A survey by America’s Health Insurance Plans (AHIP) of its members selling Health Savings Accounts (HSAs) found 1,031,000 people were covered by HSA/HDHP (high-deductible health plan) products as of March 2005. That is more than double the figure reported by AHIP members in September 2004.
Eight percent of 555 large employers surveyed by the human capital consulting firm Watson Wyatt and the National Business Group on Health currently offer HSAs, and 18 percent plan to offer them in 2006.
An HSA plan combines a savings account and a high-deductible health insurance policy that covers catastrophic medical costs. The account is controlled by the insured and used to pay for smaller and routine health care expenses below the deductible.
Public Sector Allowing HSAs
In 2004, Kay Cole James, at the time director of the federal Office of Personnel Management, decided to allow federal employees participating in the Federal Employee Health Benefits Program (FEHBP) to have access to HSAs. More than 8 million people participate in FEHBP, the health insurance program for federal workers and their dependents, according to the Office of Personnel Management.
If states allowed it, 15.7 million people who work for state or local governments could also opt for HSAs.
Several states, including Alaska, Iowa, Minnesota, Montana, New Hampshire, Texas, and Washington, are looking at Health Savings Accounts as a state employee option. Some proposals face significant opposition, especially from unions.
Useful in Risk Pools
According to a May 2004 survey by the National Association of State Comprehensive Health Insurance Plans (NASCHIP), nine states reported they were in the process of establishing or already had an HSA-qualified health plan for the 1 to 2 percent of the population that is medically uninsurable.
These programs, known as high-risk pools, were established more than 25 years ago and operate in 33 states. In 2004, they covered 181,441 people.
The states with high-risk pools that have established plans with HSAs or are considering doing so include Alabama, Colorado, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Nebraska, and South Dakota. Most recently, Arkansas signed into law an HSA plan for its risk-pool participants.
In August 2002, the federal government approved funding of up to $1 million each for states that did not have a qualified high-risk pool, as an incentive to establish one. Risk pools typically offer benefits comparable to basic private market plans.
Because funding is the number one challenge facing risk pools, states are looking at creative ways to keep costs down. Many public high-risk pools already offer high-deductible plans as an option, and they have proven to be very popular.
Medicaid and HSAs
To solve ongoing cost problems with Medicaid, two states recently turned to HSAs.
Iowa passed a Medicaid HSA, H.B. 841, on May 12. Florida’s new Medicaid reform has an innovative HSA plan. Gov. Jeb Bush (R) signed the legislation and it is awaiting federal approval by the Centers for Medicare and Medicaid Services, after which it will go to the Florida legislature for final approval.
Under such an approach, government continues to be the insurer but increases the deductible, depositing part or all of the savings in the Medicaid beneficiary’s HSA. Better yet, supporters say, the state could simply provide a defined contribution to a private-sector insurer or third-party administrator selling HSA plans.
Victoria Craig Bunce ([email protected]) is director of research and policy, and Merrill Matthews, Ph.D. ([email protected]) is director, of the Council for Affordable Health Insurance. This article is based on a report for CAHI. Used with permission.
For more information …
The CAHI report on which this article is based, “What’s Next for HSAs,” is available online at http://www.cahi.org/cahi_contents/resources/pdf/n131hsa.pdf.
Additional information, including the second edition of “Road Rules,” by HSA Coalition Executive Director Dan Perrin, is available online at http://www.hsainsider.com/.