GAO: HSA Plan Premiums Significantly Below Traditional Offerings

September 15, 2006 ( - A new report by the Government Accountability Office (GAO) found that health plans eligible for health savings accounts (HSA) had lower premiums, higher deductibles, and higher out-of-pocket spending limits than traditional plans in 2005.

For example, the report states, a 2005 national HSA survey found that HSA-eligible plan premiums were, on average, 35% less than traditional plan premiums for single coverage and 29% less for family coverage. Further, average HSA-eligible plan deductibles were six times greater than those for employers’ traditional plans.

The agency wanted to weigh the arguments of the proponents of HSA plans, who believe giving people more say in their medical care will drive down costs, and critics, who argue that high premiums associated with HSAs will deter people from the plans and that the plans only attract a disproportionate share of wealthier enrollees.

However, the agency found that the HSA-eligible plans it reviewed covered the same broad categories of health care services as did traditional plans in 2005, including preventative, diagnostic, maternity, surgical and emergency services.

The report found that HSA-eligible plan enrollees generally had higher incomes than comparison groups. In 2004, more than half (51%) of those reporting HSA contributions had adjusted incomes of about $75,000, or more.

Just over half of all HSA-eligible plan enrollees and about two-thirds of employers contributed to HSAs, and account holders used their HSA funds to pay for current medical care and to accumulate savings.

According to the GAO, about 45% of those who made 2004 HSA contributions also reported that they withdrew funds in the same year – 90% of these funds having been withdrawn for qualified medical expenses. Just over half of those contributing to HSA accounts withdrew nothing for medical expenses in 2004.

Tax filers claimed an average deduction of about $2,100 for their HSA contributions in 2004 and the average amount increased with income. About two-thirds of employers offering HSA-eligible plans contributed to their employees’ HSAs, and the average employer HSA contribution was about $1,064 in 2004.

The GAO heard from the HSA plan enrollees who participated in its focus groups, most had positive experiences, but would not recommend the plan for everyone. In fact, the report stated that “Participants said they would recommend HSA-eligible plans to healthy consumers, but not to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.”

As far as behavior related to signing onto an HSA plan, few of the participants said they actually researched plan costs, but did look into the cost of prescription drugs.

For the full report go here.