8 February 2009
HSA Health-Insurance Plans After Four Years:
What Have We Learned?
Senior Fellow, Manhattan Institute for Policy Research
This paper reports the available data on the characteristics of Health Savings Accounts (HSAs) and the progress
they have made in enrolling Americans and drawing them away from traditional, comprehensive insurance plans. Authorized
by federal law in 2003, HSAs are financial instruments linked to high-deductible health insurance plans (HDHPs). They
allow households to set aside tax-free funds for routine medical expenses.
We report data showing that these policies are now used by over 6 million U.S. residents and that their use is growing
at a rate higher than the one at which the assets in individual retirement accounts (IRAs) accumulated in the first years
following their authorization. We also found that HDHPs cover preventive-care services (physicals, immunizations, and
other recommended screenings) at a rate that other types of insurance do.
The brief history of HSA-qualified plans suggests that they are likely to continue to expand their market share
significantly over time, especially if policymakers take steps to make them more economical and easier to understand.
The rationale for HSAs extends beyond giving U.S. households greater control over their health-care expenditures.
The spread of HSAs, it was hoped by their authors, would strengthen the economy and finances of the nation. U.S. economists,
policymakers, and business leaders have long voiced concern about the nation's rapidly rising health-care costs. Health-care
inflation has for many years outstripped both general inflation and income growth. U.S. spending on health care already
represents 17 percent of GDP and is predicted to go to 20 percent by the year 2016. If the 46 million Americans lacking
health insurance were to obtain it under the present system, the disparity would be wider still.
One important factor contributing to the escalation of health costs is the exemption of employer-provided health
insurance funds, and the resulting benefit, from taxation, despite the fact that health insurance is undoubtedly
a form of employee compensation. The exemption encourages employers to offer and employees to demand health-insurance
plans with low-deductibles (paid with after-tax dollars) and high premiums (paid with pre-tax dollars). This arrangement
effectively transforms coverage that is a vehicle for protection against catastrophic costs into a system of pre-payment
for routine expenses.
Because this tax preference is linked to employment, individuals who are self-employed, employed by businesses that
don't offer a health-insurance benefit, or who are unemployed must purchase "unsubsidized" health insurance, i.e.,
insurance purchased with after-tax dollars. It is the costliness of these premiums that is a major reason that so many
Americans have not obtained health-care coverage.
Congress, in the Medicare Reform Act of 2003, best-known for extending prescription drug coverage to America's elderly,
created a new, more flexible way in which Americans could obtain less expensive insurance coverage as well as save tax-advantaged
funds to offset health expenses. This portable savings vehicle is known as a Health Savings Account (HSA).
Either at their place of business or on their own, enrollees can direct to their HSA some portion of annual income on which
they do not have to pay income tax. The funds deposited there can then be withdrawn, tax-free, to pay health-care bills not
covered by insurance. For such funds to be "HSA-qualified," as defined by the IRS, the insurance policies to which they are
attached have to feature high deductibles—for 2009, a minimum of $1,150 for individuals and $2,300 for families. However, such
plans for that reason and others typically carry significantly lower premiums than the comprehensive plans ordinarily offered
Policymakers hoped that HSA accounts linked to high-deductible health plans would offer the uninsured an affordable vehicle
for obtaining at least catastrophic insurance coverage, while also encouraging discipline in discretionary
health-care spending, thus slowing the rate of inflation in health-care costs.
Since any funds expended would be an HSA owner’s own, it was expected he would show caution in seeking discretionary health care
and also "shop" for cost-effective treatments. For instance, he would probably want to substitute less expensive generic drugs
for branded medications.
To the extent that the policyholder was able to control his consumption of less necessary health-care services (but not
preventive services such as checkups and vaccinations, which are in most cases covered on a "first-dollar" basis), funds could
accumulate and appreciate year after year in these accounts, until such time that more serious ailments, which are typically more
expensive to treat, should arise. Even though those suffering from chronic illnesses would be less likely than healthy enrollees
to have funds left at the end of the year to roll over, they might also find such policies worthwhile financially.
Once the deductible and then a ceiling on out-of-pocket expenditure for co-insurance had been reached, holders of HSA-qualified
insurance would be fully protected against major or catastrophic illnesses and accidents, making HSA-qualified insurance more like
traditional car or homeowners' insurance, for example.
Policyholders in workplace plans would retain ownership of the account if they should leave the job where the account was established;
however, contributions could continue only if a subsequent employer as well offered an HSA-qualified plan.
This paper's chief findings regarding HSAs are the following:
- The number of individuals covered by HSA-qualified and high-deductible health plans, as a proportion of all those covered by private
insurance, shows a rate of growth slightly higher than the rate at which the quantity of assets in IRAs in their early years reached
an equal fraction of total retirement assets. (The latter criterion is used in the absence of enrollment figures.) The early data on
defined-contribution assets as a proportion of total retirement assets are more difficult to interpret, but the data on the whole
suggest that HSA-qualified health coverage has the potential to expand at least as sharply over time as IRAs and defined-contribution
retirement plans did, assuming conducive legal and regulatory developments.
- Suggesting even further room for improvement, survey data indicate that relatively low percentages of consumers are "extremely or very"
familiar with HSA-qualified health coverage or find such plans "easy to understand."
- Less than half the funds in HSA accounts in 2007 were expended on health care, demonstrating these accounts' viability as savings
- Premiums for HSA-qualified policies are significantly lower than those for other types of plans—by about 10 percent to 40 percent.
- A wide range of preventive-care services counts toward plan deductibles (or are covered on a "first-dollar" basis) under most
HSA-qualified policies. Unsurprisingly, the rates at which enrollees in HSA-qualified plans draw on preventive care or rely on
treatment of chronic illness are roughly equal to the rates shown by policyholders in comprehensive plans.
- While the ceiling for out-of-pocket spending by holders of high-deductible plans (including HSA-qualified plans) covering
workers and their families tends to be higher than it is for other types of health plans (although the available data do not
allow an estimate of how significant that difference is), there is some evidence that higher deductibles are almost entirely
responsible for higher out-of-pocket expenditures. Out-of-pocket expenditures are, of course, only one element of total plan
costs. The data for coverage purchased in the non-group market are more mixed.
- For both covered workers and individuals, deductibles for HSA-qualified policies are significantly larger—by multiples of
1.2 to 4.7—than the deductibles for the other types of health coverage plans. But the deductibles for HSA-qualified plans
recently have risen much more slowly.
- Because spending on chronic illness, unlike spending on prevention under most HSA-qualified plans, does not enjoy
first-dollar coverage, the chronically ill would be likely to draw down their HSA funds before they have time to accumulate.
Even so, the right combination of a given plan’s deductibles, its out-of-pocket ceiling, and the marginal tax rate of a
chronically ill person could make HSA-qualified coverage a better bargain than a traditional comprehensive insurance plan.
Adoption of the following financial incentives for consumers would lessen the advantage that the tax code provides to
employer-based plans at present:
Insurance policy (financial):
- Payroll taxes now imposed on amounts employees direct to their HSAs should be lifted.
- Insurance premiums for HSA-qualified insurance purchased in the non-group market should be made deductible from income taxes.
- Funds in an HSA account should be allowed to cover all "qualified medical expenses," as the tax code defines them, so long
as they have been incurred after HSA-qualified coverage begins, and the account is established by, say, April 15 of the
following year, as enrollees in retirement plans receiving tax preferences are allowed to do.
- Sums paid by patients to their primary-care physicians for the right to receive medical services on an as-needed basis should
be deemed qualified medical expenses.
Insurance policy (treatment):
- At present, the most that an HSA participant might have to spend in a given year exceeds the amount that he is allowed to
place in his HSA savings account. The contribution maximum should be raised to match the limit on out-of-pocket expenditures,
so that he does not have to pay out more than he has put in.
- Policyholders should be permitted to pay insurance premiums with funds deposited in HSAs.
- Spouses aged 55 and over should be allowed to make catch-up, or extra, contributions to a single health savings account
up to the maximum allowable for a couple, instead of being required to establish a second account.
- High deductibles for hospital and chronic care should be lowered, since they are unlikely to discourage excessive consumption
of health-care services, because of the non-discretionary nature of treatment of acute or incurable conditions.
- Many HSA policies offer first-dollar coverage of preventive services, such as vaccinations and physicals. A greater variety
of prescription drugs should be defined as "preventive," so that their cost to the patient would count toward a policy's deductible.
The same benefits should be extended to the management of chronic health conditions, such as diabetes.
- Congress should allow participants, after turning 65, to continue to contribute to their HSAs, although they have become
- Simplification of HSA-qualified insurance would enable clear comparisons with other types of plans, help familiarize consumers
with its features (with the assistance of insurers and employers) and might expand the benefits to be obtained.
ABOUT THE AUTHOR
Benjamin Zycher is a senior fellow at Manhattan Institute's Center for Medical Progress and a member of the advisory
board of the quarterly journal Regulation and the advisory councils of Consumer Alert and USA for Innovation. During the first
two years of the Reagan administration, Zycher was a senior staff economist at the president's Council of Economic Advisers. He
is also a former senior economist at the RAND Corporation, a former vice president for research at the Milken Institute, and
a former member of the board of directors of the Western Economic Association International. He holds a Ph.D. in economics
from the University of California Los Angeles (1979) and a master’s degree in public policy from the University of
California Berkeley (1974).
Zycher's research focuses on the economic and political effects of regulation, government spending, taxation, and counterterrorism
public expenditures. He has done considerable work on health-care policy and the economics of the pharmaceutical sector and on
energy and environmental policy. He is the author of "Defense Economics" and "OPEC" in The Concise Encyclopedia of Economics (2008).
