NCPA - National Center for Policy Analysis


December 18, 2009

Health savings accounts (HSAs) are one of the few truly innovative developments in health insurance markets in recent years, forcing consumers to make smarter choices about the health care resources they use.  Created as part of the 2003 Medicare Modernization Act, they combine a savings account with a high-deductible insurance plan, giving consumers more control over routine health care expenses while still providing them with financial protection from catastrophic illness.  Since 2006, enrollment in HSAs and other high deductible health care plans (HDHPs) has more than doubled -- from 3.2 million to 8 million, says Paul Howard, Director of the Center for Medical Progress at the Manhattan Institute.

Critics allege that these plans only cater to the healthy and wealthy, but data suggests otherwise:

  • According to a May 2009 survey from AHIP, an insurance trade group, 53 percent of all HSA enrollees in the individual market were age 40 or older.
  • A 2007 survey found that 33 percent of HSA account holders in the individual market were formerly uninsured.
  • In another study of over 1 million HSA accounts, AHIP found that 46 percent of account holders lived in lower-middle income neighborhoods, with incomes between $25,000 and $50,000.
  • In total, 83 percent lived in neighborhoods where the income was at or below $75,000.

A February 2009 study from the Manhattan Institute also found that HSA account holders spent less than half of the money in their accounts in 2007, showing that HSAs can be an effective savings vehicle for offsetting future healthcare costs.

But the biggest attraction for HSA-qualified health plans is clearly their lower cost, says Howard:

  • The MI study also found that premiums for HSA plans are much less expensive - by ten to 40 percent - than more traditional insurance options.
  • The vast majority of these plans (86 percent) also offered generous "first-dollar" coverage for preventive care services like infant/child well care, colonoscopies, immunizations, mammograms and pap smears.

Unfortunately, obscure details buried deep in the Democrats' health care reform legislation -- or left up to the future discretion of bureaucrats in the Department of Health and Human Services -- could easily kill HSAs with the stroke of a pen, says Howard.

Source: Paul Howard, "ObamaCare's HSA Promise -- and Peril,", December 17, 2009.

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