Will rising insurance premiums lead to more Health Savings Accounts?
An article "Up, up and away: Health care premiums rising" in The Bakersfield Californian implies that the persistently high rate of inflation in health insurance costs will lead to an increase in the number of Americans who choose Health Savings Accounts as an alternative to traditional health coverage. The article cites the already outdated government projection that the number of HSAs will more than quadruple in the next two years from 3.2 million to 14 million.
We think this logic is oversimplified. HSAs cover about 1% of Americans today and will certainly cover more than 1% by 2010. But we don't see the number growing as rapidly as cited. In fact, MedSave.com was among the first to publish lowered expectations of HSAs more than five years ago and every industry and government projection has decreased their projections of HSA growth since that date. While we were accused of being "Anti-HSA" this is not the case; we simply recognized that the plans will not succeed in their current format.
The current front-runner in the quest for affordable health insurance are limited benefit polices or supplemental "mini-med" policies. Here the concept is simple and straightforward - buy less insurance at a lower cost. These plans are more attractive to many consumers because they provide "front-end" benefits with little or no deductibles or co-pay. This group of consumers tends to view high deductible policies as "worthless insurance" without adequately considering the implications of a catastrophic claim. Because too many people are led to HSAs for the wrong reasons, we are now seeing a backlash among consumers who want to return to traditional health plans.
Meanwhile, HSA providers are scrambling to make their products more attractive to consumers. See "Health Savings Accounts in 2009". Only time will tell how effective the changes will be in attracting more customers.
Health Savings Accounts are a niche solution that appeal to a minority of sharp and affluent individuals who manage their health care finances in a manner similar to other important areas of financial planning. These people likely have personal relationships with their physicians and can accurately identify the most likely medical and financial risks associated with their own health care.
Moreover, Health Savings Account owners recognize that HSAs are primarily a way to take better control of their own health care rather than a way to reduce overall costs. In fact it is highly unlikely that the overall medical costs of those covered by the majority of HSA owners are less than the population covered by traditional health plans. These people have access to the health care system and they use it extensively. The primary difference now is that they get their routine health care on a tax-free basis.
So we hope and expect that the use of HSAs will increase. But it needs to happen for the right reasons, not because we expect these plans to trigger a significant drop in health care costs.Tags : health savings account, hsa