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The Pros, Cons of HSAs

APRIL 20, 2005 -- Seven out of 10 employers expect to offer "consumer-driven" health plans, such as health savings accounts (HSAs), by next year, but those plans will do little to reduce the ranks of the uninsured, according to studies released Wednesday.

A survey conducted by the Federation of American Hospitals and the American Hospital Association found that a "competitive marketplace" is evolving for plans such as HSAs. The study also concluded that 95 percent of enrollment in HSAs and health reimbursement arrangements, or HRAs, is in plans that build on the insurance company's existing provider network and negotiated rates, "showing that there is a level playing field for these plans."

But two other reports unveiled Wednesday predicted that HSAs would do little to lower the number of uninsured Americans. A report from researchers at Columbia University and Baruch College found that fewer than 1 million of the nation's 45 million uninsured are likely to get new health coverage as a result of HSAs because more than one-half of uninsured adults currently owe no income taxes, so tax incentives for high-deductible health plans would have little impact on coverage among the uninsured.

A separate report from The Commonwealth Fund concludes that HSAs will be unaffordable for the uninsured because the plans' out-of-pocket costs, including deductibles, would be too expensive for many uninsured families.

Funded either by employers or individuals themselves, HSAs, which were included in the Medicare drug bill (PL 108-173), give their owners big tax breaks for investing in the accounts and using them to pay their out-of-pocket health care expenses. The accounts are sold in tandem with high-deductible health plans, whose premiums are cheaper than those insurers charge for traditional employer health coverage.

Money from the accounts is used to pay expenses not covered by the health plans, but the owner gets to keep what is left over and can make it grow by shopping carefully for health care and taking responsibility to maintain personal health, enthusiasts say.

A Congressional Research Service (CRS) report on HSAs published earlier this month found a "burgeoning market" for the accounts, which are much touted by the White House and by many congressional Republicans as the answer to fast-rising health spending and to widening coverage of the uninsured.

The report found some evidence that HSAs reduce health care spending, but added that the data are not rigorous. CRS researchers also concluded that such accounts "are not likely to make a big difference in the number of uninsured."

The hospital groups' survey found that HSAs are gaining enrollment in the small group and individual markets, markets where hospital officials said consumers have traditionally had few options.

"These survey results should dispel the myth that consumers with HSA and HRA-type coverage will be treated differently by hospitals than those who are members of HMOs or who have traditional health insurance," Federation president Chip Kahn said in a news release.

The study by Sherry Glied of Columbia University and Dahlia Remler of Baruch College, City University of New York, says HSAs could lead to destabilization in the group health insurance market if small businesses begin to offer only high-deductible plans because their higher-wage employees prefer them. "Lower-wage workers in small firms are likely to be most at risk for dropping coverage if they are only offered a plan that provides little protection for out-of-pocket costs," Glied stated in a news release. That research was also funded by The Commonwealth Fund.

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