Health Savings Accounts Attract Younger, Higher-Income Federal Employees, Report Finds

Federal Employees Health Benefits Program members enrolled in high-deductible health plans associated with health savings accounts on average are younger than those enrolled in traditional plans and more likely to have annual incomes of $75,000 or more, according to a Government Accountability Office report released on Thursday, CQ HealthBeat reports.

According to the report, which examined data for the first year in which HSAs became available in FEHBP, the average age of members who enrolled in high-deductible plans associated with HSAs was 46, compared with 59 for all members. In addition, the report finds that, when retirees are excluded, the average age of FEHBP members who enrolled in high-deductible plans associated with HSAs was 44, compared with 47 for all members.

However, according to the report, a new health plan unrelated to HSAs that recently became available in FEHBP also attracted a higher rate of younger members. The report states, "Thus it is not clear whether younger individuals were uniquely attracted to high deductible health plans, or if younger enrollees are typical of recently introduced health plans in general."

The report finds that 43% of FEHBP members who enrolled in high-deductible plans associated with HSAs had annual incomes of $75,000 or more, compared with 23% of all members. According to the report, the results indicate that high-deductible plans associated with HSAs "uniquely attract higher-income individuals with the means to pay higher deductibles and the desire to accrue tax-free savings."

The report also finds:

• Cost-sharing for preventive care for FEHBP members enrolled in high-deductible plans associated with HSAs was "the same or less than (for) traditional plan enrollees and always covered certain preventive care services before the deductible was met," although the same services "were not always covered before the deductible by their traditional plan counterparts";
  


• Traditional health plans were much more likely than high-deductible plans associated with HSAs to cover prescription drugs before the deductible was met; and
  


• Monthly premiums for high-deductible health plans associated with HSAs averaged $91 for individuals and $208 for families, compared with $99 and $243, respectively, for traditional plans.

In related news, the Wall Street Journal on Friday examined how HSAs "are generating savings on payroll taxes for companies that adopt them, and they could hasten a shift of health care costs from companies to employees." According to the Journal, HSAs might "be poised to become the 401(k)s of health care: a low-cost substitute for a once standard workplace-provided benefit."

Employers receive tax benefits from HSAs, regardless of whether they "contribute a cent" to the accounts, and "the more of their own pay employees set aside each year, the bigger their employers' tax breaks" because of reduced payroll taxes, the Journal reports.

According to Rebecca Miller, a tax specialist with McGladrey & Pullen, at a minimum payroll tax savings from HSAs "basically pay the administrative costs" of the accounts.

Princeton University economist Uwe Reinhardt added that the payroll tax savings could provide employers with "an incentive to encourage contributions" to HSAs by employees.

However, James Klein, president of the American Benefits Council, said, "In the scheme of what health care costs are, I doubt that would be a compelling reason to move to that kind of plan design" (Francis/Schultz, Wall Street Journal, 2/3).