Originally touted as an affordable way to expand insurance coverage to more people, high deductible insurance plans paired with health savings accounts (HSAs) are not working out that way. A report from the Government Accountability Office (GAO), the investigative arm of Congress, has found that HSA enrollees were much wealthier than people who were covered by other types of plans, based on tax returns from 2005. The report raises questions about who selects these plan types and how they use the accounts.
Tax filers who reported HSA activity in 2005 had higher incomes on average than other tax filers. The average adjusted gross income for filers reporting HSA activity was about $139,000, compared to $57,000 for all other filers.
Proponents say the low premiums of HSA-eligible plans and the tax-free savings of HSAs appeal to many consumers, while the high deductibles encourage them to be better health care consumers.
But critics say that HSA-eligible plans may attract enrollees who seek lower premiums but lack the resources to contribute to an HSA. HSAs may also attract wealthy enrollees who may seek to use the HSA primarily to accumulate tax-advantaged savings rather than pay for medical expenses.
HSAs are clearly attractive to high-income people, “but they aren’t the answer for providing adequate health-insurance coverage for average Americans,” says Rep. Henry Waxman, a Democrat from California, who requested the report from the GAO.
These plan types do have a following as the number of individuals participating in HSA-eligible health plans and HSAs increased significantly, going from 438,000 covered lives in September 2004 to an estimated 4.5 million covered lives in January 2007.
However, throughout those years, more than 40 percent of eligible people did not open an HSA. Why?
“It’s a matter of affordability. Consumers may purchase the high deductible plans with low premiums but they may not have money set aside for HSAs or they may feel that they don’t need the account,” says John Dicken, a director of health care in the GAO.
Getting the word out about HSAs and high deductible health plans is a role insurers can play.
“A key point in having consumers effectively manage their health care is to provide information about the cost and quality of services. In our focus groups with HSA users, they’ve indicated that they’re not using that type of information and feel that the information is limited,” says Dicken.