House Committee Approves Bill on Health Savings Accounts
On September 27, the House Ways and Means Committee approved, 24-14, the Health Opportunity Patient Empowerment Act (H.R. 6134). The committee held a hearing on health savings accounts on June 28 (see The Source, 6/30/06).
The bill would make several changes to current law governing health savings accounts (HSAs). HSAs are tax-preferred savings accounts for health care expenses that are usually coupled with high deductible health plans and were created as part of the Medicare Modernization Act of 2003 (P.L. 108-173). Currently, taxpayers with a high-deductible health plan (HDHP) are permitted to make contributions to a HSA up to their deductible, $2,700 for a single person, or $5,450 for a family, whichever is less. The bill would allow all persons with a HDHP to set aside up to the previous maximum of $2,700 or $5,450 regardless of their deductible.
The bill would require the secretary of the Treasury to announce the cost-of-living adjustment to the maximum HSA contribution annually by June 1. It also would allow employers to make higher contributions to non-highly compensated employees (those making less than $100,000 in 2006).
Senate Committee Hearing Examines Health Savings Accounts
On September 26, the Senate Finance Subcommittee on Health held a hearing on health savings accounts (HSAs).
Director of Health Care Issues for the Government Accountability Office (GAO) John Dicken said, “The number of enrollees and dependents covered by an HSA-eligible plan increased from about 438,000 in September 2004 to about 3 million in January 2006.” He said that GAO found that “HSA-eligible plans had lower premiums, higher deductibles, and higher out-of-pocket spending limits than did traditional plans in 2005…Specifically, we estimated that in the event of an illness or injury resulting in a hospitalization costing $20,000, the total costs incurred by three employers’ HSA-eligible plan enrollees would be 47 to 83 percent higher than those faced by employers’ PPO [preferred provider organization] enrollees. In contrast, we estimated that the total costs paid by HSA-eligible enrollees who used low to moderate amounts of health care, visiting their doctors for illnesses or injuries six times in one year, would be 48 to 58 percent lower than the costs paid by the PPO enrollees.”
Deputy Assistant Secretary for Tax Analysis Dr. Robert Carroll said, “A substantial portion of rising health care costs is due to the effects of our insurance system itself. Health insurance gives people valuable protection and peace of mind that they will have help paying their medical bills should a major illness arise. However, because third parties such as insurance companies, employers, and the government finance the vast majority of health care spending, most insured Americans do not know or feel the full cost of the health care services they consume…Health care spending also has the potential to grow more slowly over time as individuals become more cost-conscious and bear a larger share of the financial responsibility for their health care decisions. To put this into perspective, if greater cost consciousness through the president’s initiative were able to lower the growth in health care costs by just 0.5 percent, the effects on health care spending over time could be dramatic. In just ten years, this decline in the growth rate would lower health care spending by 5 percent and would be an entire percent point lower as a fraction of GDP [gross domestic product] in 2015 ([an amount equal to] $162 billion).”
Dr. Sara R. Collins, assistant vice president at the Commonwealth Fund, disagreed with Dr. Caroll. She said that “the individual insurance market is not an efficient or equitable solution for uninsured or underinsured persons.” Dr. Collins outlined the findings of the Commonwealth Fund’s Biennial Survey, noting that “one-third (34 percent) of those who sought individual market insurance said they found it very difficult or impossible to find a plan with the coverage they needed. Nearly three of five (58 percent) adults who sought individual market insurance found it very difficult or impossible to find a plan they could afford. The problem was particularly acute among people with health problems or low incomes. About one-fifth (21 percent) of adults who had ever sought coverage in the individual market were turned down by an insurance carrier, charged a higher price, or had a specific health problem excluded from their coverage.” She noted that most health care costs are incurred by the very ill who are generally unable to cost compare health services, saying that “ten percent of the sickest patients account for about 70 percent of all health care spending.”
Also testifying were Joseph V. Knight, on behalf of the U.S. Chamber of Commerce; Mr. Eric C. Beittel of Enders Insurance Associates; and Dr. John Goodman, president of the National Center for Policy Analysis.
