Enrollment in high deductible health plans triples in just 10 months

More than 3 million consumers are now eligible for health savings accounts. Strong growth on tap

Issue: April 2006

Enrollment in high-deductible health plans eligible for health savings accounts tripled between March 2005 and January 2006, according to a recent study. At least 3 million people are now enrolled, according to America’s Health Insurance Plans, a national trade association.

In an America’s Health Insurance Plans (AHIP) news release, President and CEO Karen Ignagni called HSAs a “remarkable success story ... especially attractive to many who might not otherwise be able to afford coverage.”

But Paul Frontsin, an economist with the Employee Benefit Research Institute, had mixed feelings.

“Is it a success story? Yes and no,” Frontstin said in CQ Healthbeat. “Three years ago the market didn’t exist. But it still amounts to only a fraction of Americans who have private insurance.”

A federal health care reform initiative that Pres. George W. Bush unveiled in January would expand HSAs by making HSA-compatible insurance policies tax deductible for those who purchase high-deductible health plans (HDHPs) outside their jobs. Americans with HSAs, and their employers, would be able to make HSA contributions to cover all out-of-pocket costs, not just deductibles.

The current legal maximum HSA contributions are $2700 for individuals, and $5450 for families.

In other HSA-related activity, Cargill, a Minnesota-based grain marketing company, will contribute to tax-free HSAs to farmers who promise to sell part of their grain to the company, the New York Times reported. Under its “Harvest Health” program, Cargill will contribute eight to 10 cents per bushel of grain purchased. Cargill officials said the program is the first of its kind. Farmers in 18 states are eligible.

The Retail Industry Leaders Association filed a federal lawsuit in Baltimore arguing that Maryland’s newly adopted Fair Share Health Act conflicts with federal health insurance laws and unjustly targets one company (Wal-Mart), the Washington Post reported. Wal-Mart claimed that it covers more than 75% of its 1.3 million employees.

The Maryland legislature passed the bill in 2005. The governor later vetoed the bill but the legislature overrode the veto. The Maryland law requires the largest private employers to devote 8% to 11% of their payroll to health insurance or contribute to a state fund.

Colorado and Florida recently introduced similar bills. The Colorado law would require companies with 3500 or more workers to spend at least 11% of payroll on health care or contribute the difference to Medicaid, the Rocky Mountain News reported. It does not name specific companies but is believed to target Wal-Mart, which employs more than 25,000 people in the state.

The Florida bill would require companies with more than 10,000 employees to spend at least 9% of workers’ earnings or contribute to a “Fair Share Health Care Fund,” according to the Miami Herald.

Wal-Mart expanding coverage

Wal-Mart Chief Executive Officer Lee Scott blasted the Maryland “fair share” bill in a speech at the National Governors Association conference in late February. Employers offering health insurance to their employees cannot continue meeting rising health care costs, Scott told the governors.

In a related development, Wal-Mart also recently announced plans to make its lowest-cost health insurance plan more available and shorten the waiting period for part-time employees and their children to enroll in that plan, the Associated Press reported. The retail giant plans to expand an $11 monthly premium and make it available to half of all U.S. employees by 2007 and shorten the waiting period for part-time employees from 24 months, the AP report said. The company will also expand its trial of in-store clinics, which offer less expensive non-emergency care to the public, from 12 stores to 50 nationwide, the AP said.

Last fall, Wal-Mart started offering new, lower-premium insurance designed to enroll more of its workers in company plans. The company maintains that premiums of $23 (and $11 in some locations) helped enroll 70,000 workers in company health plans for the first time.

’Limited’ health plans

HDHPs and HSAs are not the only health insurance trends. Many companies are offering “mini-medical” or “limited-benefit” plans, the Wall Street Journal reported in January.

Reduced plans’ monthly premiums are usually about $40, with annual coverage caps of $10,000 or less. They cover four to 10 annual physician visits, portions of prescription drugs and lab work, but little or no hospitalization or emergency coverage.

About one million people have limited health plans and carriers that provide such plans are experiencing 20% annual growth, according to the Journal.

For more information:
To see high-deductible health plan/HSA report, visit ahip.org.