The views expressed do not purport to represent those of the Manhattan Institute or of any of its officers or sponsors. Appreciation
for thoughtful comments is due John C. Goodman, John R. Graham, Paul Howard, Howard Husock, and Roy Ramthun.
1. Introduction: Background on HSA-Qualified Health Coverage
Health coverage obtained through employers enjoys a substantial tax advantage, significantly distorting the economics of both health
insurance and health care. Specifically, the premiums paid by employers and employees for employment-based coverage are excluded from
taxable income, but deductibles and co-payments are not. Due to this tax subsidy, the premiums in question are typically high, and the
annual deductibles are consequently low, encouraging policyholders to be not as careful as they might be when deciding whether to seek
medical care, and when they decide which health-care goods and services to seek.
One response to this problem was Congress’s enactment of the Medicare Reform Act of 2003. A section of this law created a new class
of health coverage that could be obtained either at one’s place of work or in the non-group market. Those plans meeting certain federal
requirements could be coupled with Health Savings Accounts, into which covered individuals and their employers would be permitted to
direct pre-tax dollars, where they could accumulate tax-free. They could then be withdrawn, also without incurring any tax liability,
to meet their associated policies' deductibles and out-of-pocket co-payments. HSA-qualified plans have higher deductibles and, in many
cases, higher out-of-pocket spending limits as well as lower premiums than traditional policies. In most other respects, the two kinds
of plans are similar.
The central objectives of this new type of health coverage/savings account, from the standpoint of after-tax cost to the consumer,
were to level the playing field between employer-provided health coverage and coverage purchased outside of employment, to increase the
control that policyholders/patients had over their health-care expenditures, and to offer stronger incentives to economize on the
consumption of health care services while preserving protection from large or catastrophic medical expenditures. If large numbers of
Americans chose to enroll in HSA-qualified plans, the combination of lower premiums and lower consumption would have a good chance of
restraining the growth of aggregate health costs.
We now have four years of experience with HSA-qualified health coverage. This paper examines the available data so as to identify
what is already known and what additional analysis needs to be undertaken. For example, the behavior of large groups of policyholders
should be analyzed to determine whether high-deductible insurance in fact strengthens discipline in the consumption of health-care
services. In addition, more analysis is needed of the impact on health if high-deductible coverage should succeed in reducing
This paper also inquires into the prospects for meaningful
growth in the spread of HSA-qualified plans by comparing
the rate at which individuals obtained coverage in its first
four years, as well as the rate at which it gained share
in the private insurance market, with the rate at which
assets in analogous tax-advantaged savings vehiclesIndividual
Retirement accounts (IRAs) and 401(k) defined-contribution
pension plansaccumulated. Finally this paper discusses
how existing plans might be improved and made more appealing.
The Rationale for Health Savings Accounts.
The Medicare Modernization Act, a federal law that took
effect in 2004, is mostly known for the controversial new
prescription drug benefit it offered under Medicare Part
D. But this act also created Health Savings Accounts (HSAs),
a new method by which Americans may save and pay for their
medical care. HSAs are savings accounts for current and
future medical expenses; the funds that individuals (and/or
their employers) deposit, any interest accrued, as well
as subsequent expenditures on medical care are exempt from
federal (and often state) taxesa substantial tax preference.
However, these accounts must be coupled with health-insurance
plans having particular features, the most important of
which is a relatively large deductible. Such coverage is
"HSA-qualified." As discussed more fully below, the central
goals of this vehicle are twofold: 1) to give individuals
greater say in choosing the coverage they want, both by
de-linking coverage from employment and reducing the relative
tax advantage that employer-provided coverage has in comparison
with coverage purchased by individuals or families in the
non-employer or other non-group market; and 2) to discourage
excessive consumption of health care, considered to be one
of the causes of escalating spending, by asking individuals
to bear a higher proportion of the costs of the care they
do consume. In short, HSA-qualified health coverage is intended
to preserve coverage in years when health-care expenses
are highby providing insurance for "catastrophic"
expenseswhile also encouraging greater discretion
by consumers as they incur low-cost and routine expenses.
The Tax Advantage for Employer-Provided Coverage.
It is widely recognized that the market for health insurance
in the United States is heavily distorted by the federal
tax code's favorable treatment of employer-provided health
insurance: While wages are taxed as ordinary income, the
portion of the premiums for health-insurance policies that
employers pay on behalf of their employees and their families
is not taxed, even though it is undeniably a form of compensation.
Jonathan Gruber notes that "this tax subsidy makes health
insurance, which is bought with tax-sheltered dollars, artificially
cheap relative to other goods bought with taxed dollars,
leading to over-insurance for most Americans."
One outcome of the tax code’s ability to induce taxpayers to obtain greater coverage than they would otherwise is the popularity of
policies that have relatively low deductibles and copayments (or coinsurance). The tax code operates as follows:
Taxpayers enjoy an exclusion of employer-paid premiums but must pay any deductibles with unsubsidized, after-tax income.
(Even first-dollar coverage provided by employer-provided insurance is not unusual in the United States.) This carrot-and-stick combination
makes policies with relatively low deductibles and necessarily high but subsidized premiums the favorites of consumers.
By contrast, coverage purchased by individuals or families outside of their employment does not receive a tax preference. The probable net
effect of this form of tax favoritism is less economical use of resources than a more pay-as-you-go policy would encourage, and thus rising
costs for all.
The spread of savings accounts that have high deductibles but shelter the funds that participants contribute to them, plus a revision
of the tax code to assure that health-care coverage provided by employers is treated no more favorably than coverage purchased in the open
market, should lead to greater discipline in the consumption of health care.
According to the following 2006 assessment by the president's Council of Economic Advisers, Consider a scenario in which new policies
successfully reduce [the growth of] future national health spending by one percentage point per year, through a combination of
short-run quantity decreases, medium-term price decreases [for care], and long-run increases in cost-reducing technological change. If
spending were to grow by 6 percent per year, instead of by 7 percent per year as currently projected, by 2025 the expected health share
of GDP would be reduced from 22 percent to 18 percent.
John C. Goodman, a prominent and longtime proponent of such plans, argued in 2004 that HSA-eligible coverage would create "a level
playing field between third-party insurance and individual self insurance." Senator Jim DeMint of South Carolina
argued that offerings like HSAs "[turn] you into a shopper. And when you start shopping for health care, lots of good things start
happening." Senator Tom Coburn of Oklahoma, a physician, argued: "Expanding health savings accounts will help
put consumers back in charge of their own health care." These and other legislators thought that after the
introduction of HSAs attached to compatible forms of health coverage, the tax-driven distortions of the U.S. health-care system
would decline substantially. But only two years later, legislation to improve HSA coverage and the savings programs was introduced
We now have four years of experience with HSA-qualified
health coverage. This paper presents how it has fared so
far, what additional analysis needs to be undertaken, and
how it might be improved. My research also investigated
how popular such plans have become so far. Doing so permits
me to estimate how likely they are, as time goes on, to
accomplish the policy goals that inspired them.
I report on the plans' rate of uptake and then compare it
with the rate of uptake of other forms of tax-favored savings
accountsIndividual Retirement Accounts (IRAs) and
401(k) defined-contribution plans, which were established
earlier and have proved to be highly popular with the American
Some Characteristics of HSA-Eligible Health Coverage.
High-deductible health-insurance plans, as the name suggests,
are plans with a relatively large fixed amount that the
policyholder must pay for covered services in a given year
before insurance benefits begin to be paid. Such health-insurance
plans, if they meet several requirements imposed by the
federal government, often are coupled with savings accounts
funded with deposits to be used for health-related spending.
Withdrawals from these accounts to pay deductibles, copayments,
coinsurance and other out-of-pocket expenses, and a broad
range of medical expenses not covered by insurance, as well
as to pay insurance premiums under limited circumstances,
are permitted. Funds not spent in a given year may be carried
over to an unlimited number of subsequent years and used
to meet expenses incurred then. They can also be withdrawn
after age sixty-five for other purposes but will be taxed
as ordinary income in that event. Whether or not they are
coupled with health savings accounts, these health-insurance
plans often are referred to as HSA-qualified health plans.
Contributions by either employers or individuals are exempt
from federal income taxation, both when they are made and
when they are withdrawn to meet approved health-care expenses.
Sums expended on health care before a policy's deductibles are met are out-of-pocket expenses for policyholders. Sums withdrawn from health
savings accounts to pay for health care, though some portion of them may have been contributed by employers, are also a cost for policyholders,
encouraging them to exercise greater caution in the consumption of health-care goods and services, since amounts spent less prudently will be
unavailable for later, more necessary, care. The greater the control that high-deductible health insurance, particularly when coupled with
health savings accounts, gives policyholders over their spending, the greater the likelihood that that spending will be restrained.
The logic of these incentives works especially well with people who do not expect to exhaust, year after year, the funds they contribute,
as the chronically ill might be expected to do. Others would be aware that some years hence they were likely to face large medical expenses,
which would be met first by funds in the savings account, which had accumulated and appreciated year after year, until the out-of-pocket ceiling
is reached, and then by the insurance provider in their entirety. Such plans introduce incentives to consume health-care resources less
extravagantly, resulting in reduced aggregate growth in costs. How those people who have signed up for HSA-qualified
plans differ from those who have not, with respect to income, tax bracket, state of health, and subjective factors such as awareness of health
costs and risks, is not yet evident.
The traditional purpose of insurance is the pooling of
risks; in effect, each member of a large group of policyholders
pays all the other members to bear any member's future costs
to the extent that they exceed that member's deductible
and maximum responsibility for out-of-pocket spending. Because
of the ordinary law of large numbers, the proportion of
a large group of individuals exposed to the risk that a
low-probability adverse event will occur is almost always
close to the statistically expected proportion actually
experiencing the adverse event. That proportion usually
is the average experienced over time. On this basis, members
of the group can be assessed actuarially fair premiumspremiums
reflecting losses expected statisticallyplus some
administrative cost, enabling the group as a whole to bear
the now well-understood risks of the respective members.
