House offers bill to increase MSA access

Lawmakers propose making medical savings accounts more attractive as a cost-saving strategy.

By Joel B. Finkelstein, amednews staff. June 23, 2003.

Washington -- Preliminary attempts to sell small businesses on the benefits of medical savings accounts have largely failed, but lawmakers are trying to revise and expand the concept.

Several Republican lawmakers have introduced legislation to allow more companies to offer employees high-deductible health insurance linked with MSAs. The bill would add flexibility and incentives to the accounts to make them more attractive.

MSA changes
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Current law allows either companies or their employees to contribute pretax dollars to these savings accounts, which workers use to cover their medical expenses.

The liberalized MSAs, which the bill's authors have dubbed health savings accounts, "help put individuals in control of their own health care, while helping to manage health care's rising costs," said sponsor Rep. Bill Thomas (R, Calif.), chair of the House Ways and Means Committee.

Proponents of the bill argue that by putting patients in control of their health dollars, those patients will become more frugal consumers of medical services. The accounts also accrue savings for the employees over time, adding an incentive for workers to save rather then spend the money.

"By giving health care consumers -- rather than employers, health plans and government -- more control over their money, this legislation will slow the rising cost of health care, improve the doctor-patient relationship and allow workers to save for their health care needs in the future," said Merrill Matthews, PhD, director of the Council for Affordable Health Insurance, a research and advocacy association representing insurance carriers in small group markets.

Warnings about side effects

This seems like a tall order for medical savings accounts, which have not been very popular with the small businesses that are currently allowed to take advantage of them, said Linda J. Blumberg, a senior research associate at the Urban Institute in Washington, D.C.

The majority of spending across the health care system is due to a minority of patients with serious or chronic illnesses. These patients spend well in excess of the $1,000 to $2,000 deductible of the health plans linked to MSAs, meaning the plans save the health care system little money overall.

As a result, health insurers would have a difficult time providing high-deductible insurance products that were significantly cheaper than more comprehensive insurance, she said.

Paradoxically, companies that offer MSAs as an option may find themselves spending more money on health insurance as they cover the cost of unexpectedly expensive high-deductible plans combined with their contribution to the medical savings account, Blumberg explained.

Despite these drawbacks, she said, MSAs may seem worth trying to employers who are facing rising health insurance premiums. The money-saving potential of MSAs also may be attractive to healthy and high-income employees.

"It's important to think about not just what these efficiencies will mean for healthy people, but what the side effects are for low-income people," Blumberg said. She is worried that MSA legislation could lower the cost of insurance for those who are already covered while pushing it out of reach of more of the working poor.

"We have to be wary of any product that pulls apart the risk pool," she said.

ADDITIONAL INFORMATION:

MSA changes

The Health Savings Account Availability Act would allow:

Medical savings accounts to be combined with health insurance with deductibles between $1,000 and $2,250 for individuals and $2,000 to $4,500 for families.
Both employers and employees to make contributions.
Contributions up to the full amount of the deductible.
MSAs to be marketed by preferred provider organizations and offered by cafeteria plans.
Up to $500 of flexible-spending account balances to roll over tax-free every year.
Penalty-free, nonmedical withdrawals from the accounts after the individual becomes Medicare-eligible.

Weblink

Thomas, the federal legislative information service, for bill summary, status and full text of the Health Savings Account Availability Act (HR 2351) (thomas.loc.gov)