Monday, August 11, 2008

Scone: HSAs not working, time to let go

I know it’s hard to admit when something just isn’t working the way you’d hoped, despite your best efforts. It can be easy to try to force the issue or put blinders on and simply tell yourself things are fine. However, it takes true strength to acknowledge something has failed and move on.

I think we’ve reached that point with health savings accounts. Progressive employers have implemented the plans with workers and yes, some have achieved savings. But I think we all know that HSAs have not had the revolutionary effect on health care that many of us believed they would.

In addition to consistent single-digit adoption among individuals who have a choice in health plans and high levels of dissatisfaction among active workers, new research from the Employee Benefit Research Institute shows contribution limits make HSAs minimally beneficial to retirees as well.

As contributions are limited ($2,900 for individuals and $5,800 for families), and because HSAs are linked to high-deductible health plans, it is likely HSA owners will tap their accounts to pay for medical expenses during their working years, EBRI finds. Further, distributions cannot be used for employment-based retiree health insurance until an individual has reached age 65. Thus, early retirees do not have immediate access to HSA accounts for retiree health premiums.

“The maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses,” researchers bluntly conclude in this month’s EBRI Notes.

Further, a sneak at the Sept. 1 EBN reveals that experts say allowing participants to fund HSAs with IRA funds won’t help spur use either.

So are we ready to say CDHPs or at least HSAs aren’t the health-care savior we’d hoped for? Not to sound clairvoyant, but EBN made this call last year. There’s even more evidence now. Enough already.

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