Health Savings Accounts Favor High Income Consumers: GAO Report

Sen. John McCain’s plan to reform America’s health care system by expanding Health Savings Accounts took a hit last week when the General Office of Accountability, an investigative arm of Congress, showed that HSAs benefit high income tax payers more than the Average Joe.

It’s the second study released in less than a month that suggests high deductible plans aren’t the affordable health care option that many proponents claim. The Kaiser Foundation released a report last month that said many uninsured families with HSAs may not have the means to pay the high deductibles associated with the plan, (“High HSA Deductibles Could Lead to Medical Bad Debt: Kaiser Study,” April 21).
 
According to the GAO report, the average adjusted gross income of tax filers reporting HSA activity was about $139,000 compared with about $57,000 for all other filers. The GAO said the income differences existed across all age groups. Among filers reporting HSA activity, the average annual value of contributions was $2,100, compared with the average annual withdrawal of $1,000. The GAO report said average contributions and withdrawals generally increased with income and age.

“HSA’s clearly are attractive to higher-income people who are looking for tax shelters,” Rep. Henry Waxman of California told The Wall Street Journal. “But they aren’t the answer for providing adequate health insurance coverage for the average American.”  Waxman also serves as the chairman of the Committee on Oversight and Government Reform.

The GAO said the number of individuals enrolling in an HSA-eligible insurance plan increased significantly between September 2004 and January 2007, rising from 438,000 to 4.5 million during that period. But the HSA plans represented just 2 percent of individuals enrolled in private insurance plans in 2006. Additionally, more than 40 percent of HSA-eligible plan enrollees did not open tax-deferred health savings account and contribute money that could be used towards medical bills. Likewise, more than a third of the employers surveyed for the GAO report who offered HSA-eligible plans made no HSA contributions for their employees in those plans.

Nonetheless, America’s Health Insurance Plans (AHIP), a trade association for insurers, said in a press release issued the same day as the GAO report that an additional 1.6 million Americans have enrolled in HSA-eligible insurance plans since January 2007. The association also said that HSA plan enrollment as a percentage of individuals with private insurance are estimated to be highest in Minnesota, Louisiana, Washington, D.C., Vermont and Colorado.

“Employers and individuals across the country and across the age spectrum are choosing HSA plans,” which are now an important part of the portfolio of coverage options offered by health plans,” Karen Ignagni, AHIP’s president and CEO said in a press release.