The Bush administration's best estimates when HSAs came about as part of the Medicare Modernization Act of 2003 were that perhaps 7 million people would pick up on the idea of combining a tax-free savings account for healthcare expenses with a less expensive, high-deductible health insurance plan. The thought was to let people build up the savings account, with their own contributions or money from employers, which they would spend until meeting the deductible -- making them more price-conscious shoppers for healthcare services because they could keep any savings account money leftover at year's end.
It was a surprise for many this week, then, when America's Health Insurance Plans rolled out its latest statistics showing in the 14 months since their inception, HSAs have been opened by 1.03 million Americans -- and virtually all health plans belonging to AHIP now offer HSA options to individuals, as well as to small and large group employers.
"It's astonishing," remarked Greg Scandlen of the Galen Institute, a non-profit public policy group, in response to the AHIP numbers. "It's happening now, in the real world ... and Washington needs to pay attention to it."
AHIP's survey found 37 percent of the individual policies -- some 204,374 -- were sold to people who were previously uninsured; and 27 percent of the small group market plans, representing 37,868 covered lives, were bought by companies that had not previously offered a health insurance benefit to workers. So roughly 242,000 people went off the uninsured list because of HSAs.
It's important to remember most large-group employers already provide health benefits to workers, so HSA gains in that realm simply would be a shift of health plans -- which while potentially saving employer and employee money, is not insuring the uninsured.
It's a modest start with broader possibilities, though, when considering HSAs as a whole have caught the public's fancy far faster than other recent insurance debutantes.
Karen Ignagni, AHIP president, said in the first year of Medical Savings Accounts, a precursor for HSAs, only 40,000 were sold -- and MSAs, after 10 years, have not achieved the market penetration that HSAs already enjoy.
"This (HSAs) is going to continue to be a product that offers protection to people who didn't have coverage, haven't had affordable choices," Ignagni said.
Also working in favor of HSAs is the lack of a competing option for the uninsured. Policy experts and academics have drafted scores of ideas and plans, mostly revolving around how much the government kicks in, to deal with the uninsured. The trend for these plans is that more of the uninsured are covered as spending by the federal government increases to the point where some propose a national one-payer healthcare system totally funded by tax dollars. None of these plans even makes it up Capitol Hill -- much less gets a serious discussion among lawmakers.
President Bush has for years proposed refundable tax credits for buying health insurance, but that also has never impressed enough lawmakers to make it a serious consideration.
The question, therefore, becomes just how versatile and attractive can the HSA become to individuals and business so they actually can be a vehicle for the uninsured. The Treasury Department already has shown its support of the HSA concept by sending out guidance for the industry on setting up such plans at record speed for a federal agency.
Ignagni said health plans would like Treasury to find a way to provide a credit for people who purchase maintenance drugs -- such as a monthly supply of blood pressure pills -- in a way perhaps similar for carve-outs already granted for disease management and prevention expenses. That would broaden the coverage spectrum, making the HSA a better buy.
Bush already has proposed expanding HSAs to make them more attractive to small business, by offering tax credits to those that offer the benefit, and to allow people to deduct from their taxes the cost of the high deductible insurance policy.
A more far-reaching idea was proffered this week by Michael Cannon, director of health policy studies for the free-market, libertarian Cato Institute.
Cannon told a news briefing his plan would allow savings account money to be spent on insurance premiums and have HSA contribution limits -- now at $2,650 for individuals and $5,250 for families -- increase to $8,000 for individuals and $16,000 for families. The increased totals represent roughly 97 percent of the total value of health benefits per year. That would give individuals and families enough money to buy other types of insurance -- including more comprehensive coverage of a preferred provider organization or HMO.
Cannon said HSA law also should be amended to remove the requirement that purchasers buy any insurance plan at all.
"What right does the government have telling what type of health insurance they should purchase?" Cannon asked.
HSAs are not, however, without their critics -- which include many powerful Democrats in Congress, as well as some policy organizations, such as the non-partisan, non-profit Commonwealth Fund in New York.
The Fund's latest HSA study released in late April estimated fewer than 1 million uninsured ultimately will choose an HSA. The study said one-half of the uninsured adults in the country do not owe any income taxes because of their low-income status -- so they would benefit little from a tax-free savings account. It said for people in the middle income brackets, savings from HSAs would range from just 3 percent to 6 percent and come with a high deductible health plan at a $2,000 annual premium.
HSAs' overall popularity will be tested through 2005-2006 as large group employers offer the product to employees for the first time. As a product for the uninsured, the jury is still out -- but the outcome could well depend on how successful the administration is in pushing through initiatives to help small businesses offer and lower-income adults afford HSAs. How much employers contribute to each worker's savings account also will be a telling factor -- because for many people that might be the only way they can both pay the insurance premium and build up a savings nest.
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