"Insurance" Is Not "Prepayment." From the
standpoint of the individual (or family), the purpose of
health-care insurance is avoidance of what could be the
highly adverse financial consequences of a serious illness
or injury. But the tax preference
for employer-provided insurance has moved the system away
from such efficient risk-pooling and toward a system of
"prepayment" for health-care servicesthat is, smaller
deductibles, copayments/coinsurance, and out-of-pocket maximums.
Such a system has consequences for the overall economy:
As the prices that patients (as opposed to third parties
paying on their behalf) directly face fall below the (marginal)
cost of the services they are provided, due to the lower
deductibles they must pay and the copayment/coinsurance
payments they must make, aggregate demand and costs inexorably
And so an additional goal of high-deductible health insurance
is a reduction in the distortion of consumer choice caused
by tax incentives favoring low-deductible or first-dollar
coverage. Consider an individual choosing among plans with,
respectively, deductibles of $250, $1,000, and $2,500. The
coinsurance that the insured party pays after meeting the
deductible is 20 percent in each of the plans, while the
policyholder’s out-of-pocket maximum expenditures are, respectively,
$2,000, $3,000, and $5,000. The actuarially fair premiums
in this simple example are, respectively, $4,000, $3,500,
Assume that this policyholder makes no health-care expenditures
in year one but suffers a $15,000 catastrophic event in
year two. Table 1 illustrates the financial outcome for
this individual under three alternative assumptions about
This example is somewhat artificialchanges in the
expected timing of catastrophic events and other assumptions
might influence an individual's choicebut it does
illustrate how the distortion created by tax policy can
affect the relative perceived costs among insurance options.
The tax distortion in this example, if applied only to insurance
premiums (whether paid by employers or the covered party),
should induce a shift toward policies with low deductibles.
But this bias is corrected by the addition of a tax preference
for HSA contributions accompanied by a high-deductible policy,
which produces a lower total cost for the policyholder,
not to mention whatever aggregate beneficial price effects
that widespread adoption of high-deductible plans might
Evidence on Costs and Health-Care Demands.
The available empirical evidence on the question of whether
a shift of costs onto patients reduces the amount of health
care demanded tends to suggest that such a shift does.
The earliest evidence was provided by the RAND Health Insurance
Experiment, conducted in the 1970s and early 1980s,
which provided free medical insurance to some families and
graduated levels of cost-sharing (25, 50, and 95 percent)
to others. In addition, the policies had a series of levels
of out-of-pocket maximums, depending in part on family income.
One variant imposed cost-sharing on the use of outpatient
services but none on the use of hospital services. The analysis
found that policyholders and issuers of policies with high
deductibles spent about 30 percent less in total on medical
care than they did when coverage was free; lower deductibles
produced a 20 percent savings. Consumers facing large deductibles
made between one and two fewer visits to physicians per
year than those who did not have to worry about cost, and
they were hospitalized less as well.
There exists some evidence of the extent to which consumer-directed health plans reduce demand (or demand growth) for health-care
services as well as their cost. Buntin et al. find "modest favorable health selection, one-time reductions in use and costs, and mixed
effects on [health-care] quality." Dixon, Greene, and Hibbard find evidence that enrollees in consumer-directed health
plans are more likely than others to make "risky" cost-saving decisions. Fronstin and Collins find that adults "in
consumer-driven plans continue to be more cost-conscious … than those in comprehensive health plans" but that they "are more likely to skimp on
needed medical care or medications because of cost." Rowe et al. find that enrollees in consumer-directed plans use
preventive and chronic-illness services to the same extent as enrollees in PPO insurance plans. Greene et al. find
that enrollees in high-deductible plans are more likely than those with different coverage to discontinue taking drugs belonging to two out
of five classes.
Evidence presented below (in Tables 9 through 11) strongly suggests that with the possible exception of policies that insured individuals
(and families) in their twenties and that were purchased in the non-group market, HSA-qualified policies charge significantly lower premiums
than other types of health coverage do. At least in this respect, they restrain costs. Below we examine how popular such insurance policies
are proving to be, and their chances of reducing aggregate health-care costs.
Section II presents some basic data on HSA-qualified insurance policies. Section III discusses the growth in the number of individuals
obtaining HSA-qualified coverage since 2005, and it then examines the growth of IRAs and 401(k)s and related vehicles for retirement savings
enjoying tax preferences. Section IV discusses some potential problems afflicting the market for HSA-qualified plans, and offers some
conclusions and policy recommendations.
2. Some Basic Facts about HSA-Qualified Health Insurance
Deductibles under Alternative Types of Health Coverage.
In general, consumer-directed health insurance plans
that are "HSA-qualified" have higher deductibles and perhaps
out-of-pocket spending limits, and lower premiums, than
traditional health insurance plans, but otherwise resemble
the latter. For 2008, HSA-qualified
plans for an individual must have annual deductibles of
not less than $1,100 and not greater than $5,600, or, respectively,
$2,200 and $11,200 for a family.
Table 2 presents data for 2007 and 2008 on average annual
individual and family deductibles for workers enrolled in
health-maintenance-organization (HMO) plans, preferred-provider
plans (PPO), point-of-service (POS) plans, and HSA-qualified
Table 3 presents data for 2006 and 2007 on the average
individual and family deductibles of policies purchased
in the non-group (or non-employer) market, for HMO, PPO/POS,
indemnity, and HSA plans, respectively. Tables 2 and 3 show
that the deductibles for HSA-qualified policies that both
covered workers and covered individuals not members of a
group have to pay are significantly largerby multiples
of between 1.2 and 4.7than the deductibles specified
in other types of health plans.
Recently, however, they have grown much more slowly.
Out-of-Pocket Spending Limits. Table
4 summarizes the available data on the range of out-of-pocket
spending limits for individual workers enrolled in health-insurance
plans in 2007 and 2008. Table 5 does the same for workers’
Tables 4 and 5 strongly suggest that the out-of-pocket
spending limits of high-deductible plans (including HSA-qualified
plans) covering workers and their families tend to be higher
than they are in other kinds of plans. The high-deductible
plans in at least half the cases have out-of-pocket spending
limits of more than $3,000, in the case of workers' individual
plans; and more than $6,000, in the case of workers' family
Table 6 presents similar data on the out-of-pocket spending
limits of individual policies purchased in the non-group
Table 7 presents the available data on out-of-pocket spending
limits for family policies purchased in the non-group market.
Table 8 presents data on the weighted averages of the out-of-pocket
spending limits in both individual and family non-group
policies purchased in 2006–07.
The evidence summarized in Tables 6 and 7 is more mixed,
as are the data in Table 8. For individual workers' HSA-qualified
plans, Kaiser Family Foundation-HRET reports average out-of-pocket
maximums, for 2007 and 2008, respectively, of $3,090 and
$3,292; and for themselves and their families, they were
$6,505 and $6,280, respectively.
Note that Tables 3 and 8, which set out the differences among plan types in deductibles and out-of-pocket spending limits, suggest that
higher deductibles are to some degree responsible for higher out-of-pocket expenditures.
Comparative Premiums. Table 9 summarizes
the available data for 2007 and 2008 on average annual premiums
for insured workers obtaining individual and family coverage.
The premiums for HSA-qualified policies are 3540 percent
lower than those for other types of plans and actually fell
in 2008, according to the Kaiser-HRET survey. This finding
is curious, given the fact that deductibles for HSA-qualified
policies purchased for covered workers and their families
did not rise markedly in the same period, as shown in Table
2. This finding may be an artifact of the particular survey
sample represented in the Kaiser-HRET findings, or it may
result from changes in the policies adopted by employers.
With the available data, it is not possible to distinguish
among the various types of non-group plans. The data do,
however, allow a rough comparison of premiums for the best-selling
HSA-qualified plan with the weighted average of the premiums
for all plans sold in the non-group market (including HSA-qualified
plans); the data also allow a rough comparison of the respective
premiums by age group. Table 10 presents the available data.
Because the computation of the weighted-average "All Plans"
premiums in Table 10 includes premiums for HSA-qualified
policies, the difference between the average premiums for
HSA-qualified plans and all other types of plans is likely
to be greater still. Data published by AHIP show that as
of its January 2008 census, about 25 percent of those covered
by HSA-qualified policies were participants in plans purchased
in the non-group market. The presence
of this 25 percent requires an adjustment in the computation
of the all-plans averages, as shown in Table 11.
For the youngest age group, the HSA-qualified plans in the
survey were about 10 percent more expensive; but note that
the data do not include eighteen- and nineteen-year-olds,
presumably the healthiest members of the cohort. For the
other age groups, the HSA-qualified plans were less expensive
by factors ranging from 11 percent to 36 percent.
9 through 11 strongly suggest that with the possible exception
of premiums on non-group policies that individuals in their
twenties purchase for themselves and their families, premiums
for HSA-qualified policies are significantly lower than
those for other types of health coverage.
Table 12 presents summary data on the central features of the best-selling HSA-qualified plans, as of January 2008.
Preventive Care. The higher deductibles and
out-of-pocket limits of HSA-qualified policies (at least
those purchased in the employer group market) strongly suggest
that those covered by them face higher prices (or a greater
degree of cost-sharing) for health care (given their ability
to roll over account funds indefinitely) than those who
As noted above, one possible effect might be less consumption
of not only inessential health care but of essential care
as well, leading to greater expenditures down the line.
