It's the new calling card for agents, brokers and employee-benefits consultants. Health Savings Accounts and their sister health plan, Health Reimbursement Accounts, have become the hottest new product in the health insurance business, and marketers are using the concepts to open the doors to employers who are still seeking ways to reduce long and short-term health-care costs.
The health insurance lobbies have convinced Congress that they are, indeed, the health-care cost solution, and they might be--but questions remain about whether or not they will also improve health-care delivery to employees, an equally powerful concern.
Designed to be a self-funded layer of health insurance for routine and diagnostic needs above a high-deductible health plan that funds more expensive and catastrophic care, HSAs, thanks in part to tax benefits, should make health-care consumers think twice about careless utilization.
In September, the House Ways and Means Committee took a step forward in shoring up those tax incentives for HSAs--approving H.R. 6134, legislation that would increase the contributions employers and their employees could make to the health accounts to $2,700 for individuals and $5,450 for family coverage, and indexing the contribution to inflation.
The legislation would also allow covered individuals to roll over Flexible Spending Plan balances to the new accounts during a transitional period and roll over Individual Retirement Account funds to HSAs. Since IRAs are taxable when they are withdrawn but HSA funds are not, this turns into a nice tax savings for retirees who are planning ahead for their later medical needs.
"Because all funds in HSAs are not subject to taxes when spent for medical needs, the changes will help millions of Americans find more affordable ways to pay for health care as these costs continue to increase," notes Paul Dennett, vice president of health policy for the American Benefits Council in Washington, D.C.
No doubt the changes will make HSAs more tax efficient, but will they encourage more low-income retail, seasonal and part-time workers to open and fund their own HSA accounts with the minimal help they receive from their employers? Probably not. Tax breaks are excellent for employees in the higher tax brackets, but those in the lower brackets are already strained to pay daily necessities.
Sara R. Collins, assistant vice president of the Commonwealth Fund, a health-care research foundation, previously told legislators that the economic pressure to control utilization may backfire on HSA enrollees. According to Commonwealth Fund research, 44 percent of individuals with deductibles of more than $1,000 deferred medically necessary health-care or prescription-drug purchases because of the cost.
If this trend continues through HSA growth, an increasing number of employees could be deferring health care for chronic diseases such as diabetes, high blood pressure and asthma. That could have catastrophic health-care consequences, and even HSA advocates recognize that danger.
However, even more basic deferrals, such as antibiotics for respiratory infections, decongestants for allergies and treatment for simple home injuries, could create risks for employers: lost work time, poor productivity and an increase in workers' compensation claims to shift costs away from the health plan.
Health-plan costs may stabilize or go down, but health-related costs for employers may actually go up.
LEN STRAZEWSKI, a professor and benefits expert, is a columnist for
Risk & Insurance®.
November 1, 2006
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