On the U.S. Healthcare Frontier: Health Savings Accounts

While the United States is known among Western nations for its focus on private healthcare, public spending is continuing to grow, projected at $1,057.8 billion in 2007, or 46.8% of the nation's total health expenditures. Most of the private spending is through employer-provided insurance.

In order to give employees more ownership over their healthcare costs and expand the incentive structure surrounding medicine, Congress created Health Savings Accounts (HSAs) as part of the Medicare legislation, signed into law in 2003. HSAs are tax-favored and owned by the individual. The money in these accounts is used to pay for current and future medical expenses. The ownership of these accounts is coupled with a "High Deductible Health Plan" (HDHP). HDHPs are insurance plans (HMO, PPO, or other) that do not cover first dollar medical expenses. The exception to this are costs for preventative care. Preventative care includes yearly physicals, monitoring measures such as mammograms or preventative medication such as cholesterol-lowering drugs.

Typically, the HDHP has a minimum deductible of $1,100 for self coverage and $2,200 for family coverage. Although these deductibles are high, the monthly contributions are quite low. The benefits for HSAs are mostly for reasonably healthy individuals, usually young, who may need preventative care on an annual basis but are not chronically ill or suffering from prior conditions. HSAs, then, allow these individuals to save the money that would usually go straight to an insurance company for care they would not usually utilize. The money in the HAS can be used later on for necessary medical needs.

According to a study done by America's Health Insurance Plans (AHIP) in January 2007, national enrollment in HSAs was up to 4.5 million. A further benefit of the accounts is that 27% of the new individual enrollees were previously uninsured. Again, many of these new enrollees had not previously seen the need for buying regular HMO or PPO insurance, which they rarely utilized. HDHPs, however, involve little month-to-month payments and offer the benefit of saving money to be used later on in pressing situations. The majority of the HAS enrollees were aged 40 years and younger.

It is often said that beyond a healthcare crisis, America is facing a health crisis. HSA plans have attempted to combat this through the preventative health and disease management tools. Of the 69 companies participatng in the AHIP study, 63 stated that they offered HSA-eligible plans that covered preventative benefits without requiring the enrollee to first satisfy the deductible. This included disease management benefits and certain preventative prescription drugs. As preventative care is encouraged, exorbitant cost burdens associated with chronic illness and catastrophic issues decrease.

The other aspect of HSAs that is beneficial for companies and consumers is personalized ownership. HSA members reported access to online account information, health education tools, information about hospital quality, and healthcare cost information. All these methods allow members to accurately and efficiently gauge their needs and take ownership of healthcare products.

Global Insight expects prices of medical care to rise an average of 3.7% annually through 2017. These prices reflect increasing demand for medical goods from an aging and increasingly obese population, along with rising costs. The goals of healthcare policies have been to change the financing schemes to make healthcare more affordable through a sustainable system, along with reducing the rate of growth in costs and increase efficiencies in the market. The object of HSAs is to provide an alternate financial mechanism for rising healthcare costs. As a program in its infancy, it seems to be working relatively well to provide choices and incentives for healthcare cost reduction in the United States.