Reviewing the Evidence on Health Savings Accounts

Claims that HSAs do not disproportionately attract healthy and high-income individuals, and that they will reduce the number of uninsured appear to rely on a selective interpretation of the available evidence. How surprising to find that the administration would shade the evidence to support its case:

Administration Defense Of Health Savings Accounts Rests On Misleading Use Of Statistics, by Edwin Park and Robert Greenstein , CBPP: To encourage wider use of Health Savings Accounts (HSAs), ... the Administration is proposing significant new HSA-related tax breaks that it estimates would cost $156 billion over ten years. Several important concerns have been raised about HSAs: most notably, that they are most attractive to people who are in better health and have higher incomes and that they would undermine employer-sponsored health coverage. In recent days, Administration officials, including the President, have argued that these concerns are belied by actual experience with HSAs over the past two years. This analysis examines the claims made by these officials ... and explains that they rest on the misleading use of statistics.

Claim #1: HSAs are not disproportionately attractive to high-income households. Allan Hubbard, director of the White House’s National Economic Council, stated at a press briefing on February 1 that 40 percent of HSA enrollees have incomes below $50,000. Treasury Secretary Snow repeated this statement at a Senate Finance Committee hearing... and President Bush repeated it in a speech in Ohio... But they did not fully or accurately represent the data.

First, data are available from three recent surveys of HSA enrollees. ... Mr. Hubbard and Secretary Snow ignored the two surveys with the lower figures and presented the 40 percent figure (from a survey by an online insurance broker) as though it were the only one available. Second, and more important, the survey cited by Hubbard and Snow was restricted to HSA enrollees in the individual health insurance market, who tend to have lower incomes than HSA enrollees who have employer-based coverage. Excluding the latter group makes HSA enrollees appear to have lower incomes than is actually the case. ...

In addition, the survey cited by Hubbard, Snow, and the President may suggest the opposite of what they claim. ...[A] disproportionate proportion of HSA enrollees do, in fact, have higher incomes. ... other HSA data indicate this is the case. ... There can be no question that the tax benefits of HSAs are tilted toward high-income households ... Also, high-income households can afford to contribute much larger amounts to HSAs than people of more limited means. (For example, only higher-income households generally would be able to take full advantage of the President’s proposal to raise the annual HSA contribution limit to $5,250 for individuals and $10,500 for couples.) Moreover, for affluent individuals who do not expect to incur significant health-care costs, HSAs provide unprecedented tax-sheltering opportunities: they are the only savings accounts that feature both tax-deductible deposits and tax-free withdrawals. ...

Claim #2: HSAs help reduce the number of uninsured Americans. Mr. Hubbard also said ... that 37 percent of people with HSAs were previously uninsured. Several days later, in a congressional hearing, Secretary of Health and Human Services Michael Levitt rounded this figure up to 40 percent. Here, too, Administration officials ignored the results from other surveys that found a smaller percentage of HSA users were previously uninsured. ... In any event, the statistic that 37 percent of HSA enrollees were previously uninsured ... is from data that are limited to HSA enrollees in the individual insurance market. ... A survey of people who have purchased any type of policy in the individual market would show that many of them had previously been uninsured. ... In fact, a Blue Cross/Blue Shield study that covered both employer-based coverage and the individual market found that only 12 percent of individuals who purchase high-deductible plans that qualify for a HSA previously were uninsured.

More importantly, while the availability of HSAs ... should enable some uninsured people to afford coverage, the Administration’s proposals also would induce some employers — especially small-business owners — to drop coverage (or not to offer it in the first place), since the proposals would eliminate all of the tax advantages that employer-based insurance now has ... That would expand the ranks of the uninsured... If more people lost coverage (because their employer ceased to offer it) than gained coverage (because of the new tax breaks), the net effect would be to increase the ranks of the uninsured. The 37-percent statistic cited by the White House sheds no light on the question ... But a new study by M.I.T. economist Jon Gruber ... estimates that the President’s proposals would cause a net increase in the uninsured population of 600,000 people. ...

Claim #3: HSAs are not disproportionately attractive to healthy individuals. On this issue, the Administration officials cited above have been silent. But some HSA proponents outside the Administration have cited a national Blue Cross/Blue Shield survey ... as showing that HSAs do not disproportionately attract healthier people. ... The Blue Cross/Blue Shield survey did not use control groups or employ other standard statistical methodologies to ensure it could obtain an unbiased answer ... Past studies have consistently found that plans with higher deductibles tend to attract a disproportionate number of healthier people. ... Preliminary studies indicate that this seems to be occurring with high-deductible policies tied to HSAs...