Health Savings Account Blog

The bill was introduced by Rep. Tom Knox, a Republican from Cumming. He believe HSAs are one of the most effective ways to reduce the cost of health care because they put the actual purchaser of health care in control of the funds.

HSAs have been touted for years as one possible remedy for out-of-control health costs because they allow people to use pre-tax dollars to pay for their health care and they give people a stake in their own health-care spending.

But HSAs are still being met with reluctance by employees who don't want to ditch their current health plans because they're afraid they can't afford the high deductible or they don't understand how the plans work.

In Atlanta and across the South, only about 1 percent of people who got insurance through their employer actually chose a consumer-driven health plan in 2005, according to an annual survey by Mercer Health & Benefits LLC.

Knox hopes the bill will make health plans with HSAs affordable for more people, including some who are uninsured, while also encouraging insurance companies to offer more of these plans.

The bill has some powerful sponsors, including Jerry Keen, a Republican from St. Simons Island who is House majority leader, and Earl Ehrhart a Republican from Powder Springs who is chairman of the House Rules Committee.

Georgia Insurance Commissioner John Oxendine says HSAs could help put the brakes on escalating health-care costs.

"I very strongly believe that with health care we've got to get the American family more involved," Oxendine said. "We need to give families incentives where they buy into the health insurance process so they have a financial incentive to oversee the utilization of the insurance."

Oxendine says people need to learn to think about health insurance as they do other types of insurance, such as homeowner's or auto coverage, in order to reduce the overuse of health care.

"If your window breaks, you don't use your homeowner's insurance, you fix the window," Oxendine said.

"What a Health Savings Account does is it lets us start thinking about health insurance more like this. People think, 'Do I really need to go to the doctor, do I need to get that test?'"

Insurers support the measure, saying it would be an important incentive for consumers.

"To the extent that we can put more HSAs in the hands of consumers, that's a great thing," said Kirkland McGhee, executive director of the Georgia Association of Health Plans. "It's the right thing to do and has lots of benefit to consumers."

Proponents of the measure are confident that insurers, who actually pay the premium taxes, would pass the tax savings on to consumers. But some health experts question that assumption.

Regina E. Herzlinger of Harvard Business School, who is a national expert on consumer-driven health care, said the tax break could be a "dubious mechanism."

"It's better than nothing, but it's not as good as giving the incentive directly to consumers," said Herzlinger, who has written numerous books and articles on consumerism in health care. "If you want to induce purchase of HSAs, you should give the tax inducement directly to the consumer, not to the insurer. If you give it to the insurer, what is the guarantee that they will pass it on to the consumer?"

Herzlinger says that if insurers do in fact pass the savings on to consumers, the bill could boost sales of HSAs.

"Now, if the consumer does get it, would that be an effective incentive? You betcha," said Herzlinger, who is the Nancy R. McPherson professor of business administration.

Knox points out that consumers already get a direct tax break because they purchase HSAs with pre-tax dollars. He sees the proposed legislation as a second layer of tax incentives for consumers.

Herzlinger supports more consumer education and consumer choice in health care, and says that HSAs offer a more affordable option of health care for many people. She estimates that plans with an HSA are 5 percent to 40 percent cheaper for the consumer, depending on the degree of competition in individual states.

Steve Davis, managing editor of Inside Consumer-Directed Care, says consumers show an increasing interest in HSAs and that there already are about $1 billion in assets in HSAs across the nation.

For example, San Francisco-based Wells Fargo & Co. (NYSE: WFC) is selling an average of 5,000 new HSAs a month, according to research published in the February edition of Inside Consumer-Directed Care. There are about 300 to 400 financial institutions offering HSAs, Davis said.

Experts agree that incentives on HSAs alone aren't enough to reform the health-care system. They say that true consumer-driven health care includes not only HSAs and high-deductible health plans, but also a hefty dose of education, wellness programs and price transparency.

"What we're really talking about is a whole different mind-set in terms of having people stop and think about what they want from their health care and also understand that part of it is their own responsibility."

You can find extensive HSA Information at HSA for America.