In its ongoing attempt to weaken a key provision of the health care reform law -- the one that requires insurers to spend at least 80 percent of premiums on medical care -- the insurance industry is predicting dire consequences for people enrolled in health savings accounts (HSAs) if lawmakers don't act soon.
America's Health Insurance Plans (AHIP), the insurance lobbying group, warned in a recent report that the rapid growth of HSAs will be hurt unless Congress exempts them from the 80 percent requirement -- or abolishes the threshold altogether.
HSAs are available only to people enrolled in high-deductible plans. They are also exceedingly profitable for insurers.
AHIP said it is "reaching out to policymakers on both sides of the aisle about ways to mitigate the potential unintended consequences of provisions in the new health care reform law that could disrupt or limit the availability of coverage through HSA plans."
Having spent nearly 20 years in the health insurance industry, I knew it was just a matter of time before AHIP would mount a big campaign to ensure a bright future for HSA plans.
One of the reasons I left my job in the insurance industry was because I could not in good faith continue to promote HSA plans as the best thing since sliced bread, as I was expected to do. I knew from my own research that these plans were not good options for most Americans. I came to realize that ever-increasing numbers of people who were enrolling in them were actually joining the ranks of the underinsured because they had to spend far more out of their own pockets for care than they ever had before.
AHIP crowed in its report that more than 11.4 million Americans are now covered by HSA plans, an increase of 14 percent since just last year. "HSA plans continue to be a vital source of affordable coverage for millions of families and employees across the country," AHIP president Karen Ignagni said.
What Ignagni did not say was that only the wealthiest Americans can afford to sock any money away in their HSAs and to use more of their own resources to pay for care.
She also didn't acknowledge that the real reason for the rapid growth of HSAs is that her industry is well on its way to eliminating all health plans that don't feature high deductibles. Insurers don't want anything to stand in their way.
Insurers spend less on care for people enrolled in HSAs, which is why they are so profitable. The requirement to spend at least 80 percent of premiums on medical care would put a crimp in those profits. Hence, the real reason for the AHIP report.
The U.S. Government Accountability Office was among the first to sound the alarm about the shortcomings of HSAs, soon after insurers started offering them.
The GAO noted in an August 2006 report, based on a survey it conducted and other research, that just slightly more than half of all HSA-eligible plan enrollees contributed any money at all to their HSAs. Not only that, but a third of all employers offering HSA plans did not contribute anything to them either. Of the employers that did, the average contribution was $1,064 in 2004.
Not much has changed since then.
Last year, according to the Employee Benefits Research Institute (EBRI), the average balance in an HSA was just $1,355--almost 5 percent less than in 2009--and very little of that money was contributed by employees.
The problem is that the majority of people enrolled in these plans, often against their will, simply do not have the disposable income to contribute any significant amounts of money to their HSAs.