On May 19, the Senate Special Committee on Aging heard testimony on the expansion of health savings accounts (HSAs), which were established under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L. 108-173).
In his opening remarks, Chair Larry Craig (R-ID) stated, “To a greater degree than ever before, the new health savings accounts will permit individuals to build significant tax-free health care savings for use in meeting a family’s health care needs, including long-term care. Together with high-deductible insurance for very high expenses, the new HSAs help put control of health care where it belongs, with the individual.”
Arguing that HSAs will only benefit “the healthy and the wealthy,” Ranking Member John Breaux (D-LA) said that Congress “should provide more and better health care options for Americans, but expanding Health Savings Accounts is not the best way.”
Treasury Secretary John Snow highlighted the advantages of health savings accounts, saying that HSAs encourage savings for future health care needs; HSAs provide people the resources they need to access health care; HSAs are flexible in that they pay for health insurance deductibles, copayments for medical services, and prescription drugs; HSAs are available to everyone and there is no limit on the total number of policies, and HSAs belong to the employees and go with them in the event of a job change. Secretary Snow explained that on March 30, the Treasury Department “issued guidance covering the definition of ‘preventive care’ and detailing how prescription drugs fit within the definition of the high-deductible health plan that must accompany an HSA,” adding, “And just last week, we issued guidance that outlined how an employer could successfully integrate an HSA program with flexible spending arrangements and health reimbursement arrangements.” Secretary Snow said that the department has a page on its website devoted to HSAs, and consumers can obtain more information by contacting hsainfo@do.treas.gov or 202-622-4HSA.
Ronald Williams of Aetna shared the results of a study on the company’s HSA option, which became available to clients in January 2004. “Aetna HealthFund members had a 1.5 percent increase in medical claims, compared to double-digit increases for the comparable population. Results from one employer in the study that offered an integrated pharmacy benefit illustrated a decrease in pharmacy claim costs and a significant increase in generic utilization compared to the overall population. Importantly, the study found that the age and family status of members enrolled in consumer-directed plans was not significantly different than the general population.” Mr. Williams explained that Aetna’s plans have 100 percent first dollar coverage of preventive care that includes physicals, well-baby visits, annual gynecologic exams, and immunizations. He also noted that health risk assessments “allow Aetna members to complete a simple, on-line questionnaire to determine health risks or disease status, and when financial incentives are used, more members are encouraged to take advantage of this opportunity. Aetna can provide these members with relevant ‘pushed’ health information, including reminders for mammograms, eye exams for diabetics, and more.”
Testifying on behalf of the Center on Budget and Policy Priorities, Robert Greenstein said that HSAs “pose a significant risk of weakening the existing comprehensive employer-based health insurance market due to what economists and health analysts call ‘adverse selection,’ under which healthier, low-risk individual[s] abandon one type of health insurance for another.” He explained that high-income healthy workers would be most attracted to HSAs because they can better afford the high-deductible coverage and can secure the largest tax deduction for deposits into HSAs. On the other hand, he said, “Older and sicker workers who have low incomes are particularly likely to prefer comprehensive plans, as they often would be unable to afford the greater out-of-pocket costs required under high-deductible plans. Moreover, low-income individuals derive little or no benefit from the tax benefits of HSAs, and they generally lack the income or resources to make substantial contributions to HSAs.” Mr. Greenstein argued that as affluent individuals move to HSAs, premiums for comprehensive plans would rise. “If HSA use becomes widespread, as is likely, and premiums for the comprehensive coverage typically offered by employers today rise substantially (with some employers dropping comprehensive coverage entirely), many older workers, including early retirees, would suffer adverse consequences. Such individuals would either have to switch to a high-deductible plan or become uninsured.” Mr. Greenstein cited a Massachusetts Institute of Technology economist who found that “because of the of the adverse effects [HSAs] would have on employer-based coverage, this deduction would likely cause the ranks of the uninsured to increase by 350,000.”
Kate Sullivan of the U.S. Chamber of Commerce explained that small businesses are already taking advantage of HSAs. “Many small businesses had already been forced to adopt higher deductible health plans as insurance costs nearly doubled over the last five years. Insurers specializing in these kinds of health plans are reentering states where they had once done business and left, or are becoming new market alternatives to the one dominant insurance carrier serving the small group market in a given area. Traditional insurers are also offering HSA products in an effort to retain small business customers.”
