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HSAs Attract Wealthier Americans, GAO Says

By John Reichard, CQ HealthBeat Editor

September 8, 2006 -- A report released by the Government Accountability Office (GAO) on Friday found that while health plans associated with health savings accounts (HSAs) attracted enrollees with generally higher incomes—a common complaint about the plans—the data it examined on age differences were "inconclusive." GAO also said the data on which the study was based were too limited to allow conclusions about HSAs generally.

The knock on health plans associated with HSAs is that they will attract healthy young people and wealthy Americans who use fewer health care services, leaving traditional plans with more costly enrollees who drive up premiums.

Individuals or their employers fund HSAs, with money in the accounts growing tax-free. Funds can be withdrawn without penalty to pay for health care services not covered by high-deductible health plans sold in conjunction with the accounts. Money paid by individuals into the accounts can be deducted from taxable income.

"In 2004, 51 percent of tax filers reporting an HSA contribution to the IRS had an adjusted gross income of $75,000 or more, compared with 18 percent of all tax filers under age 65," GAO said.

IRS data showed that HSA holders on average were 47 years old, compared with the average age of 39 for all tax filers under age 65. And eHealthInsurance, an online insurance vendor, reported that in the individual market the average age of the enrollees in HSA-related health plans was 38 years old, or five years older than that of enrollees in traditional health plans it sold. But data from several employer groups showed that the average age of HSA enrollees was two to six years younger than that of other enrollees.

HSA critics say the high deductibles of the health plans associated with the accounts will discourage enrollees from getting needed preventive care and other services. While HSA-related health plans had higher deductibles, they covered similar health care services, GAO found.

The HSA plans charged lower premiums but had higher limits on out-of-pocket spending. One national employer survey showed the plans charged premiums 35 percent lower for single coverage and 29 percent lower for family coverage.

About half of HSA owners contributed to the accounts, while two-thirds of employers did so. Among those who claimed a deduction for HSA contributions in 2004, the average amount was $2,100, with contributions increasing with income. In 2004, the average contribution by employers funding HSAs was $1,064.

About 45 percent of tax filers who reported an HSA contribution in 2004 either by themselves or their employer also withdrew funds from their accounts that year. The average amount withdrawn was $1,910.

HSA proponents see the accounts as a way to incentivize account holders to shop carefully for health care services, but GAO did not find that to be the case in questioning members of focus groups. "Few participants researched the cost of hospital or physician services before obtaining care, although many participants researched the cost of prescription drugs," the report found.

"Participants said they would recommend HSA-eligible plans to healthy consumers, but not to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible," GAO said.

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