Today’s HSA = Healthcare Suicide Act?

A newly-released survey of human resources professionals suggests that HSAs (or Healthcare Savings Accounts / Flexible Spending Accounts) need a strong legislative antibiotic to ward off a growing epidemic of consumers who are enrolling in higher deductible health care plans in a flat, uncertain economy.

Originally signed into law as a cornerstone of the Medicare Prescription Drug Improvement and Modernization Act of 2003, HSAs were endorsed by then-President George Bush as a compromise between healthcare industry advocates who insisted at the time that higher co-payments for medical coverage are necessary to make a profit and please their shareholders and the American Association of Retired Persons (AARP), who lobbied hard for retirees on fixed incomes to obtain public assistance for medications. When the dust settled, the HSA was supposed to be the panacea for skyrocketing healthcare costs.

Shortly after last year’s health insurance open enrollment season, consulting firm Celent released dismal numbers citing the HSA market’s “disappointing early showing”, and projected 12.5 million accounts by 2012. That’s down about four million people than were originally estimated. Even with the additional tax and so-called “catch up” savings incentives for enrollees over age 55 added in, employees who are eligible for health insurance coverage through their workplaces are coming off of a wave of economic uncertainly and every penny counts. Even leading economists with the Government Accountability Office (GAO, the agency in charge of crunching these kinds of numbers) openly admit that given the slow recovery of the current economic climate, HSA enrollment this year will suffer.

“When you tell a worker in this economy that you’re going to take some money out of their pay check each month and then further squeeze them by earmarking the funds for healthcare expenses with a guaranteed loss at the end of 12 months’ time, it’s healthcare suicide,” says James Lloyd, an analyst for the Southeast region of the GAO. “This year will be especially volatile.”

Budget-Friendly HSA Alternatives:

Employers are streamlining their health insurance plans to cut costs. Whereas just a few years ago, according to the GAO, the average U.S. company with more than 100 employees offered three different health insurance plans; you could pretty much count on a high-deductible PPO, a low-deductible PPO and an HMO to choose from when signing up for benefits. Now, more and more employers are promoting the HSA option and/or eliminating any low-deductible, affordable health insurance plan they may have previously offered. Not only do FSAs cost companies less, but they get to share in tax credits too. The trend, according to the Human Resources Association of America and the U.S. Department of Labor Statistics, will only continue toward workers converting to individual medical policies. At least until open enrollment time rolls around again in 2012.