High-deductible insurance enrollment hits 10 million

Enrollment in high-deductible health insurance plans -- including those with associated health savings accounts -- reached 10 million in January, largely driven by employee take-up at large firms.

Enrollment in the plans and HSAs increased by nearly 2 million between January 2009 and January 2010, according to an America's Health Insurance Plans survey of insurers released May 19. Enrollment among workers at large employers increased by 33%, compared with 22% in the small-group market.

Health plans with HSAs allow individuals to deposit pretax income into a savings account that can be used to pay for qualifying medical expenses -- up to $3,050 for individuals and $6,150 for families in 2010. In return, enrollees have annual deductibles of $1,200 or more, with only certain types of care paid for by the plans.

Although growth in high-deductible insurance plans and health savings accounts has decelerated, it's still strong, said Paul Fronstin, PhD, a senior research associate with the Employee Benefit Research Institute in Washington, D.C. "Employers are still reacting to rising health care costs." Plans with higher deductibles generally cost less than more traditional coverage.

The health reform law includes some changes to the plans and HSAs, said Devon Herrick, PhD, senior fellow at the National Center for Policy Analysis, headquartered in Dallas, which supports private-sector solutions to health issues. Starting next year, subscribers no longer will be able to use HSA balances to pay for over-the-counter drugs. Also next year, the penalty for using HSAs for nonmedical expenses increases from 10% to 20% of the amount spent.

Enrollment in the plans and their savings accounts could continue to grow as national health reform is implemented, depending on the language in federal regulations, Herrick said. Although some Democrats have said HSAs can serve as tax shelters for people who don't need them, the health reform law does not restrict access. Many Republicans see HSAs as a tool to encourage Americans to take a greater interest in the cost of their health care.

However, federal rulemaking eventually will determine limits of deductibles and other cost-sharing allowed by health plans participating in health insurance exchanges. Rules will also address the amount of premiums health plans must spend on patient care. Restrictive rules could decrease access to high-deductible health plans and HSAs, Herrick said.

Enrollment already varies widely among states, in part because of their varying insurance regulations, he said.

For example, only 0.2% of privately insured Hawaiians signed up for a high-deductible insurance plan or HSA, compared with 13.8% of Vermont residents. Hawaii has an employer health insurance coverage mandate that limits the types of insurance, levels of cost-sharing and premiums workers can be required to pay for coverage, Herrick said. AHIP spokesman Robert Zirkelbach suggested Vermonters might be reacting to high local health care costs.

AHIP has surveyed health plans offering HSAs and products with high deductibles every year since March 2005. Federal legislation authorized HSAs beginning in January 2004. The AHIP report does not look at enrollment in health reimbursement arrangements.