HealthBiz: Creating business-friendly HSAs

By ELLEN BECK, United Press International  |  July 22, 2004 at 5:47 PM
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WASHINGTON, July 22 (UPI) -- We hear a lot about the growing popularity of health savings accounts, but there is concern these consumer-driven health vehicles might not give medium and large employers the control and flexibility they want, reducing the potential for widespread use.

A survey released Thursday by the non-partisan Center for Studying Health System Change said employers are skeptical that even the more employer-biased health reimbursement accounts actually would save them money in the long run.

HSC questioned businesses in 12 metro areas across the United States in 2002, prior to the passage of the Medicare law, which contained the HSA language.

"Some (businesses) have crunched the numbers for themselves and don't see the savings," said Paul Ginsburg, HSC's president.

One employer told the center that 70 percent of employees had healthcare expenses below $1,000 -- the amount the company allocated to an employee's health reimbursement account. The company ended up spending more because workers had an incentive to use more medical services because extra money was available.

Another employer reported that creating an HRA prompted workers who had not availed themselves of the company insurance option before to take the benefit -- ultimately costing the company more money.

HSAs, which are tax free both going in and coming out, can be created by individuals or as a group plan option that may or may not include employer contributions to the savings account part. Money actually goes into an account, controlled by the individual or employee, and used to pay medical expenses until the deductible is reached on a high-deductible health plan. Savings account money is spent at the employee's discretion under plan guidelines and anything left over at the end of the year belongs to the employee and can be rolled over, year after year, into retirement.

HRAs, on the other hand, are employer-controlled. Though it sounds like an employer is putting money into a savings account -- the way the law is written it actually is unfunded. The employer may allocate $1,000 for an employee, but no money really goes into an account -- the employer simply pays out as needed as the employee accesses services payable by account money, until the health plan deductible is reached. At the end of the year any money "left over" can be rolled over to the employee's HRA account on the company books for the next year, but the funds still belong to the company and are not portable.

"When it comes to larger employers, who may be inclined to experiment with this whole consumer driven concept, why would they possibly create a HSA when they can do an HRA, which is not portable and not funded upfront," one health policy analyst told UPI's HealthBiz.

Employers would like to help employees meet their plan deductible, but they prefer HRAs because they can control the purse strings, getting a better handle on how much healthcare will cost and how much an HRA could save them.

Employees prefer HSAs for the same reasons. The question becomes, then, can HSAs and HRAs be blended to the benefit of both -- opening them up to wider participation?

Amit Gupta, president and chief operating officer for CareGain, told HealthBiz when he initially worked with Congress on establishing health account options, he pushed for a funded HRA structure so an employer could deposit some of the money leftover at the end of the year to an actual employee health savings account. The employer would control how the money is spent throughout the year and how much of the left over money would go to the employee, giving the company the ability to better manage spending and realize savings throughout the year.

Influenced by medical savings account supporters, Congress instead opted for the employee-driven HSA but allowed employers to contribute to it.

Gupta said CareGain, a privately held New Jersey company that provides HSAs, HRAs and other benefit program platforms and solutions, again is lobbying to have Congress pass legislation to allow an HRA/HSA combo.

"The money that goes into the HSA could be portable and it would be less important for the employer to track where that money is going because during the time when the HRA plan was active they have tracked that utilization," Gupta said.

For example, if an employer contributes $1,500 to an employee with a $2,000 deductible health plan, and at the end of the year there is $1,000 unused, the company could decide to give 25 percent or 50 percent of that amount to the employee's HSA "after the fact -- after the employer saves money" rather than in the beginning of the plan year, after which the employer has no control over the money.

"What's happening is that employers are offering HSAs but they're not funding them, they're leaving that to the employee," Gupta said.

CareGain has modeled this type of HRA/HSA plan, using three employers with 100 employees in a virtual system. Running the numbers through the model found a savings to employers of 26 percent on healthcare costs while employees still got contributions toward their health plan deductible and some money into their HSA at the end of the year.

"This becomes truly an asset and benefit-type model," Gupta said.

Helen Darling, president of the National Business Group on Health, told HealthBiz opening up HSAs, HRAs and flexible spending accounts in ways "to make it easier and simpler to save" more money for healthcare and retirement is a good idea. She said the plans are difficult for people to understand, which prevents them from participating.

She added, however, Congress is preoccupied with the bigger issues -- such as Iraq -- and this issue might not get lawmaker attention any time soon.


The 2004 Most Wired Survey and Benchmarking Study finds U.S. hospitals are getting wired -- moving to set up electronic medical records. The survey by Hospitals & Health Networks, the journal of the American Hospital Association, lists the 100 most wired hospitals and health systems for the past six years. The report is found at and shows 90 percent on the Most Wired list provide access to the current medical records online and 87 percent offer access to online medical histories. Some 88 percent offer online lab results review and 90 percent have online radiology reports.


The Centers for Medicare & Medicaid Services Thursday said it will spend $1 billion over four years to help hospitals and other healthcare providers pay the emergency room costs of the uninsured, regardless of citizenship status.

State will get the funding based on a special formula and they will in turn reimburse hospitals, physicians, ambulance providers and others for care provided to people who cannot afford to pay for it.


Attorney Richard Scruggs has brought the American Hospital Association in as a defendant in his class action lawsuits against non-profit hospitals and hospital systems in Florida, Georgia, Michigan, New Mexico, New York, Ohio and Pennsylvania.

The lawsuits, which now total 39 and include about 340 hospitals, allege the hospitals and AHA failed to provide government required charity care to the uninsured.

AHA President Dick Davidson issued a statement calling the filing "misdirected and baseless" and "diverting focus away from the real issue of how we as a nation are going to extend health care coverage to all Americans."

Scruggs' suits allege the AHA encouraged its hospitals to perform "wallet biopsies" on uninsured patients, charging them inflated prices for medical services and then intimidating and harassing them when they cannot pay the bill.

"When the facts are known, the reality of what's happening in the communities hospitals serve will be found to be far different than the charges outlined in these lawsuits," Davidson said. "We are confident the cases will be easily defeated and the resources of these hospitals will again be freed up to address the important mission each has in contributing to its community."



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