Health savings accounts (HSAs), a creation of the Medicare Reform and Drug Benefit bill, allow workers to contribute pre-tax dollars to an account to pay for out-of-pocket medical expenses. The accounts work in conjunction with a high-deductible health plan — at least $1,000 for individuals and $2,000 for families.
HSAs also cap annual out-of-pocket expenses at $5,100 for individuals and $10,200 for families. Funds contributed into the accounts can be invested; they can also be rolled over when workers change jobs.
So, how have HSAs caught on so far? In the past few days, several studies of health savings accounts have offered conflicting prognoses for these plans.
A new study by America’s Health Insurance Plans applauds the fact that about 438,000 people chose the new coverage through September of last year, according to responses from 29 AHIP member companies. “These early data demonstrate that the market is reacting very quickly to health savings accounts,” said Karen Ignagni, president and chief executive officer of the insurance industry trade association, noting that the rules governing the new accounts were not finalized until midsummer.
Ignagni added that 58 companies now offer the plans to large employers, compared with 15 in September; 56 provide plans to small employers, up from 20; and 47 offer plans for individuals, compared with 11.
Watson Wyatt Worldwide, however, offers a different spin. Its newly released survey of 1,000 U.S. workers with health insurance found that three out of five haven’t heard of health savings accounts, and only one-third “completely” or “mostly” understand how they work.
“It’s not surprising that many individuals haven’t yet heard of HSAs,” said Ted Chien, global director of group and health care consulting at Watson Wyatt. “But the plans are likely to gain momentum this year, especially since they offer both employers and employees some hope to slow rising health care costs.”
Indeed, after receiving an explanation of how HSAs work, 60 percent of survey participants said that having control of HSA funds, even after they leave their current employer, would be an extremely important benefit; half believed that lower premiums are also important.
However, many respondents to the Watson Wyatt survey were also concerned about a number of HSA features: two-thirds don’t like the fact that they must shell out the full price of prescription drugs before meeting the high deductible, while 57 percent expressed similar opinions about paying higher deductibles in general.
Most employees, however, won’t even have the option of signing up for an HSA anytime soon.
According to Hewitt Associates, which surveyed more than 500 major U.S. employers covering more than 6 million employees and family members, 17 percent of companies use health accounts plus high-deductible coverage. Although 57 percent of employers are considering the use of HSAs in the future, in 2005 just 3 percent plan to provide access and contributions for active employees, and slightly less than 2 percent will offer them to retirees.