NCPA - National Center for Policy Analysis


February 1, 2007

Despite a slew of critical reports about consumer-directed health care, health savings accounts (HSAs) are gaining popularity as an affordable and available alternative to health care insurance, says David Gratzer, a physician and a senior fellow at the Manhattan Institute.


  • William Boyles, publisher of the Consumer Driven Market Report, estimates that enrollment in HSA-type plans or health reimbursement accounts (HRAs) more than doubled since January 2006, to 13.4 million Americans.
  • Last year twice as many employers offered this coverage than in 2005 and the number of financial institutions supporting HSAs tripled.

Further, early data suggest good results:

  • Following a year-long analysis, Cigna Health Insurance Co. reports that costs are 16 percent lower than for enrollees in traditional plans, but the use of medications for chronic conditions increased.
  • Enrollees in Aetna's consumer-directed HealthFund maintain their health (even if chronically ill), and purchase more preventative services, yet medical costs rose just 3 percent in HRA-based plans between 2002 and 2005.
  • A Kaiser Family Foundation survey finds 71 percent of those with the new "consumer-directed health plans" consider cost when seeking health care, compared with just 49 percent of those with more traditional employer-sponsored coverage.

But there is still room for improvement, says Gratzer:

  • Loosen the mandated structure of the HSAs; employers have no flexibility, for instance, to decide what the deductible covers, thus lumping diabetic supplies and Viagra into one cost category.
  • Allow individuals to make larger annual deposits into HSAs, as President Bush has championed.
  • Level the tax playing field by allowing individuals to purchase HSAs with the same tax preference as employers.

Source: David Gratzer, "A Health-Care Bargain," Wall Street Journal, January 31, 2007.

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