part of the answer, but they show just how effective private market approaches can be.

It's all about giving businesses and consumers -- the nation's patients -- a variety of affordable coverage options. Every bite taken out of that tally of 45 million uninsured Americans is a victory, one that represents better access to care for patients.

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External links

AMA brochure on health savings accounts, in pdf (link)

AMA on expanding coverage for the uninsured (link)

America's Health Insurance Plans on health savings accounts (link)

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