The Health Shopper

President Bush has threatened to Veto a tax bill that could substantially raise administrative costs for HSAs. H.R. 5719, which passed by a vote of 23-17 through a House of Representatives committee, would require that banks and other HSA administrators have tools in place to verify that individual spending from the accounts goes toward qualified expenses. Currently, banks or other administrators do not need to confirm that HSA funds are used on health related expenses.

Proponents of the change say that the bill would help the IRS ensure that individuals who use HSAs for non-health expenses are taxed appropriately. Opponents of the bill argue that the regulations are unnecessary and would force banks to build elaborate verification systems that they would pass on to account holders through substantial fee increases.

Retiring couples will need approximately $225,000 in savings to cover health expenses, according to a new study by Fidelity Investments. The sum is $10,000 more than the $215,000 estimate Fidelity put out last year, and a 41 percent increase over Fidelity's estimate in 2002. To arrive at that number, the investment firm assumed that couples would retire at the age of 65 and be insured through Medicare-which has co-payments and co-insurance charges for most medical care as well as premiums for Parts B and D. The Associated Press notes that Fidelity's estimates mirror other figures, such as an estimate by Boston College's Center for Retirement Research, which says that retiring singles need $102,000 and couples need $206,000 for health expenses.  

High-deductible health plans with HSAs offer the best values to individuals and families, according to a recent report by the Consumers' Checkbook that focused on health options for federal employees. Walton Francis, an analyst for the organization, told the Washington Post that HDHPs "are among the biggest bargains," noting that while "they are a bit complicated to understand" they offer much better values for the average consumer.

Although the Consumers' Checkbook study focused on federal employee health options, this commentary argues that an HDHP is a smart option for anyone. Writing about efforts to shift Milwaukee area residents to HDHPs, state representative Bob Ziegelbauer notes that HDHPs provide better coverage at lower costs and encourage preventive care. "The power of the plan is in empowering the insured. It is the power of individuals making decisions affecting their own lives with their own money."

As we've previously noted, 26 million Americans now have some form of a high deductible health insurance plan, a number that experts predict will more than double in the next 12 years. To help consumers figure out how to best take advantage of HSAs, Vimo has partnered with Roy Ramthun, former Senior Advisor to the Secretary of the U.S. Treasury for health initiatives and former Health Care Advisor to President George W. Bush, on a comprehensive guide to HSAs.

The report spells out the requirements for a health plan to be HSA eligible, gives clear guidance on how to maximize savings with an HSA, and provides a helpful appendix listing HSA qualified expenses.

The report is free. You can read it online here and you can download a pdf version here.

A number of health insurers have begun offering credit cards to be used specifically for health related costs. According to the Fort Worth Star-Telegram, insurers including Humana, UnitedHealthCare and Aetna are offering the cards to consumers with high-deductible plans as a way to speed doctor's office payments and streamline administrative paper work and costs. The good news for consumers? Many of these cards have interest free grace periods of several months, allowing consumers to pay off medical bills over several months. However, after a few months, interest rates on the cards can climb to above twenty percent.

Insurers are seeking to expand these sorts of offerings as the number of people in consumer driven plans grows. A new study by the International Foundation of Employee Benefits Plans found that more than 40 percent of private employers are offering consumer driven plans to employees, including 22 percent who offer HSA-qualified high deductible plans.

The New York Times recently ran a Q&A with Barbara Weltman, a lawyer and small-business specialist in Millwood, N.Y., who has written books on small businesses, including J. K. Lasser’s Small Business Taxes 2007 and J. K. Lasser’s Finance and Tax for Your Family Business. She had some interesting things to say about health insurance benefits, including an estimate of how much businesses can save on health insurance if they make maximum contributions to Health Savings Accounts (HSAs). This is an issue that Vimo brought up in its HSA funding report earlier this year. If companies make maximum contributions to employees' HSAs, millions can be saved in health-care expenditures. Given this, it should be no surprise that HSAs are catching on with small businesses, although not as quickly as they should be. Here's an excerpt from the interview with Weltman:

Q. How are small businesses addressing the problem of providing health insurance?

A. Health savings accounts are growing in popularity. They go hand in hand with high-deductible health insurance plans. The minimum deductible amount changes every year. This year it is $1,100 for an individual or $2,200 for a family. A company with 15 employees can save 40 percent over a traditional policy if they make the maximum contribution. By law, either the company or the employee can make contributions to the savings account, or they can split the contributions. …

Small businesses can offer their employees affordable group health insurance that offers big ticket benefits, simply by HSA-empowering their health plans. Visit Vimo's HSA comparison-shopping engine to find the HSA that's right for your firm.

In case you hadn't heard, Vimo releases great industry reports from time to time. Our VP of Partners, Tom Cochrane, has just released our most recent report HSA Funding: Are Health Care Consumers Leaving Money on the Table?  It warns that low corporate contributions to health savings accounts threaten the CDHP model.

The report reveals a significant gap between the number of people enrolled in high deductible health plans and the number of people that hold a Health Savings Account. The report also shows that funds on deposit in the average HSA are roughly half of what is required to cover the typical health plan deductible for these consumers. Both findings hint at disturbing trends that may jeopardize the "Consumer-Driven Health" movement.

This newest report from the Vimo Research Group is free, and available for immediate download at http://www.vimo.com/reports/hsafunding.pdf.

For free markets to work well, we need open information and analysis available to consumers. One step in that direction is to make side-by-side comparisons available as we do on our site each day. A second approach is to build on our data and provide consumers some editorial analysis. To that end, we published a research report on the wide disparity between fees that banks charge customers for Health Savings Accounts (HSAs).

We found that little correlation exists between higher fees and higher interest rates, emphasizing the need for consumers to do research before they settle on an HSA and probably implying (although this was not a focus of our study) that fees have more to do with transaction support and service levels than interest rates. As mentioned in our press release, this is the first of many reports we intend to conduct over a period of time, each highlighting a different aspect of the consumer-driven healthcare landscape. As always, your feedback and thoughts are welcome.