Accordingly, federal policy allows (but does not require)
HSA-qualified plans to cover preventive care on a first-dollar
basisthat is, before the plan deductible is met. Ramthun
notes that most HSA-qualified plans do offer coverage of
at least some preventive serviceswhether at 100 percent
or with a copayment/coinsurancebefore the plan deductible
is met. Examples are periodic health
evaluations and physical examinations, prenatal and well-child
care, immunizations, smoking-cessation programs, obesity
programs, and some drugs. Table 13 presents the available
data on the extent of preventive-care coverage of insured
workers by plan type. The differences
among them are quite small.
Table 14 shows the available data on cost-sharing for preventive services in HSA-qualified and high-deductible health plans in 2007.
Roughly three-quarters or more of such plans have no cost-sharing for preventive services.
Table 15 presents the available data for 2007 on the percentage
of HSA-qualified and high-deductible health plans offering
various preventive benefits on a first-dollar basis. Most
of the plans cover most preventive services on a first-dollar
Rowe et al. found that enrollees in consumer-directed plans
are using preventive and chronic-illness services at rates
close to those of enrollees in PPO insurance plans.
Fronstin and Collins, comparing the rates of use of preventive-care
services by people enrolled in high-deductible plans with
the rates at which such services are used by enrollees in
more comprehensive programs, made a similar finding.
However, among high-deductible plans in which preventive
and screening services are not available on a first-dollar
basis, Fronstin and Collins found some differences.
Shaw Electric: Making HSAs Work for Their Employees
By Paul Howard*
Rising health-care costs are one of the biggest challenges
facing small-business owners. A December 2008 Robert
Wood Johnson Foundation survey of small firms offering
health benefits found that 36 percent reported that
rising costs are likely to force them to cut
some portion of coverage for their employees within
the next three to five years.
Shaw Electric is a small, family-owned firm based
in Detroit that clearly cares a lot about both its
work and its employees. The hallways are decorated
with aerial photos of Shaws many completed projects,
such as the University of Michigans football
stadium, and the company website prominently mentions
the International Brotherhood of Electrical Workers
representation of Shaw employees starting in 1931.
Dave Kurtz is chairman of Shaw Electric. He has the
lean frame of an iron-man triathlete and the can-do
attitude of his grandfather, who had the guts to launch
the company in the teeth of the Great Depression.
Granddad started the company in 1930 and had
no work, Kurtz explains over coffee at Shaws
Livonia, Michigan, headquarters, but he was
on equal terms with every other contractor in Detroit.
For both personal and financial reasons, it came
as a shock to Kurtz and his management team when in
2005 three of his longtime employees developed serious
heart ailmentsone of them fatal. At the end
of the year, Shaws health insurer, Blue Cross
Blue Shield of Michigan, announced double-digit premium
increases for 2006; and from 2000 to 2005, the companys
monthly premiums for family coverage had already increased
a staggering 75 percent.
Shaw wanted to control its health-care costs without
cutting coverage to the bone. My wife has a
serious autoimmune condition and requires a lot of
care, Kurtz said, and I wanted to make
sure that that level of coverage was preserved. And
we have other families also dealing with serious illness.
Still, people have to start taking more responsibility
for their own health.
Kurtz started shopping for a new health-care plan
and corporate wellness package with help from Cindy
Shaw, a retired benefits administrator and President
Tim Shaws wife. She had heard good things about
Health Savings Accounts (HSAs).
Two principles guided their search for a new plan.
The first was giving employees more responsibility
for routine care. Insurance is supposed to cover
the catastrophes, Kurtz stated. You need
to think a little bit about the minor items and become
more educated about what youre spending your
money on. High-deductible health plans were appealing
for that reason. The second principle was to
retain all or nearly all the physicians included under
the existing plan.
Shaws management team quickly realized that
switching to an HSA-eligible high-deductible health
plan (HDHP) would save the company tens of thousands
of dollars in premiums every year. But Cindy also
knew that employees would have lots of concerns and
that the company would have to work hard to allay
them. On our benefits committee, we put on an
employee who had a child with chronic illness so that
this employees concerns would be addressed.
Before switching, the company held meetings to walk
everyone through the transition, which was completed
in April 2006.
The HSA structure that Shaw adopted is relatively
simple. Shaw fully funds the HSA deductible$2,000
for individuals and $4,000 for families. After the
deductible is met, 80/20 coinsurance is extended until
the employee has paid an additional $10,000 out of
pocket. Once a cap of $14,000 on out-of-pocket spending
is met, all additional costs are fully covered.
Shaw also added $500 to cover employee physicals,
which can lead to early detection and treatment, and
to help young families pay for infant and pediatric
immunizations before the deductible kicks in. Savings
from the switch to HSAs were immediate and substantial.
The company was able to contribute to every enrolled
employees HSA an amount equal to the policys
deductible, offer a corporate wellness benefit that
included gym membership, and still pay about 2 percent
less than the previous years premium.
The company has been happy with its HSAs: its 2008
premiums for family coverage are still about 40 percent
below what it had been paying in 2005 under the old
plan. The company is, however, expecting increases
in 2009, largely because its insurer will be writing
separate policies for Shaw Electric and one of its
subsidiaries, Detroit Electric, thus reducing the
size of the insurance pool to which each company belongs.
Still, Kurtz believes that Shaw will keep its HSAs.
Why did HSAs catch on at Shaw? Kurtz has a quick
answer: education and trust. We had meetings
with the staff explaining how and why we were switching
to a different plan. The employees know Im not
going to turn around and blindside them.
*Paul Howard is a senior fellow at the Manhattan
Institute and the director of its Center for Medical
3. Growth of HSA-Qualified Plans and Tax-Preferenced Retirement Savings Vehicles
Early Participation in HSA-Qualified and High-Deductible
Health Coverage. If HSA-qualified health coverage
is to restrain the growth of health-care costs in the aggregate,
it must appeal to ever-growing numbers of health-care consumers.
Questions arise as to how its rate of adoption is to be
measured, and then how to judge whether that rate is fast
or slow. One difficulty is that while enrollment data on
high-deductible plans in general are available, data on
HSA-qualified policies in specific are not. However, it
should be possible to make inferences about HSA-qualified
policies' prospects for widespread adoption by comparing
the rate of adoption of high-deductible plans in general
over the almost four years for which data on HSA-qualified
plans exist with the rate of adoption over similar intervals
of other kinds of tax-advantaged savings plansnamely,
individual retirement accounts (IRAs) and defined-contribution
retirement-savings plans such as 401(k) plansthat
feature longer histories.
Table 16 presents the available data on the growing numbers
of people covered by HSA-qualified and high-deductible health
insurance for the period 2004/2005 through 2007. Note that
the data in Table 16 may underreport coverage under such
policies due to incomplete reporting in the AHIP survey;
as of January 2008, about 6.1 million individuals were covered
under such plans.
The subject of Table 17 is the number of U.S. residents
covered by private insurance and the proportion of them
covered by HSA-qualified and other high-deductible insurance.
The large increases in the rate at which HSA-qualified/high-deductible
coverage has grown reflect the low base from which it started;
in fact, the rate of increase has tapered off as the numbers
of enrollees have become larger. Even so, after only four
years of availability, HSA-qualified and other high-deductible
insurance plans achieved a 3 percent market share by 2007,
indicating the possibility that HSA-qualified coverage can
become an important part of the private health-insurance
The Kaiser Family Foundation-HRET reports that among firms
offering health benefits, 2 percent offered an HSA-qualified
option in 2005, 6 percent in 2006, 7 percent in 2007, and
11 percent in 2008. Among those
not offering an HSA-qualified option in 2008, 4 percent
reported themselves as "very likely" to offer one in 2009,
and 21 percent as "somewhat likely."
Kaiser-HRET also reports that while the percentage of workers
enrolled in HSA-qualified plans increased from 3 percent
in 2007 to 4 percent in 2008, worker enrollment in other
types of high-deductible plans was constant at 3 percent,
perhaps demonstrating the relative attractiveness of HSA-qualified
plans. However, it should be noted that the average annual
premiums of other types of high-deductible plans for individuals
rose sharply in this periodby 14.7 percent (0.7 percent
for family coveragewhile premiums for HSA-qualified
plans, according to the Kaiser-HRET survey, appear to have
fallen, as shown in Table 9.
Interestingly, the actuarially expected cost of an HSA-qualified
plan, other things held constant, is lower than that of
a high-deductible plan coupled with a health-reimbursement
arrangement (HRA), under which an employer reimburses an
employee for health costs that the employee's policy did
not cover, because the funds in the HRA revert to the employer
if they are not spent or if the employee leaves the firm,
both common occurrences. Accordingly, beneficiaries of HRAs
have an incentive to incur medical expenses, lest the benefit
that the HRA extends be forfeited. By contrast, the fact
that savings deposited into health savings accounts are
owned by the policyholder and can be rolled over indefinitely
discourages ill-considered use of health care, which depletes
funds that will be needed when genuine health problems arise.
Fronstin and Collins report several relevant findings in the latest EBRI/Commonwealth Fund survey:
- 61 percent of consumers are "extremely" or "very" familiar with consumer-directed health plans;
- 53 percent find such plans "easy to understand";
- 63 percent of those covered by employment-based consumer-driven health plans had a choice among plans, while 35 percent of such
individuals did not have a choice;
- Of those covered by employment-based comprehensive plans, 54 percent had a choice, while 40 percent did not. Of those enrolled in
other high-deductible plans, 46 percent had a choice, while 50 percent did not.
