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CCH® BENEFITS — 9/13/07

Policy Brief Sees Few Advantages To HSAs In Colorado

From Spencer's Benefits Reports: An August 2007 policy brief prepared by the Bell Policy Center in Colorado reviews the existing data on health savings accounts (HSAs) and high-deductible health plans and concludes that these consumer-driven health plans are unlikely to lower the number of uninsured residents in Colorado.

The policy brief, “Health Savings Accounts and High-Deductible Health Plans,” summarizes the existing research as follows:

• Enrollment in HSA-eligible plans is rapidly expanding, but growth is limited.
  Nationally, there were about 800,000 people with HSA-eligible plans in 2005 and 1.4 million in 2006. In Colorado’s small-group market, there were 26,025 people covered by HSA-eligible plans in 2005 (8% of the people covered by the small-group market) and 33,196 in 2006 (9% of people covered by the small-group market).
  Studies show that when given a choice of plans, about one in five workers chose a HDHP with a tax-advantaged savings account.
• HSAs coupled with HDHPs increase cost-consciousness among enrollees, but have little effect on overall health care costs.
  People enrolled in HSA-eligible health plans are more likely than people in other types of insurance plans to check on the cost of their prescription drugs, and more likely to use the quality and price information provided by their insurers.
  The RAND Health Insurance Experiment found that when people paid a greater portion of their health care bills, they used less health care. Recent surveys, however, have found that HSA-eligible enrollees use about as much health care as people with other types of health insurance.
  Specific price and quality information is not available to people with HSA-eligible health plans, making it difficult for them to find the best deals on health care.
• HSAs subsidize high-income families that save for future health costs more than low-income families that save.
  The HSA tax advantage increases with income.
  Nationally, the average income for taxpayers claiming an HSA deduction was $133,000 in 2004. The average income for all tax filers in the same year was $51,000.

Conclusions

The Bell Policy Brief makes the following conclusions regarding consumer-driven health plans in Colorado:

Giving HSAs a tax advantage was an attempt to lower health care costs without affecting health or exposing individuals to great financial risks, but current evidence indicates that this may have made some families more financially vulnerable and has not significantly lowered health care costs.

While there is some demand for the type of HDHP that accompanies an HSA, this plan structure has not appealed to the majority of people whose employers offer it, and, given current pickup rates, it appears unlikely that HSA-compatible plans will gain a majority of the health insurance market.

HSA-eligible, HDHP provide far too little coverage for many families. Low income families often struggle just to pay premiums and might not build up enough savings in an HSA to cover the high deductible.

Current enrollees in HSAs are more cost conscious, but they make up only a small portion of all insured families. Their modest numbers might limit their effect on the health care market.

While several experts have proposed ways to alter HSAs that would make their tax advantages less regressive and encourage savings by low-income enrollees, in their current form these plans have done little to help low-income families save, and they are unlikely to lower the number of uninsured residents in the state.

For more information, visit http://www.thebell.org

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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