National Nurses United

HSA 2:3 9/30/08 2:22 PM Page 16 as themselves. The Commonwealth Fund, a private healthcare research foundation, concluded in 2006 that people with HSAs are in the same boat as the uninsured: They delay care, they don't take their medications, and they ignore chronic problems. As the country's healthcare crisis has worsened and costs have skyrocketed, the Bush administration and insurance industry, as well as employers, have pushed health savings accounts more heavily. The number of people with health savings accounts rose to 6.1 million in January, from less than half a million in 2004. Many of these people have insurance through individual plans and are self employed, a $116 billion market, according to Forrester Research. But HSAs are not just being marketed to self-employed people; they're also increasingly on the menu of health insurance plans provided by both big employers and small businesses. "These health plans are ruining people's lives," said Karen Pollitz, director of Georgetown University's Health Policy Institute. Pollitz has done extensive studies on HSAs. "We have 18,000 people who die in this country every year because they can't get healthcare for treatable diseases. We need to quit messing around with these ideas that deflect the conversation of how to pay for healthcare for all until another day. HSAs are a distraction. They aren't about healthcare." hink of an hsa as the individual retirement account, or IRA, of healthcare, said Joseph Anthony, a tax accountant in Portland, Ore. When Congress created HSAs in 2004, the concept seemed simple: Couple high-deductible health plans, in which people are essentially self-insuring anyway, with a savings account that functions like any other tax-deferred retirement account. Today, health savings accounts still must be connected to a high-deductible health plan. "When these HSAs came out, people started converting from a regular health plan with a high deductible to a high-deductible plan, or HDHP, that was linked to an HSA," said Anthony. "They thought, 'If you have a high deductible anyway, why not set it up so you can get a deduction [from your taxes] for the money you have to pay out of pocket anyway?'" Indeed, the real attraction of HSAs is as a financial instrument for sheltering income and as an investment vehicle. According to 2008 Internal Revenue Service regulations, someone with a high-deductible plan with an HSA can annually deposit up to $2,900 as an individual policy and $5,800 for a family. That money can then be invested into savings accounts, stock, or other assets according to the client's preferences. When tax time comes, the HSA holder can take the entire amount they've deposited during the year as a deduction, whether they've used it or not. Gains on the account are tax free, unlike a traditional savings account. Money spent from an HSA on health expenses is tax-free. Money spent on non-healthcare purchases before age 65 is taxed, and the holder pays a penalty. After age 65, however, HSA monies are taxed but can be spent on anything, making an HSA essentially the same as a traditional IRA. If HSAs sound like a way for the wealthy to keep more of their money, you'd be right. High-deductible plans and HSAs only seem to work for the affluent, according to an April report from the Government Accountability Office. Of the approximately 2 percent of the population with an HSA, the GAO found that the average annual income was $139,000. Also according to the GAO, 41 percent of those with HSAs in 2005 did not use any of their money for health costs. Anthony, the tax accountant, thinks he knows why. "It's an ideal plan for well-off people who are healthy and who are looking for another way to shelter their money," he said. "If you are, say, young and healthy and don't really need medical care, and can T 16 REGISTERED NURSE max out your 401(k), your Roth IRA, and then still contribute a few thousand dollars to your HSA and leave it in there every year, it will accrue interest or capital gains. I have well-off clients who have these accounts and when they have medical expenses, they say, 'We have other sources of money with which to pay.' They don't want to touch that HSA because of the tax benefits." he plans are not just a boon for tax-savvy, affluent, healthy young professionals. They are proving to be a profitable market for the financial institutions that administer them. While some banks don't charge fees for handling the accounts, most do. Those fees can range from a fee to open the account, to fees for each transaction, for withdrawals, and for each time you invest. Some banks that administer these accounts won't invest your money until you hit a minimum, such as $1,000, leaving the supposed growth potential of HSAs unrealized. And, because it's an investment in the stock market, it's possible to lose money. "Wall Street loves these things," said Pollitz. "Wall Street says this is the most lucrative financial instrument since the IRA." Those expecting the account to function like a tax-advantaged, high-interest checking account dedicated to healthcare are likely to be shocked by the fees. Wendy Clark Levy, a human relations vice president at a Houston, Texas commercial real estate firm, is used to seeing lower-income employees sheepishly return to her office to change out of their HSA and high-deductible plan. "It only seems to benefit those who can afford such a highdeductible plan," she said. "Those who subscribe and are lower-wage earners usually admit later that they didn't understand the plan or they wouldn't have [signed up]." T ndeed, health savings accounts linked to high-deductible health plans appear to benefit everyone except the group their supporters claim they help: normal, lower- to middle-income people who may get sick once in a while, have an accident, start a family, or are likely to be managing a chronic condition. This group, which is the vast majority of Americans, faces major challenges with HSAs. One of them is the way high-deductible health plans are structured. HSAs are always linked to high-deductible health plans, but with deductibles between $1,100 and $11,000 per year, these plans require considerable savings. Some plans may provide free or reduced-cost preventative services such as annual exams and flu shots. But most plans don't cover any other costs until the user has met the deductible. Many plans do not count prescriptions or other routine services toward the deductible. A doctor visit can run $300. A prescription can cost hundreds of dollars per month. Until a person hits the deductible with qualifying expenses, it is almost as if the person has no health insurance at all. Everything comes out of the patient's pocket, or out of the health savings account. When patients visit the doctor, they draw from the account, often using a credit- or debit-like card. With high deductibles, lower-income people receive little benefit from such plans. "People in the U.S. already spend more out of pocket on healthcare than any other industrialized country," said Sara Collins, assistant vice president for the Program on the Future of Health Insurance at the Commonwealth Fund. "The main point is that the trend in health benefits is to encourage more cost sharing without attention to income. Obviously, a $1,000 deductible will be higher share of income for someone who's low income than someone who's not." I W W W. C A L N U R S E S . O R G SEPTEMBER 2008

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