In that survey, 51 percent of individuals who had a choice of employer health plans or who were in the non-group market report the main
reason for their choice of a consumer-directed insurance plan to be its lower premium. The percentages of
consumers who are "extremely" or "very" familiar with consumer-driven health plans (61 percent, as stated above) or find such plans
"easy to understand" (53 percent, as stated above) thus could probably be raised by better provision of clearer information by insurers
If the tax benefits of adopting a HSA-qualified plan, plus its lower premiums, exceed the cost of such policies' higher deductibles,
the health-care consumer for whom this is true will likely choose such a policy. In the Fronstin/Collins survey, 46 percent of the
respondents reported that the "opportunity to save money in the account [and] rollover [sic] funds for future years" was the main reason
for choosing a consumer-directed plan. This responsiveness to economic incentives suggests that it is reasonable
to project a growing market share for HSA-qualified plans over time, as those to whom they are best suited embrace them.
Available data on the present number of HSA savings accounts
are limited. Unofficial estimates suggest that there are
about 3 million to 3.5 million such accounts, or about one
for every two individuals covered by HSA-qualified plans,
or about one per family. This number is consistent with
private findings by the Health Savings Accounts Council
of the American Bankers Association, which reports about
1.66 million such accounts in a survey in which more than
half of U.S. banks participated (an equivalent figure if
extrapolated to 100 percent). It
is consistent as well with the figure of 2.9 million health
savings accountscontaining over $3.9 billionreported
by AIS Health. But some evidence
suggests that a substantially greater number of HSA accounts
than that are open: 5.7 million in one survey and 6.5 million
in another, both as of the third quarter of 2008.
AHIP reports that among the health savings accounts open in January 2008, 44 percent had been open more than eighteen months, with an additional
16 percent open for thirteen to eighteen months. Balances in these accounts averaged $1,382, and spending of funds in the
accounts in 2007 averaged $1,083. Kaiser-HRET reports that 72 percent of employers made contributions to their employees’
health savings accounts in 2008 and that these contributions averaged $1,139 for individual coverage and $2,067 for family coverage.
 Eighty-six percent of the customers of UnitedHealthCare said that they were more likely to open health savings
accounts to which their employers contributed, according to a survey conducted by that company.
Early Participation in Individual Retirement Accounts
and Defined-Contribution Retirement Programs. Table
18 presents annual data, for the years 1975 through 2007,
on total assets in Individual Retirement Accounts (IRAs),
in defined-contribution pension programs, and in total retirement
assets, in billions of year-2007 dollars. Of course, some
of the growth in value represents asset appreciation, not
just increases in participation rates and the size of contributions,
whose mandated maximums have grown over time.
The available data do not report the assets in defined-contribution
pension plans separately before 1975. This lack of data
on the growth of such assets in the years following the
plan's implementation precludes comparison with the early
growth of HSA-qualified and high-deductible health insurance,
as shown in Table 17. The available data do permit the summing
of assets in defined-contribution and defined-benefit plans
between 1945 and 1974, assuming that during the 194574
period, the ratio of defined-contribution assets to defined-benefit
assets, as it shifted, corresponded to the ratio observed
in the 197584 period. During the latter period, the
ratio increased from 0.44 to 0.49.
These figures yield an imputed ratio for 1945 of 0.29, which
grows to 0.335 for 1954.  Table
19 presents these data and calculations.
Table 20 presents data on the growth of HSA-qualified and high-deductible health-insurance plans, as well as IRAs and defined-contribution
pension programs, in their respective early years. Participation in HSA/high-deductible health coverage, as a proportion of all health coverage,
has grown slightly faster than the proportion of total retirement assets that IRA assets alone represent. The data on defined-contribution
plans are murkier, as discussed above, and so do not allow inferences to be made with confidence. Since IRA and defined-contribution funds
are subject to the account owners' control, they may have performed differently from the other varieties of pension funds.
Lessons from the Early Years of IRAs and Defined-Contribution
Plans. Individual Retirement Accounts were created
as part of the Employee Retirement Income Security Act (ERISA),
enacted in 1974. Congress has introduced a number of changes
to the IRA system since then: encouraging small businesses
to offer retirement plans to their workers, expanding and
then restricting eligibility, and so on.
Among the most important changes was the creation of the
"universal" IRA in 1982, to which all workers under age
70½ were eligible to make contributions, regardless of income.
As shown in Table 18, a sharp increase in the growth of
IRA assets occurred in the years following this change and
then tapered off in the years after 1986, when the universal
right to establish an IRA no longer existed, due to congressional
action. From then to the present, participation has been
governed by increasingly complex contribution and eligibility
rules that have changed over time; in addition, Congress
has created several new types of IRAs.
Holden et al. note:
Incentives work best when rules, structure, and provisions
are simple, understandable, and predictable.… In contrast,
the record shows that complexity discourages the use of
IRAs. This is particularly evident in individuals' negative
reactions to the complicated rules that determined tax-deductible
contribution eligibility after the elimination of the "universal"
Tax rules implemented virtually since the (re-) introduction
of the income tax in 1913 have allowed workers to defer
taxation of profit-sharing contributions that their employers
made to their retirement plans.
Various legal and regulatory changes have ensued, some having
the effect of expanding participation and drawing additional
assets, and others having the opposite impact. The IRS published
regulations in 1981 that clarified the conditions under
which employees could make contributions from wages on a
pretax basis to 401(k) plans, and these clarifications had
the effect of promoting the adoption of such plans and increasing
their assets sharply the following year and beyond. On the
other hand, various congressional actions in the 1980s and
1990s limited the size of contributions to these plans,
as well as the tax preferences for them. Congress also increased
sharply the complexity of administering them.
Unfortunately, data on defined-contribution plan assets
are available only for the years since 1975 and, as noted
above, must be inferred for the period 194574. Nonetheless,
it is the case, unsurprisingly, that, as with IRAs, simplicity
and liberalized eligibility and contribution limits are
conducive to greater participation in such retirement plans
and the growth of their assets.
Table 20 shows that the percentage of all those covered
by private insurance who received HSA-qualified and high-deductible
health-plan health coverage in the first years of its availability
closely corresponds to the percentage of total retirement
assets found in IRAs in their beginning years. Indeed, the
former category slightly outperforms the latter. Defined-contribution
assets as a proportion of total retirement assets seem to
have declined in the years following 1945. Again, the data
for DC assets are based upon inferences permitting imputation
of figures for years for which there isn't data, as noted
above, and data on the size of such assets before 1945 are
not available. Moreover, the massive economic adjustments
following the Second World War are certain to have created
anomalies in rates of adoption and asset growth. Nonetheless,
these data on the whole suggest, preliminarily, that HSA-qualified
health coverage has the potential to expand sharply over
While both contributions to and withdrawals from HSA savings accounts enjoy a tax advantage, withdrawals from non-Roth IRAs and
defined-contribution retirement plans (subject to age requirements) are subject to taxation, a comparative advantage for HSAs.
Employers offering health-insurance coverage, however, typically offer a choice between HSA-qualified and other types of health plans.
For purposes of comparing rates of uptake of retirement plans and HSA-qualified plans in recent years, it is worth noting the finding of Holden, Brady,
and Hadley: "Increasingly, 401(k) plans are the only retirement plan offered by an employer. By 2002, 90 percent of 401(k) plans were stand-alone
Note that many larger employers offer a choice among retirement plans, so that 41 percent of all workers participating in 401(k) programs had
a choice of plans in 2002. But, as noted above, 65 percent of individuals covered by employment-based consumer-driven plans have a choice
among health coverage plans. Given the much higher rate of choice available to enrollees in employment-based
consumer-driven health plans, the rate at which they selected those plans is all the more impressive.
4. Conclusions and Policy Recommendations
The central purpose of high-deductible health coverage, combined with health-care-related savings accounts enjoying tax preferences, is
the provision of stronger incentives for individuals to economize on their consumption of health-care resources. As noted above, there are
good reasons, both conceptual and empirical, to believe that economizing would be the likely outcome. But it is clear that with HSA-qualified
insurance in its infancy, more evidence is required.
Toward that end, the consequences of the choices of large groups of policyholders at a few large firms who have been offered a range of
coverage plans, including HSA-qualified insurance, should be studied. Do those opting for such HSA-qualified plans systematically consume
fewer health-care services, holding age, medical characteristics, and other such important factors constant? In other words, is the case
in favor of high-deductible health coverage, particularly that qualifying for HSA savings accounts, empirically borne out?
Second, we need to learn to what extent high-deductible plans can jeopardize the health of policyholders by discouraging them from
incurring the cost of treatment. By the time a patient’s deteriorating condition can no longer be ignored, it will be more expensive to
treat, thus adding to aggregate health costs. In the case of a diagnosed chronic illness, continuation of treatment is rarely a matter of
discretion. Even so, federal law does not permit what is merely the continuation of treatment for an established, incurable condition to
receive first-dollar coverage, as preventable services may.
Nevertheless, even the chronically ill might opt for HSA-qualified coverage rather than a traditional fee-for-service plan.
For a patient covered by a policy with a low deductible of, say, $500 and a 20 percent copayment for the next $5,000 in medical expenses, the
total out-of-pocket expenditure would be $1,500, to be paid with after-tax dollars. Moreover, the premiums for such coverage would be higher
than those for HSA-qualified coverage. However, under an HSA-qualified plan, even an individual suffering from a
chronic illness would pay a low annual premium and use the savings to fund a health savings account, the pretax dollars in which could finance
the cost of the higher deductible. The net financial outcome for this hypothetical patient depends on the particular premiums, deductibles,
and out-of-pocket maximum expenditures that he is obligated to pay, as well as his marginal tax rate and other such factors. But it is far
from clear that high-deductible coverage linked to a health savings account is “only for the healthy.”
Should this combination of costs and benefits fail to be generous enough to induce the chronically ill to sign on to such coverage,
perhaps the extension of first-dollar coverage to the treatment of chronic illness would, provided a year’s worth of deductibles has been paid.
