GAO Finds Health Savings Accounts Not for Everyone
WASHINGTON -- A recent Government Accountability Office report finds that the jury is still out on Health Savings Accounts.
HSAs are tax-free savings accounts that can be used to pay for medical expenses including prescription and over-the-counter drugs incurred by individuals, spouses or dependents. These accounts are accompanied by high-deductible comprehensive insurance policies that cover preventive care and larger medical bills. Unused HSA money rolls over from year to year and can then be used to pay for medical care up to the plan's deductible.
With research gathered from a mix of IRS data on HSA withdrawals and three large employers, the GAO report, Early Enrollee Experiences with Health Savings Accounts & Eligible Health Plans, finds that although focus group HSA-eligible enrollee participants generally reported positive experiences with their plan, most would not recommend these plans to all consumers.
For the three employers' health plans reviewed, the GAO found that HSA-eligible plan enrollees would incur higher annual costs than preferred provider organization plan enrollees for extensive use of health care, but would incur lower annual costs than PPO plan enrollees for low to moderate use of health care.
According to the report, participants said they would recommend HSA-eligible plans to healthy consumers, but not to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.
The GAO adds that having a variety of health plan options is critical.
"Enrollees who were generally satisfied with their plan each had a choice of health plans and voluntarily selected the HSA-eligible plan," the report stated. "HSA satisfaction may be lower when employees are not given a choice of health plans or when employer contributions to premiums or accounts do not sufficiently offset the potentially greater costs faced by CDHP enrollees."
In addition, while focus group participants enrolled in HSA-eligible plans understood the key attributes of their plan, such as low premiums, high deductibles, and the mechanics of using the HSA, they were confused about certain other features such as which medical expenses qualified for payment.
"Contrary to the hopes of CDHP proponents, few of the HSA-eligible plan enrollees who participated in our focus groups researched cost before obtaining health care services," the report stated. "Any increase in consumerism that may be exhibited by CDHP enrollees will likely require time, education and improved decision support tools that provide enrollees with more information about the cost and quality of health care providers and services."
Participants said positive aspects of having HSAs range from the ability to accumulate savings and tax advantages to the ability to use an HSA debit card or online accounts.
In general, HSA-eligible plan enrollees had higher incomes than comparison groups in 2004 and traditional plan enrollees in 2005.
About two-thirds of employers offering HSA-eligible plans contributed to their employees' HSAs with an average contribution of $1,064 in 2004. Some 45% of tax filers reported they withdrew funds in 2004 of which 90% were withdrawn for qualified medical expenses.
Despite the mixed reviews, when given a choice of health plan options, many focus group participants reported that they opted to re-enroll in an HSA-eligible plan for the following year. Here is a look at some other GAO report findings: