Pros & Cons
Chicago Tribune
PLUSES
* Tax-free accounts could accumulate money over several years andturn into a sizable health-care nest egg for healthy people with lowmedical expenses.
* Consumer is more likely to question health-care expenses thatcurrently do not get much scrutiny.
* High-deductible policies that must be linked with HSAs tend tobe cheaper.
* May be attractive to young, healthy people who are uninsured.
* With incentives, could drive down cost of insurance for small-business employees.
MINUSES
* Low-income people don't have as much money to salt away as thewell-to-do and often cannot afford the high out-of-pocket costs.
* Could cause some to delay or deny themselves needed care inorder to economize.
* Chronically ill people would spend accounts each year and wouldface high deductibles.
* Could make health care for older, sicker people more expensiveas young, healthier people abandon the risk pool.
* Could move consumers away from the employer-based insurancemodel and into individual insurance. But the individual insurancemarket does not cover people who are sick and is less well-regulated.
* Shopping for health care is difficult when little goodinformation exists that can support comparison shopping.
WASHINGTON - Al Meginnis signed up for a health savings accountand an accompanying high-deductible health insurance policy lastyear, and so far he has been pleased.
'I jumped at it because it made a whole lot of sense,' saidMeginnis, director of Lutheran Social Services' Behavioral HealthService Center in Elgin, Ill. The account also covers his wife andson and is less costly than traditional health insurance, he said.
Meginnis said he's saving $2,400 this year on premiums alone andadded he has saved even more by being more of a health consumer. Hesaid the Web site of his health-care company, United Healthcare,provides estimated prices for various services. 'I can figure outpretty easily what it's going to cost to do something before I decideto do it,' he said.
Once, he rejected an orthopedist's recommendation for more than$600 in physical therapy for arthritis in his knee after questioningwhether the therapy would help him. A second orthopedist recommendeda 'wait-and-see' attitude on physical therapy but also prescribed abrand-name painkiller that would cost $50. He asked for a genericversion and saved $40.
But when it comes to health care, Meginnis is more willing toembrace new ideas than other employees at Lutheran Social Services.The agency dropped its traditional health insurance plan last yearand converted to a vanguard product - a health savings account pairedwith a high-deductible health plan - in July to reduce escalatinghealth-care costs.
Larry Lutey, the agency's vice president of human resources, saidmany employees 'don't like the HSA, to be quite frank,' because it'sa new way of thinking about buying medical services and workers thinkit costs them more. 'If my position had been an elective one,' headded, 'I would have been voted out of office this year.'
Lutey said employees are unhappy with HSAs because 'it feels likethey're paying more up front. The perception is, this is a veryexpensive type of plan. Even though there is money in [employee]accounts to cover these expenses, people end up feeling they'repaying more out of pocket.'
In an era of surging health-care costs, health savings accountshave grown rapidly since Congress began encouraging their use in2004. And now President Bush wants to give them a big boost withgenerous tax incentives and favorable regulation, with the aim ofoverhauling traditional health insurance in America.
Like the 1,400 workers at Lutheran Social Services, the nation andCongress are deeply divided over whether HSAs are one way to help fixan ailing health-care system. Critics say they favor the healthy andthe rich at the expense of the sick and the poor, while proponentssay such claims are overstated, even inaccurate.
Health savings accounts allow people to salt away a specifiedamount of money each year tax-free, while it gains interest, to payfor relatively routine medical bills. The savings accounts must becoupled with a high-deductible health insurance policy, usually withthe deductible starting at about $1,000. More companies are offeringsuch accounts these days, and many employers are contributing totheir employees' accounts.
HSAs shift more of the burden of health-care costs to consumers,who then may have an incentive to curb such costs because they arespending their own money rather than that of their employer or aninsurance company. But once the high-deductible policy kicks in, thesystem works more like traditional health insurance.
Democrats are linking the president's proposals to his failedSocial Security privatization plan and his beleaguered Medicareprescription drug program.
'Underlying all of this is [Republicans'] main purpose of tryingto get rid of entitlements,' said Rep. Pete Stark, D-Calif., a memberof the House Ways and Means Committee. 'They would like to turnMedicare into a voucher.'
Rep. Henry Waxman, D-Calif., added, 'The president's healthsavings account plan combines the worst elements of the president'sfailed Social Security privatization plan and his Medicareprescription drug fiasco.'
But Rep. Sam Johnson, R-Texas, a Ways and Means member and sponsorof a Bush-like plan to expand health savings accounts, said some, butperhaps not all, parts of the president's plan could wincongressional approval this year. One key Senate GOP staff membersaid there is a 50-50 chance the plan could pass, but saidRepublicans might have to tilt the legislation to provide bigger taxincentives for low-income Americans in order to attract Democraticvotes.
A major question is whether Bush's proposals will erase thepublic's doubts about HSAs.
About 3 million people are enrolled in HSAs out of the 245 millionAmericans covered by health insurance, and Johnson said the accountsdo tend to be more attractive to healthy workers. Many analysts doubtthere will be significant health-care savings because once adeductible is met, consumers have less incentive to save money.
Bush said he wanted to 'level the playing field' betweentraditional health insurance and HSAs. He would allow people who buyHSA-related high-deductible policies outside their workplace todeduct the premiums from their income taxes. Also, they could get atax credit to offset payroll taxes paid on these premiums.
The president also has proposed that those with health savingsaccounts and their employers make annual contributions to cover out-of-pocket costs, not just the amount of the deductible, as undercurrent law. These out-of-pocket expenses would be tax-deductible,but they would be limited to $5,250 a year for individuals and$10,500 for families.
To answer charges that HSAs do not benefit low-income people, Bushhas proposed a 'refundable' tax credit to help uninsured Americanspurchase high-deductible policies in connection with HSAs. Themaximum credit would be $1,000 for one adult, $2,000 for two adults,and $3,000 for two adults with children. The credit would phase outfor individuals earning $30,000 or more and families earning $60,000.
The president's proposal would allow policyholders to take theirinsurance to another employer if they change jobs, and it would allowthem to purchase HSAs across state lines, which the White House saidwould greatly increase competition. Bush's plan also would allowcompanies to make higher contributions to the HSAs of chronically illemployees.
Karen Davis, president of the Commonwealth Fund, a health-policyorganization, said she thinks HSAs have problems. Many people willdelay getting care to save money, she said, adding, 'When you havehigh deductibles, it reduces the uses of both essential and lessessential [medical services].'
Health-care companies offering HSAs dismiss such claims.UnitedHealth Group, for instance, said a 2005 study found theirenrollees used more preventive services than those in traditionalplans.
Sherry Gini, director of human resources for Goldberg Kohn, aChicago law firm, said 37 of its 175 employees have signed up for anHSA plan. Attorneys liked the tax savings, she said, but in somecases the paperwork proved too burdensome, and employees have foundthe cost of prescription drugs to be much higher.
Scott Spiker, chief executive of Chicago-based Destiny Health,said Bush's proposal to allow companies to sell across state lineswould give a strong push to expansion of the accounts.
But Brian Diedrich, senior managing director of employee benefitsat Mesirow Financial, a Chicago-based financial firm, said unlesscompanies put money into their workers' accounts, they will not buyinto the plans.
'I think people are very much in love with the [traditional healthinsurance] system,' he said. 'We're a long way from moving to aconsumer-directed health-care system.'
