Health Savings Account Blog

If Congress passes a healthcare bill this year, all health plans would have to meet certain criteria to qualify as adequate coverage. Most people's current coverage would be grandfathered in, but if they switched plans, those plans would need to meet the new standards.

Not all HSA-qualified health insurance plans, in particular those sold to individuals and small businesses, would make the cut.

"It's a concern. We want the accounts to be viable going forward," says Kevin McKechnie, staff director of the American Bankers Association's HSA Council, which represents banks, insurance companies and their technology providers. More than 2,000 banks, credit unions and brokerage firms offer Health Savings Accounts.

About a third of people who have Health Savings Accounts were previously uninsured and HSA-qualified health insurance plans have grown in popularity among small businesses, the group most likely to drop coverage in recent years due to its cost, he adds. Premiums for these plans are lower than for traditional options.

Congressional committees have set the bar at varying heights for the minimum standards that coverage must meet. For instance, the House bill says that health plans must have an actuarial value of at least 70% - meaning the insurance covers 70% of health-care expenses. The Senate Health, Education, Labor & Pensions Committee sets the bar at 76%. A proposal by Senate Finance Committee Chairman Max Baucus released Wednesday implies a minimum of 65%.

Benefits consultants and industry experts say that HSA plans offered by large employers are likely to meet the criteria, because larger employers tend to offer more generous benefits.

But many HSA plans offered by insurers to individuals and small businesses are unlikely to make the grade. Roy Ramthun, president of HSA Consulting Services and a former senior health-policy adviser to President George W. Bush, estimates the actuarial value of these products ranges from 50% to 70%.

"The higher the bar is raised, the less likely these products will continue to be offered in the future," he says.

Banks and insurers want employees' contributions to be factored into the value. The maximum annual contributions to Health Savings Accounts this year are $3,000 for individuals and $5,950 for families.

Launched around six years ago, Health Savings Accounts were the cornerstone of the Bush administration's policy for making health care more affordable for American families. Many high-deductible plans cover some preventive care or prescription drugs before the deductible is met.

Health Savings Accounts are unpopular with Democrats. High-deductible health plans have lower premiums than more traditional plans, but enrollees must pay more out-of-pocket expenses before their insurance starts picking up the tab. (This year the maximum deductible for an HSA-qualified plan is $11,600 for a family). Such arrangements tend to favor the young and healthy, those who receive generous contributions to their Health Savings Accounts, and individuals who can afford to cover out-of-pocket medical expenses while fully funding their Health Savings Accounts.

Democrats resisted the introduction of Health Savings Accounts, which were created by the 2003 Medicare Prescription Drug Improvement and Modernization Act, describing them as an "unnecessary $16 billion subsidy" for the wealthy. Savings not needed to pay out-of-pocket medical expenses can accumulate in HSA for years, attracting the attention of firms seeking to manage these accounts.