The difficulty in establishing that the treatment exempted from the deductible is for a chronic condition should be no greater than establishing
that a different kind of treatment is “preventive,” a category of treatment already covered under most such plans on a first-dollar basis. Of
course, the extension of this valuable benefit could require an increase in the level of premiums. Whether it actually
would is worth finding out but cannot be unless regulations proscribing such experiments on behalf of differently situated individuals are lifted.
If the link between employment and health insurance should unfortunately be perpetuated, there are nevertheless several smaller steps that could
be taken to increase the popularity of HSA-qualified plans. This country’s experience with retirement plans suggests that greater legal and
regulatory simplicity combined with looser eligibility standards and more generous limits on the contributions that policyholders can make
to their health savings accounts could achieve that outcome. Many of these ideas would be worthy candidates for
1. One policy change that might induce people to adopt HSA-qualified plans would be the elimination of payroll taxes on that portion of
salary contributed to a health savings account. Employee contributions are now excluded from income taxes, but not payroll taxes, while
employer contributions are exempt from both.
2. Another such change would be raising the annual contribution limit for HSA savings accounts to the out-of-pocket maximum for a
given plan, so that a policyholder's tax-advantaged contributions would be able to cover his out-of-pocket expenses in their entirety.
This change might prove particularly important for those suffering from chronic medical conditions, who are likely to reach the
out-of-pocket maximum, and should not let cost keep them from obtaining essential care.
3. HSA-qualified insurance premiums for policies purchased in the non-group market should be tax-deductible; perhaps they could even
be paid for with HSA funds. Under current law, funds in HSA accounts may be used to pay health-insurance premiums only when the covered
individuals are receiving federal or state unemployment benefits or are covered by their former employer's COBRA continuation policy. In
addition, HSA funds may not be used to pay a spouse's Medicare premiums unless the HSA account holder is aged sixty-five or older. The
extension to everyone of the right to pay premiums with HSA funds might be combined with a tax credit for the portion of an individual's
payroll taxes that equals these premiums. With these two changes, the tax treatment of HSA-qualified health-insurance premiums would become
the same for all taxpayers, regardless of whether their employers offer health benefits.
4. Deductibles should be reduced for hospital care, which is usually mandatory and thus unlikely to be sought less often as the result
of such economic disincentives as a high deductible.
5. When people enroll in an HSA-qualified plan, some let a few months elapse between the beginning of their health coverage and the
establishment of their health savings account. Current regulations do not allow reimbursement of medical expenses incurred during that
time gap with funds drawn from a health savings account. Perhaps all "qualified medical expenses" (as defined under the tax code)
incurred after HSA-qualified coverage begins could be reimbursable with funds from an HSA account, as long as the account is established
by, say, April 15 of the following year. Such a change would be consistent with the regulatory treatment of many tax-preferenced retirement plans.
6. Preventive care should be redefined to cover a greater
number of prescription drugsin particular, the type
of drugs that prevent complications resulting from chronic
conditions. Current law allows "preventive care" services
to be covered on a first-dollar basis.
7. Current law allows HSA-eligible individuals aged fifty-five or older to make catch-up contributions each year. If made by both
spouses, however, they must be deposited into separate HSA accounts, even if both are eligible to make catch-up contributions. Allowing
the spouse who is the HSA account holder to double his or her catch-up contribution on behalf of the other eligible spouse would avoid
an unnecessary duplication of accounts.
8. Most Medicare beneficiaries may not contribute additional
funds to their health savings accounts, although they may
continue to draw funds from them. Enrollment in Medicare
Part A is automatic upon turning sixty-five and receiving
Social Security, and it is difficult to delay or decline
enrollment. Being able to contribute additional funds after
enrollment would be desirable in view of the size of the
current deductible for hospital coverage under Medicare
Part Aover $1,000 per admissiona sum nearly
equal to the minimum deductible required of HSA-qualified
9. Medicare Medical Savings Accounts are a relatively new type of plan under the Medicare Advantage program. MSA plans allow seniors
to enroll in a high-deductible plan and receive tax-free contributions from the federal government to HSA-like accounts. Because the
government contribution is significantly lower than the plan deductible, Medicare beneficiaries enrolled in such accounts should be
allowed to contribute their own pretax dollars to them, which they may not do today.
10. The HOPE Act of 2006 allowed employers offering Flexible Spending Arrangements (FSAs) or Health Reimbursement Arrangements (HRAs)
to shift an employee's unused funds to a newly established HSA up to the amount that was in an FSA or an HRA as of September 21, 2006.
However, an employer may not roll over any unused FSA funds unless it offers a "race period" to the employee, extending until March 15
of the year following the conversion, during which he can get his medical expenses reimbursed. These restrictions should be loosened or
eliminated, so that any FSA or HRA funds can be rolled over into HSAs at any point.
11. Prepaid medical services, under which amounts paid by patients to their primary-care physicians in advance for the right to receive
medical services on an as-needed basis, do not come within the current definition of "qualified medical expenses" and are thus disqualified
from reimbursement with HSA funds. This restriction should be revoked.
These and similar policy prescriptions are worthy of serious consideration as alternatives to the inevitable rationing and distortions of
rational economic decision making inherent in reform proposals that lack incentives for constraining the consumption of health-care resources.
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Health Insurance Plans: 2007," 2007.
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Pension Plan: The Rise of 401(k) and Other Defined Contribution
Plans," Federal Reserve Bank of St. Louis Review,
Fronstin, Paul. "The Tax Treatment of Health Insurance and
Employment-Based Health Benefits," Employee Benefit Research
Institute, Issue Brief 294, June 2006.
———, and Sara R. Collins. "The 2nd Annual EBRI/Commonwealth
Fund Consumerism in Health Care Survey, 2006: Early Experience
with High-Deductible and Consumer-Driven Health Plans,"
Employee Benefit Research Institute, Issue Brief 300, December
———. "Findings From the 2007 EBRI/Commonwealth Fund Consumerism
in Health Survey," Employee Benefit Research Institute,
Issue Brief 315, March 2008.
Gabel, Jon R., et al. "Employers' Contradictory Views about
Consumer-Driven Health Care: Results from a National survey,"
Health Affairs (web exclusive, April 21, 2004): w4-210–w-4-218.
Goodman, John C. "Making HSAs Better," National Center for
Policy Analysis, Brief Analysis 518, June 30, 2005.
———. "Statement on Health Savings Accounts," before the
U.S. Senate Special Committee on Aging, May 19, 2004.
Greene, Jessica, et al. "The Impact of Consumer-Directed
Health Plans on Prescription Drug Use," Health Affairs 27,
no. 4 (July/August 2008): 1111–19.
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U.S. Senate, July 31, 2008.
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at Age 30: A Retrospective," Investment Company Institute,
Holden, Sarah, Peter Brady, and Michael Hadley. "401(k)
Plans: A 25-Year Retrospective," Investment Company Institute,
House Ways and Means Committee. "Hearings on HSAs and Consumer-Driven
Health Care," May 14, 2008, and June 28, 2006.
———. "Hearings on IRAs," June 26, 2008.
HSABank. "2008 Benchmark Survey," April 2008.
Investment Company Institute. "The U.S. Retirement Market,
First Quarter 2008," October 2008.
Kaiser Family Foundation. "Tax Subsidies for Health Insurance:
An Issue Brief," July 2008.
———. "Tax Issues for Health Insurance: An Issue Brief,"
———, and Health Research and Educational Trust (HRET), "Employer
Health Benefits 2007 Annual Survey," 2007.
———. "Employer Health Benefits 2008 Annual Survey," 2008.
Marquis, M. Susan, et al. "Consumer Decision Making in the
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Newhouse, Joseph P., et al. "Some Interim Results from a
Controlled Trial of Cost Sharing in Health Insurance,"
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17, 1981): 1501–7.
Newhouse, Joseph P., and the Insurance Experiment Group.
Free for All? Lessons from the RAND Health Insurance Experiment
(Cambridge, Mass.: Harvard University Press, 1996).
Newhouse, Joseph P., and Anna D. Sinaiko. "What We Know
and Don’t Know about the Effects of Cost Sharing on the
Demand for Medical Care—And So What?." In Incentives
and Choice in Health Care, ed. Frank A. Sloan and Hirschel
Kasper (Cambridge, Mass.: MIT Press, 2008).
Osterberg, Lars, and Terrence Blashke. "Drug Therapy: Adherence
to Medication," New England Journal of Medicine 353,
no. 5 (August 4, 2005): 487–97.
Ramthun, Roy. The Common Sense Guide to Health Savings Accounts,
2008–09 edition, at http://hsaconsultingservices.com.
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Plans on the Use of Preventive and Chronic Illness Services,"
Health Affairs 27, no. 1 (January/February 2008): 113–20.
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16, 2008, at http://www.unitedhealthgroup.com/global/hsa-final.pdf.
UnitedHealthGroup. "Analysis of Chronically Ill Care under
Consumer-Driven Health Plans," April 2007.
———. "Health Savings Account Adoption, Contributions, and
Spending Behavior," data analysis, January 29, 2007.
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Disease Control and Prevention. "Chronic Disease Overview,"
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Historical Tables," February 2008.
United States Government Accountability Office. "Health
Savings Accounts" (letter and appended testimony), GAO 08-474R,
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———. "Health Savings Accounts" (report), GAO 08-802T, May
Zeckhauser, Richard. "Insurance." In The Concise Encyclopedia
of Economics, ed. David R. Henderson (Indianapolis: Liberty
Fund, 2008), pp. 281–84.
Zhang, Jane. "To Your Health (HSAs)," Wall Street Journal,
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Zycher, Benjamin. "Comparing Public and Private Health Insurance:
Would a Single-Payer System Save Enough to Cover the Uninsured?,"
Center for Medical Progress, Manhattan Institute for Policy
Research, Medical Progress Report No. 5, October 2007, pp.
