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Health Savings Accounts (HSAs)
You Should Know:
  • HSAs, tax-advantaged accounts created to pay for qualified medical expenses in conjunction with high-deductible health plans, are an innovative feature of consumer-directed health plans (CDHPs).
  • CDHPs represent a marketplace solution to the problem of rising health care costs and accessibility. These plans raise awareness of the real costs of health care and provide consumers with greater decision-making control over their health care spending. Research has shown that total health spending is reduced when consumers bear more responsibility for their health care expenses.1
  • HSAs can help consumers prepare for future health events, including long-term care premiums, because their health savings can be rolled over from year to year. HSAs also are portable from job to job as well as into retirement. The money in an HSA belongs to the individual and can be invested, with earnings growing on a tax-free basis.
  • CDHPs are helping to address the problem of the uninsured. Data show that 27 percent of new individual market enrollees in health plans with HSAs were previously uninsured.2
Background
With rising health care costs continuing to strain their bottom lines, many employers have been forced to reduce benefits, shift more costs to employees or drop coverage entirely. Today, only 61 percent of all employers offer health insurance to their employees.3 The marketplace increasingly is turning to CDHPs because of their ability to create consumer awareness of health care costs. Authorized by the Medicare Modernization Act of 2003, HSAs are an increasingly popular CDHP option. In fact, more than 4.5 million people receive health coverage through HSA-compatible plans.4

How HSAs Work
HSA plans include three major components: a portable savings account, high-deductible medical coverage that typically includes 100 percent payment for covered preventive care not charged against the deductible, and access to informational tools that help consumers make informed decisions. HSA plans encourage members to become more involved in their own health care decisions and give them the tools and resources necessary for being responsible and efficient health care consumers. And, HSA plans are uniquely positioned to help consumers be better prepared for medical expenses later in life, regardless of where or whether they work.

The Aetna Difference
Shortly after HSAs became authorized, Aetna became the first national, full-service health insurer to announce an HSA offering. Aetna strongly believes in the potential of HSAs and HSA-compatible health plans to engage consumers and to help slow rising health care costs. Aetna has developed HSA-compatible plans for small employers and individuals in some states to help make this innovative health benefits solution more widely available. A four-year study of 1.6 million Aetna members, including members of HSAs, health reimbursement arrangements (HRAs) and other Aetna plans, found that the consumer-directed health plans consistently resulted in lower medical costs while maintaining or improving levels of chronic and preventive care.5

Health Savings Accounts

Questions & Answers:

Q. How is an HSA different from an HRA?
A. A Health Savings Account (HSA) is a tax-advantaged fund to which employers, employees or both can contribute. Unused funds in an HSA can be rolled over for future use and are portable from job to job. A Health Reimbursement Arrangement (HRA) is an employer-funded account. Unused HRA funds at the end of the year can be rolled over for future use but are not portable from job to job. An HRA is usually offered in conjunction with high-deductible health coverage; an HSA must be combined with high-deductible health coverage.

Q. Aren't HSAs and other CDHPs really just cost-shifting in disguise?
A. No, that is not our experience. First, most HSA plans provide upfront, 100 percent coverage of preventive care, which is a strong incentive for consumers to get the quality care they need. Second, HSA plan premiums are more affordable than most traditional plans, which means some consumers are able to afford coverage they otherwise might not have. We believe employees increasingly are ready for the choices and responsibilities of this new age of "consumerism." Hewitt Associates, which administers benefits for more than 18 million employees and their families, found that of 39,000 employees surveyed (Nov. 17, 2004) 93 percent indicate they are comfortable taking on more responsibility for health care decisions.

Q. Aren't HSAs complicated for consumers to understand, compared to traditional plans?
A. In the past, most consumers spent more time researching a car purchase or a vacation than they did their health benefits choices. Asking patients to become engaged consumers is not always an easy task, but it is one from which they can benefit enormously. With access to online tools and information about health care costs and quality, consumers are empowered to make informed decisions that are right for them. Aetna provides members with access to a host of health and benefits management information online through its easy-to-use, secure member website, and via telephone. Aetna's online information for consumers includes industry-leading price and quality transparency information (for certain markets) upfront, evidence-based, clinical information on 6,000 health topics, and an interactive online health and wellness program.

Q. Will HSAs replace other health benefits products?
A. While HSA plans are an attractive health care benefits option, the marketplace continues to look for a full complement of health products and services to effectively meet the needs of today's employers and consumers. One size definitely does not fit all. Aetna has developed a comprehensive suite of products and services to address the needs of diverse customers and member populations.

Q. Are HSA plans really just for the young and the healthy?
A. These products may be especially appealing to young and healthy consumers. But research shows they appeal to consumer across different age groups, since consumer-directed plans encourage preventive care and allow people to save for future medical expenses. A recent AHIP study of HSA plans demonstrates the broad appeal of HSA-based plans, having found that 46 percent of those covered by HSA plans are 40 or older.6

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1 "Consumer-Directed Health Plans and the RAND Health Insurance Experiment," Health Affairs, Vol. 26, No. 6 (November/December 2004).
2 "4.5 Million Enrolled in Health Savings Account Plans," America's Health Insurance Plans, April 2, 2007.
3 "Employer Health Benefits 2006 Annual Survey," The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2006.
4 "4.5 Million Enrolled in Health Savings Account Plans," America's Health Insurance Plans, April 2, 2007.
5 "Aetna Releases Broadest Study To Date Of Consumer-Directed Plans," Aetna news release, Oct. 2, 2006.
6 "4.5 Million Enrolled in Health Savings Account Plans," America's Health Insurance Plans, April 2, 2007.