Pushing HSAs

The Office of Personnel Management released more details this week on their much touted Health Savings Accounts.

OPM and an array of Bush administration officials-including the president himself-have been pushing the new HSAs as a sharp improvement in health insurance that allows patients to decide where to spend their money. The accounts are generally available to people who are not enrolled in Medicare. Federal workers will be able to contribute pre-tax earnings, plus employer contributions, to the accounts. The money will stay in the account as long as is necessary with no deadline for it to be used. Patients can use their HSAs like money in a checking account, paying for noncatastrophic medical visits as they occur. Regulations require that employees who open the new accounts be simultaneously enrolled in a high deductible health insurance plan to guard against catastrophic injury. Withdrawing the money for nonmedical expenses would incur a penalty and tax liability.

The HSA pep rally continued this week as OPM Director Kay Coles James and several top benefits officials praised the concept of consumer-driven health care spending and explained how the accounts would be available to federal workers in 2005.

"We have carefully designed a product that we believe is unique in the industry," said Abby Block, OPM deputy director for family benefits.

The federal HSA plan includes the offering of 18 high-deductible health care plans in 2005. Employees would be able to contribute an annual amount to their Health Savings Account that is no more than the amount of the deductible on their health coverage. If that amount is not used, however, it will roll over into the next year, when employees can donate the amount of their deductible again.

Of the high-deductible plans, the lowest deductible offered is $1,050 per year for single-person coverage and $2,100 per year for family coverage. The highest deductible available is $2,500 for single coverage and $5,000 for family coverage.

Officials said that while the high-deductible plans were primarily meant to defray catastrophic medical costs, they include other benefits such as preventative care.

"We did not negotiate a bare-bones plan here, " Block said. "The benefits, once you get past the deductible, are quite good."

Amid the enthusiasm, however, OPM officials acknowledged that much of their hope for consumer-driven health care plans is based in theory, not practice.

During the same press conference, OPM officials announced that the average premium in the Federal Employees Health Benefits Program will increase by 7.9 percent in 2005-the first single-digit increase since 1999. OPM officials said they could not credit existing consumer-driven health care plans with keeping the increase below 10 percent because those plans to not have enough participants to affect the overall increase. OPM officials also predicted that federal workers would take a little while to warm up to the new HSA initiative.