MEDICAL SAVINGS ACCOUNTS: GAO Report Says Demand Low
The General Accounting Office issued its final report on medical savings accounts Dec. 31, determining that the response of both consumers and the insurance industry to the idea has been tepid at best. The study, delivered to the Senate Finance Committee and the House Ways and Means Committee as part of a four-year demonstration project on MSAs included in the 1996 Kassebaum- Kennedy Act, revealed that after one year of the program, only 41,668 MSAs had been opened, with only 26,160 of those counting against the end-of-year cap of 600,000. The IRS estimated that consumers had opened 50,172 MSA accounts as of the end of 1998 that counted against the final enrollment cap of 750,000. While the "insurance industry responded to the legislation rapidly," with 54 companies offering qualifying plans during 1997, the number of participating companies declined slightly last year. Currently, 48 plans qualify for the demonstration. While many insurers were enthusiastic about the MSA market, others simply offered a plan for competitive reasons, that is, to protect market share, and marketing tended to be targeted toward affluent, independent consumers. Only six plans had sold more than 1,000 accounts as of summer 1998. Although qualifying plans are still widely available, the GAO noted that "there is little evidence that new insurers will enter the market unless demand for MSAs increases, features of the demonstration design are changed, or both." The report, however, stated that the low demand may reflect the "complexity of the qualifying plan/MSA product for both agents and consumers" as well as the constraints of the demonstration project. The GAO study was compiled by Westat using IRS and health plan data and information culled from interviews with insurers ("Medical Savings Accounts: Results From Surveys of Insurers," 12/98).
Edsels? Yes, Edsels.
Commenting on the study, Rep. Pete Stark (D-CA), ranking Democrat on the Ways and Means Committee, said, "The GAO report shows that the MSAs are the health insurance equivalent of Edsels. People don't like them, don't want them, and they are not the answer to the nation's health insurance problem." Stark pointed to the low projected enrollment relative to the cap and insurers' lack of marketing as evidence of his assertion. He added, "One, the GAO reported that MSAs appear to skim the insurance pool. They are bought by healthier than average people, which means that sicker people are left in the traditional insurance pool -- which is certain to drive up costs for those who need it. Second, some insurers believe the MSA is viewed by purchasers more as a tax shelter than a way to pay for medical bills. ... The president and Congress should let the MSA demonstration die. All it proves is that gimmicks won't solve Americans' health insurance problems" (Stark release, 1/5). According to Kelly Loussedes of the Council for Affordable Health Insurance, however, Kassebaum-Kennedy contained "barriers" to marketing and sales of MSAs, and thus cloud any real assessment of demand. The demonstration project constrained the market to such a degree, in fact, that it was "designed to have the law fail," she said. Click here to download a pdf version of the GAO report.