Congress Rejects Efforts to Limit HSAs

Published December 1, 2004

In the days preceding the current, lame duck session of Congress, two attempts to prohibit funding for or otherwise restrict Health Savings Accounts (HSAs) under the Federal Employees Health Benefits Plan (FEHBP) failed in the U.S. House of Representatives.

Democratic House members Jim Moran (VA) and Eleanor Holmes Norton (DC) offered amendments in September during floor debate on the Treasury appropriations bill. Moran offered the first amendment, which would have denied funding for the HSA options under the FEHBP. The Moran amendment lost 223-181, a 42-vote margin.

The next legislative day, Norton offered an amendment that would have required any federal employee who selected an HSA to keep it for at least three years.

Democrats Crossed Party Lines

Norton’s staff circulated an email with the following talking points on HSAs:

  • “HSAs appeal to healthy individuals or those who don’t foresee any upcoming medical requirements.
  • “The movement of healthy individuals to HSAs from comprehensive plans triggers a “premium spiral” in the plans they left behind.
  • “By requiring enrollees to remain in an HSA for at least three years upon selecting that option, this amendment will mitigate some of the problems associated with HSAs.”

Despite this “healthy and wealthy” criticism of HSAs and strong lobbying efforts by the National Association of Retired Federal Employees (NARFE), the Norton amendment was defeated 224-175, a 49-vote margin. Thirty Democrats reached across party lines to vote against the Moran or Norton amendment, or both.

“Adverse Selection” Charge Refuted

In response to these amendments, the HSA Coalition sent a letter to Capitol Hill, stating:

“The Federal Employees’ union’s main objection to HSAs is that their mere existence will create adverse selection. Perhaps you should require some form of proof of this allegation. You will find that there is not a single, real-life example they can point to, despite their rhetoric to the contrary. They base their objections on analysis that is based on projections and speculation.

“In short, the unions opposing HSAs have latched on to adverse selection as a cover for their political opposition to HSAs.

“For the adverse selection charge to be accurate, one of two things needs to be true: Either the average age of those purchasing an HSA are considered to be young, and/or the less healthy will not purchase HSAs.

“After all, the unions constantly repeat the ‘only the young and healthy will choose an HSA,’ which they say will leave only the sick in the insurance pool, driving up health care costs.

“Based on the seven years’ experience of the Archer MSA pilot, and based on data from companies selling HSAs in the marketplace this year, we know the following:

“The average age of an HSA purchaser is 47 years old. The median age of all Americans is 36 years old. Clearly, the ‘young’ are not [predominantly the ones] buying HSAs.

“With regard to the healthy choosing HSAs, we know that the uninsured who purchase health insurance for the first time are, as a group, less healthy than the rest of the population because these uninsured have health issues they have postponed because they were uninsured. We also know these uninsured are less healthy because in the first year they become insured, they consume more health care than the average person who has been previously insured. We also know that during the Archer MSA pilot about 25 percent of MSAs were purchased by the uninsured.

“Additionally, two companies selling individual insurance report their uninsured HSA applicants and purchasers this year are running at 43 percent and 33 percent respectively. Clearly, the less healthy are disproportionately purchasing HSAs compared to the rest of the U.S. population.

“Other explanations for the lack of adverse selection are that there are significant incentives for the less healthy to choose an HSA. The first incentive is to control their own health care.

“They are the world’s foremost expert on their own health condition and they appreciate not having to fight with their insurer or having to wait to see a specialist, or be told X or Y treatment is not covered.

“The second incentive for the less healthy to choose an HSA is that their out of pocket costs are tax-free. The less healthy have a large number of health care costs, and if they were in a standard $500 deductible plan, with the standard 80/20 co-insurance up to $5,000, they would be paying $1,500 in after-tax costs before they were 100 percent insured. With a $1,500 deductible for an individual HSA qualified health insurance plan, their out of pocket deductible payments become tax-free.

“Therefore, given the evidence from the MSA pilot and from current HSA sales, and the financial and non-financial incentives a less healthy person has to choose an HSA, one cannot help but conclude that the unions are simply wrong about HSAs and adverse selection.”

Congressman Gil Gutknecht (R-MN) worked hard to defeat both amendments. “I have worked closely with representatives of public employees, unions, and retirees who want to make their own decisions regarding their health care,” Gutknecht said. “There are fire, police, and public employee unions in Minnesota who want to expand HSAs to include the 65 and over population, and I support their efforts.”

Gutknecht’s message to his fellow representatives, of union support for HSA expansion, was a factor in defeating both the Norton and Moran amendments.

Dan Perrin ([email protected]) is executive director of the HSA Coalition and publisher of