Health Savings Account Blog

"I was surprised to find that the Health Savings Account option was far better financially for all of my people, even my employees with medical situations," he told a Senate committee earlier this week. "Now that we are nearly through our second year with an HSA, everyone is happy with the change."

The accounts are tax-free and tied to HSA-qualified health plans with high deductibles. Policyholders pay up front for doctor visits, prescriptions and trips to the dentist from the accounts. Unlike flexible-spending accounts, any unused money rolls over from year to year.

High deductibles - they start at $1,050 per person and $2,100 per family - keep the policies cheap and, as a result, employers can afford to pay more of an employee's premium or finance a portion of the accounts. Annual out-of-pocket expenses are capped at $5,250 for an individual or $10,500 for a family.

Sen. Orrin Hatch, who chaired the hearing of the Senate Finance Subcommittee on Health Care, is sponsoring legislation aimed at offering incentives and expanding the savings accounts.

The Utah Republican argues that giving workers a health savings account to pay health costs makes them more active participants in choosing their medical care, encouraging them to seek out better deals and save their money, something they can't do with traditional employer-provided coverage.

"The economics of it works. The practicality of it works, too," Hatch said. The cost of medical care will come down "if we can get people to be concerned about the cost of their treatment."

Health Savings Accounts are also a key component of the Bush administration's health plan. Deputy Assistant Treasury Secretary Robert Carroll said consumers will make the most responsible choices when they have "more skin in the game."

The number of people enrolled in HSAs has grown, from fewer than a million in March 2005 to nearly 3.2 million in January 2006, according to America's Health Insurance Plans, a national health-insurance trade association.

But Sen. Jay Rockefeller, D-W.Va., is not convinced that the savings accounts are the panacea that Hatch and others claim, and could actually harm lower-income or chronically ill individuals.

The accounts will primarily benefit those in higher income brackets and healthier workers, he says. Only about 4 percent of employer-sponsored health plans fell into that category, according to the annual report by the nonprofit Kaiser Family Foundation and the Health Research and Educational Trust that was released Tuesday.

"As healthier and more affluent workers shift to HSAs, older and sicker workers will be left in traditional employer-sponsored policies," Rockefeller said. "This type of adverse selection will drive up premiums for traditional employer-based coverage, further encouraging firms to provide less desirable coverage or to drop health coverage altogether."

Health Savings Accounts generally carry much lower premiums, but much higher deductibles. Research by the Government Accountability Office, Congress' nonpartisan investigative service, found that the average deductible was nearly six times higher in the HSAs than in typical plans.

The GAO also found that more than half of those who had signed up for Health Savings Accounts made more than $75,000 a year as of 2004. The average income was $133,000.

Learn more about HSAs at: http://www.health--savings--accounts.com