- See, e.g., Professor Jonathan Gruber, Statement before
the Committee on Finance, U.S. Senate, July 31, 2008;
and "Tax Expenditures for Health Care," prepared by the
Staff of the Joint Committee on Taxation for the Finance
Committee, U.S. Senate, July 31, 2008. See also Council
of Economic Advisers, Annual Report of the Council
of Economic Advisers, February 2006, Washington, D.C.:
U.S. Government Printing Office, pp. 85–106; Kaiser Family
Foundation, "Tax Subsidies for Health Insurance: An Issue
Brief," July 2008; and Paul Fronstin, "The Tax Treatment
of Health Insurance and Employment-Based Health Benefits,"
Employee Benefit Research Institute, Issue Brief 294,
- Gruber, Statement before the Committee on Finance. Note
that while the tax subsidy may make health insurance appear
"artificially cheap" in the eyes of an individual employee,
it is likely to have the effect of increasing the aggregate
demand for health-care goods and services and thus the
prices for them and health insurance itself. Finkelstein
estimates that the expansion of health insurance between
1950 and 1990 explains "about half of the six-fold rise
in real per-capita health spending" over that time period.
See Amy Finkelstein, "The Aggregate Effects of Health
Insurance: Evidence from the Introduction of Medicare,"
Quarterly Journal of Economics 122, no. 1 (February
2007): [list p. no. of quotation].
- The deductible for an insurance policy is a fixed dollar expenditure that the insured must make for covered services before the plan
begins to pay benefits. A copayment is a fixed dollar amount that the insured pays the medical provider at the time of service. Some policies
set a maximum for copayments, after which the insurer pays the entire bill. Coinsurance is a percent of the cost of covered services that the
insured pays, again until an out-of-pocket maximum is reached.
- Again, one complication is the effect of current medical consumption on future health, and thus future health-care demands. There is some
evidence that the reduction in consumption that higher consumer costs of some medical goods and services—certain pharmaceuticals being one
prominent example—bring about may exacerbate health problems over time, with higher attendant costs. This issue falls largely outside the
scope of this paper, but it is noted below. See also n. 13 [ok?] below.
- For example, $1,000 of health-care services fully covered
by employer-provided insurance costs the employee about
$700 in after-tax dollars, assuming a 15 percent marginal
tax rate and a 15.3 percent payroll tax (half of which
nominally—that is, the employer contribution results in
a lower wage virtually dollar for dollar--is paid by the
employer). If paid out of pocket by the employee, due
to a higher deductible and/or copayment, the cost would
be the full $1,000 in after-tax dollars. Note also that
medical expenditures must exceed 7.5 percent of adjusted
gross income, or 10 percent of adjusted gross income for
purposes of computing the alternative minimum tax, in
order to be deductible from income subject to the U.S.
income tax. See Staff of the Joint Committee on Taxation,
supra, fn. 1.
- Council of Economic Advisers, Annual Report of the
Council of Economic Advisers, February 2006, p. 100.
Obviously, the rate of GDP growth as well would affect
the health spending/GDP ratio. By decreases in the "short-run
quantity" and "medium-term price[s]" of health care, the
CEA probably means reductions in their respective rates
of growth rather than actual decreases.
- John C. Goodman, "Statement on Health Savings Accounts," before the U.S. Senate Special Committee on Aging, May 19, 2004.
- Quoted in Redorbit News, "Senator Touts Medical Accounts
System Is Failing DeMint Warns," February 24, 2006, at
- Statement quoted at http://coburn.senate.gov, June 9, 2006.
- Ibid. [Ibid. would mean the Coburn website of June 9,
2006—ok?] Several such improvements are suggested in the
conclusion of this paper. Possible methods for reducing
the tax distortion of the U.S. health-insurance market
have been discussed for almost twenty-five years. See
National Center for Policy Analysis, "A Brief History
of Health Savings Accounts," at http://www.ncpa.org/prs/tst/20040811_hsa_history.htm.
- Federal law over time has engendered three variants of "consumer-directed" health plans: Flexible Spending Arrangements (FSAs), Health
Reimbursement Arrangements (HRAs), and High-Deductible Health Plans (HDHPs). FSAs are health-care spending accounts offered through employers;
employees make pretax contributions through payroll deductions, which may be used to pay medical expenses approved by the employer. Unused funds
at the end of the year are assigned to the employer. HRAs are health-care spending accounts funded by employers; withdrawals may be used for
medical expenses approved by the employer. Unused funds at the end of the year may be carried over to the next year if the employer allows it,
but will revert to the employer if the employee leaves the firm. For HDHPs, federal rules specify minimum deductibles, maximum out-of-pocket
expenses, and the benefits that are covered. HDHPs allow the employer and/or the employee to contribute dollars on a pretax basis to a health
savings account, and they permit disbursements for a broad range of medical expenses. These accounts can be carried over from year to year and
are fully portable—if the employee leaves his or her firm, the account and its funds remain with the employee.
- Employer contributions to health savings accounts are excluded from both an employee’s income and payroll taxes, but an individual's
contributions are excluded only from income taxes.
- For a useful discussion of the characteristics and goals
of high-deductible health insurance and health savings
accounts, see Roy Ramthun, The Common Sense Guide to
Health Savings Accounts, HSA Consulting Services,
2008–09 edition, at http://hsaconsultingservices.com.
Note that there is evidence that a shift of specific types
of medical costs onto patients has the effect of reducing
the use of those medical services and thus may worsen
medical conditions and drive up medical costs. This seems
to have happened when the cost of certain pharmaceuticals
was shifted to the patient. See Joseph P. Newhouse and
Anna D. Sinaiko, "What We Know and Don't Know about the
Effects of Cost Sharing on the Demand for Medical Care—And
So What?," in Incentives and Choice in Health Care,
ed. Frank A. Sloan and Hirschel Kasper (Cambridge, Mass.:
MIT Press, 2008). See also Lars Osterberg and Terrence
Blashke, "Drug Therapy: Adherence to Medication," New
England Journal of Medicine 353, no. 5 (August 4,
2005): 487–97. Many medical services are sufficiently
costly that shifting costs to patients could discourage
them from seeking needed medical assistance.
- In other words, from the standpoint of the individual,
insurance is a way to shift income, or assets, to time
periods when the need for funds will be greater. For a
nontechnical discussion of the economics of insurance
markets, see Richard Zeckhauser, "Insurance," in The
Concise Encyclopedia of Economics, ed. David R. Henderson
(Indianapolis: Liberty Fund, 2008), pp. 281–84.
- This discussion ignores the regulatory distortions introduced by mandatory "community rating" (insurance premiums for individuals or groups not reflecting medical risks) and "guaranteed issue" (a requirement that insurance pools accept all applicants). But see Benjamin Zycher, "Comparing Public and Private Health Insurance: Would a Single-Payer System Save Enough to Cover the Uninsured?," Center for Medical Progress, Manhattan Institute for Policy Research, Medical Progress Report No. 5, October 2007, pp. 16–21.
- For a fuller discussion, see American Academy of Actuaries, "The Impact of Consumer-Driven Health Plans on Health Care Costs: A Closer Look at Plans with Health Reimbursement Accounts," January 2004, at www.actuary.org/pdf/health/cdhp_jan04.pdf. See also Congressional Budget Office, "Consumer-Directed Health Plans: Potential Effects on Health Care Spending and Outcomes," December 2006; Congressional Budget Office, "CBO's Health Insurance Simulation Model: A Technical Description," October 2007; and Kaiser Family Foundation, "Tax Subsidies for Health Insurance: An Issue Brief,” July 2008.
- Other important empirical questions such as the effect of price increases for a given medical service upon demand for substitute or complementary services, or the longer-run effects of reductions in medical consumption on health outcomes and future costs, have been examined, but the literature does not yield conclusive answers. See Newhouse and Sinaiko.
- See Joseph P. Newhouse et al., "Some Interim Results
from a Controlled Trial of Cost Sharing in Health Insurance,"
New England Journal of Medicine 305, no. 25 (December
17, 1981): 1501–7. See also Joseph P. Newhouse and the
Insurance Experiment Group, Free for All? Lessons from
the RAND Health Insurance Experiment (Cambridge, Mass.:
Harvard University Press, 1996).
- For the "free," 25 percent, 50 percent, and 95 percent coinsurance groups, average annual physician visits per person were, respectively, 4.5, 3.3, 3.0, and 2.7. For the group with required coinsurance for outpatient visits only, average annual visits were 3.0. The respective numbers for hospitalizations (per 100 individuals) were 12.8, 10.5, 9.2, 9.9, and 11.5. Interestingly, almost all the additional visits to emergency rooms observed in the plans with less cost-sharing were for nonemergencies or minor problems. Medical services used per physician visit or per hospitalization were about the same; and these results were about the same throughout the income distribution.
- Melinda Beeuwkes Buntin et al., "Consumer-Directed Health
Care: Early Evidence about Effects on Cost and Quality,"
Health Affairs (October 24, 2006): [p. no. of quotation]
- Anna Dixon, Jessica Greene, and Judith Hibbard, "Do
Consumer-Directed Health Plans Drive Change in Enrollees'
Health Care Behavior?," Health Affairs 27, no.
4 (July/August 2008): [p. no. being discussed].
- Paul Fronstin and Sara R. Collins, "Findings from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey," Employee Benefit Research Institute, Issue Brief 315, March 2008, p. 1.
- John W. Rowe et al., "The Effect of Consumer-Directed
Health Plans on the Use of Preventive and Chronic Illness
Services," Health Affairs 27, no. 1 (January/February
2008): 113–20. Note that preventive and screening services
in the consumer-directed plans examined in their study
were not subject to the plans’ deductibles. This issue
is discussed further below
- The two are antihypertensives and lipid-lowering drugs.
