Health Savings Accounts (HSAs)

A new study of purchasers of Health Savings Accounts shows that the new health care financing arrangements are appealing to those who previously were shut out of the insurance market, to families, to older Americans, and to workers of all income levels.



The study shows that 70 percent of purchasers are over age 40, one-third make less than $50,000 a year, and more 75 percent are families with children.



Critics of Health Savings Account have charged that HSAs are only for the “healthy and wealthy” and argue that they should be rejected because they will destabilize health insurance for everyone else. But early findings about HSAs and other consumer-directed health plans show that the critics are wrong.



The study, conducted by Assurant Health of Milwaukee, also showed that 43 percent of those purchasing the accounts were previously uninsured. Clearly, HSAs also provide a new option to help the uninsured.



Another study by the major health insurer Aetna of Hartford, Connecticut, showed that its consumer-directed health care products are helping companies lower their health costs while providing incentives for employees to get better access to preventive care.



The Aetna study showed that companies that replaced their traditional health insurance with a consumer-directed plan saw their health costs fall by 11 percent. Meanwhile, the use of preventive services by workers increased by as much as 23 percent.



eHealthInsurance, an on-line health insurance brokerage, also surveyed those who have purchased insurance though its website and found that nearly half of HSA purchasers make less than $50,000 a year. Further, 70 percent of them paid less than $100 a month for their health insurance premiums.



Health Savings Accounts were enacted as part of the Medicare bill signed into law by President Bush December 8, 2003. The first Health Savings Account was sold on Jan. 1.



They allow anyone under age 65 to put aside money tax free for health care expenses. The only consideration is that the accounts must be accompanied by a high-deductible health insurance policy.



Individuals, employers, or employees can make a pre-tax annual contribution of $2,600, and families can make an annual contribution of up to $5,150 into an HSA. Interest earned on HSA funds is tax-free, and funds for qualified medical expenses can be withdrawn tax-free.