Health Savings Accounts & High-Deductible Plans

Health Savings Accounts (HSAs) and high-deductible health plans (HDHPs) have received a lot of attention in recent years from policymakers trying to make health care more affordable.

HSAs provide a generous tax incentive for people who save money for medical costs.  The reason for creating this incentive is to give consumers a financial stake in the medical services they purchase.  By making consumers more cost-conscious, it is hoped the medical marketplace will become more price-sensitive and systemwide costs will moderate.

HDHPs are intended to serve the same purpose and often are linked with HSAs.  Through a high deductible, these plans shift the initial burden of medical costs to consumers, who (it is assumed) will tap their HSAs for the funds to pay medical providers.  After the deductible is met, the insurance protection of these HDHPs covers all or a portion of the remaining costs.

What impact are HSAs and HDHPs having on the marketplace?  By shifting more responsibility to consumers, are they helping to contain health care spending?  These are questions addressed by a Linda Blumberg and Lisa Clemans-Cope in Health Savings Accounts and High-Deductible Health Insurance Plans:  Implications for Those with High Medical Costs, Low Incomes, and the Uninsured.

Published by the Urban Institute and funded by the Robert Wood Johnson Foundation, the discussion by Blumberg and Clemans-Cope concludes that HSAs and HDHPs are very attractive to high-income earners with low expected use of medical services.  Within this population, relatively few are currently uninsured; thus, HSAs and HDHPs are not significantly decreasing the number of uninsured.  The uninsured typically have lower incomes and fewer savings; thus, they receive little or no benefit from the tax advantages given HSAs and have little capacity to cover the larger deductibles associated with HDHPs.

Employers that choose to fund HSAs help to counter this effect.  However, most employers (two-thirds) with a HSA and HDHP in place do not contribute to the HSAs of their employees.

The study by Blumberg and Clemans-Cope includes a detailed analysis of which consumer behavior is impacted by HSAs and HDHPs.  Among consumers that regularly seek medical care but who are not very high users, some researchers have found lowered frequency in the number of visits seeking care.  Whether this results in systemwide savings can not be determined.

Among the 10 percent of the population that incurs 65 percent of health care costs, and among the 50 percent of the population that uses very little medical care, HSAs and HDHP have no impact at all. 

The authors also note their concern that the attractivenesss of HSAs and HDHPs to healthy, high-income consumers will segment the market, leaving fewer healthy people in traditional, comprehensive insurance plans.  The impact of that trend will be to drive up the premiums for those traditional plans, thereby causing more people to become uninsured.