Dr. HSA

Guest Columnist, Roy Ramthun

Former Economic Advisor to President Bush

HSAs Grow Despite "Cold Water Tactics" By Some Policy Makers

May 2008 - Vol. 14

On April 30, America’s Health Insurance Plans (AHIP) released its 4th annual survey of enrollment in HSA-qualified health plans.  As of January, 2008, more than 6.1 million Americans are covered HSA insurance plans, a 35 percent increase over last year and almost double the number in 2006.  This is an increase of approximately 1.6 million Americans enrolled in an HSA plan since January 2007.

Other key findings from the latest survey include:

• The majority of the enrollment continues to come from the employer-based group market – 4.6 million Americans with   HSA coverage had employer-based coverage.  30 percent of individuals covered by an HSA plan were in the small group market, 45 percent were in the large-group market, and the remaining 25 percent were in the individual market.
• Small businesses are strongly embracing HSAs – HSA enrollment in the small group market increased 70 percent over the past year.  Over 1.8 million Americans working for small businesses now have coverage through HSAs.
• HSAs continue to make health insurance more affordable for the uninsured -- HSA products accounted for 31 percent of new coverage issued in the small-group market and 27 percent of their new purchases of health insurance in the individual market.

For the first time, AHIP’s survey also provides enrollment data by state.  For example, they find that HSA enrollment as a percentage of individuals with private coverage (under age 65) is estimated to be the highest in Minnesota (9.2 percent), followed by Louisiana (9.0 percent), Washington, D.C. (8.7 percent), Vermont (7.5 percent) and Colorado (7.1 percent).  States with the largest numbers of enrollees were California (639,000), Florida (397,000), Illinois (384,000), Texas (358,000), Ohio (353,000), and Minnesota (325,000).  On the low end are Hawaii (0.1 percent), Massachusetts (0.9 percent), New Mexico (0.9 percent), West Virginia (1.0 percent), and New York (1.1 percent).

For more information about the 2008 census, please visit www.AHIPResearch.org.

Not coincidentally, House Oversight and Government Reform Committee Chairman Henry Waxman (D-CA) and House Ways & Means Health Subcommittee Chairman Pete Stark (D-CA) chose to release a report they requested from the General Accountability Office on the same day as the AHIP survey was released, even though the report was delivered to the Chairmen on April 1.  The Chairmen’s press release, seeking to throw cold water on the otherwise solid numbers from AHIP, says the report shows that HSAs are used more often as a tax shelter by wealthy individuals rather than as a mechanism to help working families obtain needed health care.

The Chairmen base their conclusion on two findings from the report:

• The average adjusted gross income was about $139,000 for Health Savings Accounts enrollees compared to $57,000 for all other filers – in 2005.
• The total value of all Health Savings Accounts contributions reported to the IRS in 2005 was about twice that of withdrawals -- $754 million compared to $366 million – suggesting an interest in it more as a shelter than vehicle to obtain needed health care or supplement inadequate coverage.

According to Waxman and Stark, “GAO’s findings are bolstered by HSA advocates’ extreme opposition to legislation passed earlier this month in the House (HR 5719) that would require HSA enrollees to substantiate that HSA withdrawals were used for allowable medical expenses. Data from at least one company indicate that HSA funds appear to have been spent on escort services, at casinos and bowling facilities and in other non-health related areas.  Flexible Spending Accounts, a different tax-preferred health account with fewer tax breaks than HSAs, require substantiation.  In addition, the federal government requires far more onerous verification standards to qualify for Medicaid and for Part D low-income subsidy.”

“How can anyone seriously oppose minimal verification standards for wealthier people who get tax breaks that are supposed to be for health care when we have far more burdensome requirements on people with incomes near the poverty level?," asked Stark.

Looking past all the demonizing quotes by Stark and Waxman the astute observer knows that 2005 was only the second year of the HSA program.  According to the AHIP survey for that year, only 1 million Americans were even covered by HSAs, over half of which were covered by HSAs in the individual (non-group) market.  And yes it is quite possible that the better educated people buying policies on their own, likely better-educated, self-employed people like lawyers and accountants, were the first ones to understand the opportunity HSAs present.

Still, GAO does not present a strong case for HSAs being “tax shelters for wealthy Americans.”  For example, the average contribution to an HSA in 2005 was an average of $2,800 for taxpayers with income above $100,000 vs. $1,400 for those with income of under $30,000.  But the average taxpayer with an HSA also made withdrawals -- $1,300 for those with income above $100,000 vs. $600 for those with income below $30,000.  So the net-net is that taxpayers with HSAs with income above $100,000 “sheltered” $1,500 vs. $800 for those with income below $30,000. 

Actually, it’s surprising that the Chairmen didn’t also say that HSAs are a tax shelter for the elderly.  The GAO report says that average contributions for those age 55-64 was almost $3,000 vs. $1,400 for those age 19-34.  Furthermore, withdrawals for those age 55-64 only averaged $1,200 vs. $550 for those age 19-34.  But then again, advocates of “Medicare-for-all” (like Waxman and Stark) wouldn’t want anyone about to enroll in Medicare to know about that.

>> What's your point of view? Email Dr. HSA. We look forward to hearing from you!

Related Links: 

• AHIP HSA Enrollment 2008
• AHIP PR Survey Data
• AHIP HSA Survey Results April 2008
• GAO HSAs More Common Wealthy April 2008
• GAO Report Stark Waxman PR

About the author...

Roy Ramthun is President of HSA Consulting Services, LLC, a health care consulting practice specializing in Health Savings Accounts and consumer-driven health care issues. Mr. Ramthun is also a Visiting Fellow at the Council for Affordable Health Insurance. Click here for Roy's website.