The other three are antidepressants, asthma drugs, and
anti-ulcerants. Interestingly, the two former drugs are
used for conditions that are largely asymptomatic in many
or most cases. See Jessica Greene et al., "The Impact
of Consumer-Directed Health Plans on Prescription Drug
Use," Health Affairs 27, no. 4 (July/August 2008):
- See Ramthun, supra, fn. 13.
- For HSA-qualified family policies, the deductible for each family member must be at least $2,200. All these limits are adjusted annually for inflation. For 2009, the figures for individual policies are $1,150 and $5,800; and $2,300 and $11,600 for families.
- The differences between the deductibles for the HSA-qualified plans and the others are statistically significant at significance levels of 0.05 or lower.
- For both Tables 4 and 5, the differences in out-of-pocket limits between the HDHP/SO plans and the "all plans" weighted averages are statistically significant at significance levels of 0.05 or lower. As noted in the tables, HDHP/SO plans include both high-deductible plans with health-reimbursement accounts and HSA-qualified plans.
- Kaiser Family Foundation-HRET, 2007 and 2008, Exhibits 8.4 and 8.6, respectively.
- AHIP, "January 2008 Census Shows 6.1 Million People Covered by HSA/High-Deductible Health Plans," April 2008, Figure 2.
- The All-Plans averages in Table 10 are approximately the sum of 25 percent of the average HSA-qualified premiums and 75 percent of the average of the premiums for all other types of policies (not shown in Table 10). Average premiums for all other types of policies can be computed, roughly, as X = [(All Plans average) – (.25)(HSA-qualified average)]/.75. This computation is shown in Table 11.
- Note that in the AHIP data reported in Tables 10 and 11, the premiums for HSA-qualified insurance are for the "best-selling policies in the individual market, by age group." See AHIP, April 2008, p. 6. This may introduce a bias in terms of the comparison of HSA-qualified premiums across age groups; the fact that premiums are higher for the HSA-qualified policies for the youngest seems anomalous; the inclusion of eighteen- and nineteen-year-olds in the non-HSA data may account for this.
- Ramthun, p. 9.
- An AHIP survey finds that in 2007 84 percent of HSA-qualified policies provided first-dollar coverage for preventive care, although the specific services covered by different policies and insurers certainly varies. See AHIP, "A Survey of Preventive Benefits in Health Savings Account (HSA) Plans," July 2007, Table 1.
- This was noted above. See Rowe et al.
- Paul Fronstin and Sara R. Collins, "The 2nd Annual EBRI/Commonwealth Fund Consumerism in Health Care Survey, 2006: Early Experience with High-Deductible and Consumer-Driven Health Plans," Employee Benefit Research Institute, Issue Brief 300, December 2006.
- See Kaiser Family Foundation-HRET, 2008, Exhibit 8.1.
- Ibid., Exhibit 8.19.
- Ibid., Exhibit 8.4. These other types of high-deductible plans are coupled with health-reimbursement accounts; as noted above, these accounts revert back to the employer if the employee leaves the firm. Accordingly, such accounts are not "savings."
- These increases in premiums from 2007 to 2008 are not adjusted for inflation, since 2008 deflators for the health-care sector or for the economy in the aggregate are not available.
- For 2008, the average annual premiums for HDHP/HRA policies for covered workers are $4,468 for individual coverage and $11,571 for family coverage. The respective figures for HSA-qualified plans are $3,527 and $9,101. See Kaiser Family Foundation-HRET, 2008, Exhibit 8.6.
- Fronstin and Collins, "Findings from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey," Figures 3, 15, and 17.
- Ibid., Figure 20.
- Ibid. It is not clear why the figures presented by Fronstin and Collins sum to more than 100 percent, since their Figure 20 reports the "main reason" (singular) that the individuals responding chose a particular type of health plan.
- See Steve Davis, "Health Savings Accounts Approach $4
Billion Mark and Financial Firms Expect Continued Growth,"
AIS’s Health Business Daily, Atlantic Information Services,
September 25, 2008, for various qualitative projections
of substantial prospective growth in HSA accounts. See
also Eric Dash, "Health Savings Accounts Attract Wall
Street," New York Times, January 27, 2006.
- Private communications with Roy Ramthun of HSA Consulting Services and Kevin McKechnie of the American Bankers Association.
- See Davis. The respective figures for a year earlier were 1.76 million accounts and $2.33 billion.
- See Todd Berkley, "HSA Usage Patterns—The Evolution Continues," OptumHealth Financial Services presentation, slide 4, October 20, 2008. The analysis presented in this work on net favors the lower estimates; see slide 5.
- AHIP, April 2008, Table 8.
- Ibid., Tables 9 and 10. The AIS estimate of the average account balance is $1,348; see Davis.
- Kaiser Family Foundation-HRET, 2008, Exhibit 8.8. Inclusion of employers that do not make contributions to their employees’ health savings accounts yields average contributions of $838 and $1,522, respectively.
- UnitedHealthCare, “Health Savings Accounts: A Year-Long
Look at Adoption, Usage, and Funding Patterns,” September
16, 2008, at http://www.unitedhealthgroup.com/global/hsa-final.pdf.
- See Board of Governors of the Federal Reserve System, Tables L.118.b and L.118.c.
- For the 1945–54 period, the respective imputed ratios of defined contribution assets to total private pension assets are 0.29, 0.295, 0.3, 0.305, 0.31, 0.315, 0.32, 0.325, 0.33, and 0.335.
- For a fuller discussion of this history, see Sarah Holden et al., "The Individual Retirement Account at Age 30: A Retrospective," Investment Company Institute, February 2005.
- These include the Simplified Employee Pension (SEP) IRA in 1978, an employer-based program; the universal IRA noted above, between 1982 and 1986; a replacement for the universal IRA beginning in 1987, which allowed workers within certain income limits to make IRA contributions even if they were covered by an employer retirement plan; the Savings Incentive Match Plan for Employees (SIMPLE) IRA, created in 1996 and aimed at small businesses; the Roth IRA, created in 1997, which allows after-tax contributions; and increases in income and contribution limits in 1997 and 2001[increases in income & cont. limits just for Roth? or for all? please clarify].
- Holden et al., "The Individual Retirement Account at
Age 30," p. 2. See also Jane Zhang, "To Your Health,"
Wall Street Journal, July 14, 2008, p. R5.
- For a fuller history, see Sarah Holden, Peter Brady, and Michael Hadley, "401(k) Plans: A 25-Year Retrospective," Investment Company Institute, November 2006.
- The so-called nondiscrimination rules and the definition of "highly compensated" employees in particular are complex. See Holden et al., "The Individual Retirement Account at Age 30," pp. 9–14.
- Contributions to Roth IRAs are made on an after-tax basis, but account earnings and later withdrawals are exempt from taxation.
- See the discussion above of the Fronstin/Collins findings, supra, n. 43 [change from 45 to 43 ok?].
- See Holden, Brady, and Hadley, p. 7.
- See supra, n. 63 [wrong n. no.]. There is a complex
economic issue presented by the choice of some employers
to offer defined-benefit plans, others to offer defined-contribution
plans, and others both. This dynamic must be driven to
some nontrivial degree by incentives to shape employee
tenure at particular firms, perhaps affected by the need
to make firm- or industry-specific investments in employees'
human capital. This is an issue far outside the scope
of this paper; but see Leora Friedberg and Michael T.
Owyang, "Not Your Father's Pension Plan: The Rise of 401(k)
and Other Defined Contribution Plans," Federal Reserve
Bank of St. Louis Review, January/February 2002, pp.
- We can assume that many individuals suffering from chronic conditions may prefer to avoid HMO plans, in that these may require (whether explicitly or implicitly) waiting periods or other conditions to see specialists, drug formularies with fewer new and more-effective medicines, and other such characteristics designed to restrain explicit costs. Moreover, virtually all HSA-qualified plans count prescription drug expenditures toward the higher plan deductible. For a fuller discussion, see Ramthun, pp. 25–26.
- See, supra, Tables 9 through 11, and Table 1.
- See, e.g., Department of Health and Human Services,
Centers for Disease Control and Prevention, "Chronic Disease
Overview," at http://www.cdc.gov/nccdphp/overview.htm.
- Some of these suggested changes are set forth in legislation proposed by Senator Orrin G. Hatch, the "Family and Retirement Health Investment Act of 2008," S. 3686, introduced in the 110th Congress.
shows health savings accounts cut premiums,
Benjamin Zycher, Washington Examiner,
Finds Participation in HSA-Qualified Plans
Encouraging, NuWire Investor, 3-4-09
this health savings account working? Ask a
union leader, St. Paul Pioneer Press,
3-2-09 (This article originally appeared in
the Milwaukee Business Sentinel, 2-28-09)
Released by Manhattan Institute addresses
HSAs, Inside Consumer Directed Care,
2-20-09, (subscription required)
Savings Accounts Grow Faster Than IRAs, Policy
Group's Report Finds, Bureau of National
Affairs, 2-18-09 (subscription required)
Problem with HSAs, CNNMoney.com,
for Breakfast", 2-24-09
Savings Accounts After Four Years, Heritage
Insider Blog, 2-20-09
Health Plans After Four YearsM, Health
Plan Innovation Blog, 2-21-09
Data Suggests Health Savings Accounts Are
Gaining Popularity And May Cut Healthcare
Costs, Health Savings Account Blog,
Introduction: Background on HSA-Qualified Health
Some Basic Facts about HSA-Qualified Health Insurance
Growth of HSA-Qualified Plans and Tax-Preferenced
Retirement Savings Vehicles
Conclusions and Policy Recommendations