Where Are HSAs and High-Deductible Health Plans Headed?

Health savings accounts (HSAs) offered in conjunction with high-deductible health plans are on an upswing nationally. Simply stated, HSAs require an individual to use his or her own money (or money set aside by an employer for the individual’s use) to pay for medical expenses up to a fairly substantial deductible, at which point traditional insurance coverage begins. Established by the Medicare Modernization Act, the minimum deductible this year for individuals is $1,050; for families, $2,100.

HSA contributions can be made by individuals and/or their employer. Employers see such plans as a way to reduce the rate of increase in their health care expenses. Contributions are deductible for individuals who purchase their own coverage, but do not reduce income subject to payroll tax. Interest on the funds kept in HSA accounts is tax-exempt, balances can be rolled over year to year, and withdrawals from the accounts are tax-free if made for qualified medical expenses.

The Bush Administration has proposed changes to HSAs. One proposal would give individuals a new tax credit to offset the payroll tax that they would otherwise pay on their HSA contributions. Another would raise HSA contribution limits to the level of their plan’s out-of-pocket maximum. A third would allow individuals to exclude premium costs from income taxes if purchased on the individual market.

What impact do HSAs have on the individual and group health insurance markets? How much would these proposed changes encourage the purchase of high-deductible plans paired with HSAs? How would this affect overall health spending? What impact would the spread of HSAs have on the number of uninsured Americans?

To help address these and related questions, the Alliance for Health Reform and the Kaiser Family Foundation sponsored a March 10, 2006 briefing. Panelists were: Roy Ramthun, special assistant to President Bush for economic policy; Katherine Baicker, a member of the White House Council of Economic Advisers; Uwe Reinhardt, senior economist at Princeton University; and Frank McArdle, manager of the Washington, DC, Research Office of Hewitt Associates, a research firm that provides benefits advice to large employers. Diane Rowland of Kaiser and Ed Howard of the Alliance moderated the discussion.

Transcript

Full Transcript (Adobe Acrobat PDF)

Speaker Presentations

Diane Rowland Presentation (Adobe Acrobat PDF)
Roy Ramthun and Katherine Baicker (Adobe Acrobat PDF)
Frank McArdle Presentation (Adobe Acrobat PDF)
Uwe Reinhardt Presentation (Adobe Acrobat PDF)