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Health Biz: HSA Policy Debate Continues

Estimated read time: 6-7 minutes

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WASHINGTON, May 20, 2004 (United Press International via COMTEX) -- Health savings accounts are popular with insurers, who say they are popular with employers -- but on Capitol Hill, five months after they became law via the Medicare drug bill, they remain not very popular among some Democrats.

Sen. John Breaux, D-La., ranking member of the Senate Special Committee on Aging, told a hearing Wednesday that HSAs, "as they are currently designed, are a terrible idea whose time has not yet come."

HSAs that combine a tax-free savings account with a high-deductible insurance plan for individuals, Breaux said, make for "unprecedented tax policy," because savings are deductible when they go into the account and not counted as income when they come out. "We've never done that before," Breaux added and referenced other retirement vehicles, such as 401(k) plans.

Breaux reiterated what other Democrats have said -- HSAs will result in adverse risk selection and potentially could destroy the group insurance market that provides the bulk of coverage to American workers. He questioned why, if HSAs are such a good deal, the government is spending $16 billion to encourage people to sign up.

Committee Chairman Sen. Larry Craig, R-Idaho, said it was a fair trade-off with the $75 billion annual tab for the tax break employers get when deducting 100 percent of the cost of employee health insurance.

Craig said three-quarters of employers in a Mercer Human Resources survey said they are likely to offer the option by 2006.

U.S. Treasury Secretary John Snow called HSAs "one of the best single ideas I've seen to deal with one of the most pressing issues America faces -- and that is rising healthcare costs."

The bottom line: There is not yet enough hard evidence to prove either side right or wrong -- although there are some health policy think tanks studies that make some dire predictions of HSAs ultimately doubling group insurance premiums and increasing the ranks of the uninsured by several hundred thousand. There also are predictions the less affluent simply will not have the money to place in these accounts, even if the result is lower insurance premiums.

By 2006, the numbers will begin to show whether HSAs attract the younger, healthier and wealthier set -- raising the costs for the older, sicker and less affluent in the group insurance pool. As to claims HSAs make consumers better healthcare shoppers, the jury still is out.

HSAs give tax breaks to the individuals holding the savings accounts, although employers offering them can contribute to them. The closest existing products for comparison are health reimbursement arrangements or HRAs, which involve a spending account and high-deductible plan set up by employers for their workers. The difference is the employer funds the accounts and, while employees spend from them, ultimate control rests with the company.


The talk from the insurance industry side is HSAs are very popular and Ronald Williams, president of Aetna, headquartered in Hartford, Conn., testified before the Senate Special Committee on Aging that HSAs and HRAs "are getting a very positive response from the marketplace."

Williams said the insurer has studied the impact of HRAs and found they can "lower cost without compromising quality."

He said since 2001 when the company rolled out the HRA concept, it has sold plans to 190 employers -- 180,000 members. Aetna's own 27,000 employees were given the HRA option and within two years the percentage of workers taking advantage of it increased from less than 1 percent to more than 75 percent.

A study of 14,000 people enrolled in Aetna HRA plans during the first nine months of 2003 found they saw a 1.5 percent increase in medical claims, compared to double-digit increases for the comparable population in regular health plans.

Aetna HSAs so far have been sold to 130 small employers and four mid- to large-size companies.


The General Accounting first ruled that although the Bush administration's Medicare TV ads and mailed brochures were legal they also were somewhat questionable. Now, the GAO has looked at the next phase of the administration's promotion of the new Medicare law -- the so-called video news releases -- and found they violate federal law.

The videos featured paid actors and scripts written by staff at the Department of Health and Human Services. Democrats angrily accused the administration of using Medicare money in what amounted to campaign ads for President Bush's re-election and the GAO agreed the tapes were a type of propaganda because the government was not listed as the source of the content.

Reps. Charles Rangel, D-N.Y., and Pete Stark, D-Calif., issued a statement calling on local broadcast stations that aired the video releases to run a retraction or correction explaining the situation.

"The GAO concluded what many seniors have found out long ago -- that the Bush Administration's spread of unattributed information amounts to covert propaganda," Rangel said.


By a vote of 331 to 88, the House this week tanked H.R. 3722. The bill would have required hospitals to question emergency patients to determine whether they were U.S. citizens and find out their immigration, financial and employment information to be eligible to receive federal reimbursement for their care.

House Democratic Leader Nancy Pelosi, D-Calif., said the bill would fundamentally change U.S. hospital policy that care is provided for anyone who comes to the emergency room and turn "healthcare providers into immigration enforcement officers."


California's largest purchaser of employee health benefits and the third largest in the nation, CalPERS, is sending hospitals in that state a message.

CalPERS, which provides healthcare coverage to 1.2 million state and public employees, retirees and their families, said its board Wednesday voted to exclude 38 "high-cost hospitals" from its largest HMO network with Blue Shield.

"Premium increases exceeding 50 percent in the past three years are simply unsustainable," said Sean Harrigan, the board's president. "Almost half of our cost increases are driven by hospital charges."

CalPERS and Blue Shield agreed to reconsider any of those hospitals that agrees to prices at the statewide average.

The system will save $36 million in 2005 and $50 million annual thereafter because of the cuts.

Thirteen of the hospitals are with Sutter Health, five are with Sharp, five are with Catholic Healthcare West, three are with the Daughters of Charity and two are with the Tenet systems.

The California Healthcare Association called the decision "fundamentally flawed" public policy and said the hospitals being eliminated were trauma centers and teaching hospitals that provide complex care to the highest-risk patients.

CHA President C. Duane Dauner issued a statement saying the move is nothing but "cherry picking" by CalPERS that sets a dangerous precedent that could lead to fewer trauma care centers being available to its members.



Copyright 2004 by United Press International.


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