Interest in HSAs Will Surge in 2008

Published December 1, 2007

In late September the Washington, DC-based global consulting firm Watson Wyatt Worldwide identified “more health savings accounts” as a major benefit trend during the open enrollment season, the annual period when employees can adjust the benefits their employers provide.

Employer interest in consumer-directed health plans with health savings accounts (HSAs) continues to grow, according to Watson Wyatt, which predicted 40 percent of U.S. companies will offer workers an HSA in 2008.

In another report issued in late September, Hewitt Associates, a leading provider of human resources outsourcing and consulting services based in Lincolnshire, Illinois, pointed out account-based plan designs are gaining traction among employers as a way to control costs.

According to Hewitt Associates, by the end of this year 20 percent of U.S. companies will be offering or planning to offer high-deductible health plans with HSAs, and almost 50 percent of the companies nationwide are considering offering them at a future date.

“While just 3 percent of employees elected these plans last year, most companies anticipate that enrollment will grow to 20 percent in five years,” the company noted in a September 24 news release.

Catching On

That shows just how well consumer-directed health care plans are catching on with the public, said Diana Ernst, a health care policy fellow at the Pacific Research Institute in San Francisco.

“Consumer-directed health care is making progress, and it’s giving Americans more control of their own health care dollars,” Ernst explained. “Recent studies report that some 55 million Americans will purchase their own health care in the next three years, as employers struggle to provide health insurance for workers.

“High-deductible health plans have already grown significantly, by 3.5 million since 2005,” Ernst said. “Reports show that this growth has been cost-effective for owners of these health plans, who also seek out the same level, if not more, of preventive health care services.”

Ernst said the rise of high-deductible health plans (HDHPs) is likely to continue, caused by “changes in federal tax law that exempt purchasers from federal taxation on their accounts.

Red Tape

Ernst said HDHPs paired with HSAs “are good for all Americans” because “they allow Americans to save money in their accounts over an entire lifetime, tax-free.”

However, Twila Brase, president of the Citizens’ Council on Health Care, said the insurance connection impedes effectiveness.

“The HSA should be detached from high-deductible policies,” Brase said. “The expense must still be run through the health plan to determine how much the doctor will be paid. Thus, doctors cannot cut the red tape and most of the administrative costs associated with it.”

Brase warned against the potential of government forcing individuals to purchase HSAs along with other types of insurance.

“Universal health care can come in various sizes and packages,” Brase explained. “While HSAs will hopefully begin to bring price sensitivity to patients, that is no guarantee against universal health care and its government-run model. A mandate on individuals to buy insurance, including HSAs, would still lead away from markets and toward an ever-growing central health care bureaucracy.”

Dr. Sanjit Bagchi ([email protected]) writes from India.