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The HSA Experience, So Far

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 28, 2006 -- The debate over the effectiveness of health savings accounts to improve health care coverage while reducing its cost raged on Wednesday at a Ways and Means hearing.

Employers and insurers told the panel that "HSAs" present many new options for affordable health care coverage for companies and their workers, and urged lawmakers to make several changes to current law to help increase HSA enrollment.

But the director of an urban health care center and a health care researcher concluded HSAs might actually discourage consumers from getting preventative medical care services, as patients are struggling to meet the policies' high deductibles and out-of-pocket costs.

HSAs permit individuals who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. Created in the 2003 Medicare drug law (PL 108-173), proponents of such accounts say they will make consumers more aware of the cost of health care, which in turn will reduce health care expenditures. HSA opponents say the accounts are most attractive to healthier individuals who, if they enroll in HSAs, will leave the group market, driving up costs for less healthy individuals left behind.

A January survey by America's Health Insurance Plans, a trade group representing health care insurers, found at least 3 million Americans enrolled in high-deductible plans sold in connection with HSAs—a more than three-fold increase since March 2005.

"HSAs are helping a substantial number of previously uninsured consumers purchase coverage, accumulate savings for their future medical needs and access preventative care services," AHIP president and chief executive officer Karen Ignagni told the Ways and Means panel Wednesday.

A Government Accountability Office report released earlier this month, however, found as many as half of those who purchased a high-deductible insurance policy did not open or contribute money to a tax-free HSA to help meet those deductibles and other out-of-pocket medical expenses. And many who did open HSAs met the deductibles with their own money instead of using cash from the tax-free savings account.

Jeffrey Cava, executive vice president for human resources and administration at Wendy's International, told the Ways and Means panel the company's health care claims decreased by 14 percent during the first year that HSAs were offered to Wendy's employees. Of the company's worldwide workforce of 45,000, 10,200 employees are eligible for health care coverage and 7,000 have enrolled in HSAs, he said.
Cava said the HSA offered to Wendy's employees provides full coverage of preventative medical care, such as annual routine physicals, flu vaccines, and child immunizations. To each HSA, he said, Wendy's contributes approximately 60 percent of the deductible.

In the first year of HSA coverage, 75 percent of employees received annual physicals—up 25 percent from the year before, when HSAs were not offered. There was also a "significant increase" in the number of employees using online health care information to help manage their health plan. Cava said it was "exactly the type of result we hoped to achieve."

While HSAs helped Lutheran Social Services of Illinois to reduce its health care costs and free up funds to raise salaries, some employees have found the accounts "difficult to manage, difficult to understand, difficult to access, and have chosen to leave the plan for other alternatives," said Larry W. Lutey, the company's vice president of human resources.

Other witnesses noted numerous problems presented by HSAs, such as difficulties meeting high deductibles and co-payment—especially among lower-income Americans—which have produced greater demand for care from health care providers that serve the poor.

"The patients who seek care at our health center who are enrolled in high deductible plans and those that are uninsured are indistinguishable from one another in their inability to pay for needed services," said Jean Therrien, executive director of Neighborhood Family Practice, a community health care center located in Cleveland. "They do not have first dollar coverage for preventative care, office visits, lab testing, and prescription drugs."

Sara R. Collins, assistant vice president of The Commonwealth Fund, a non-partisan think tank, said research done so far on HSAs found few people enrolled in HSA-eligible high-deductible health plans and those who are enrolled are much less satisfied with many aspects of their health care than adults in more comprehensive plans. She also testified people enrolled in such plans are "far more likely to delay, avoid or skip health care because of cost."

Committee Democrats said they feared HSAs would hurt the current system of employer-provided health care. "The expansion of HSAs is yet another step toward the Republican goal of dismantling employer-provided health and pension benefits," said Rep. Charles B. Rangel, the panel's ranking Democrat.

Republicans said the accounts were helping millions of Americans find affordable health care coverage they could tailor to their particular needs. Rep. Eric Cantor, R-Va., said HSAs were simply "one more option in the buffet of health care options being chosen by employers."

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