AS FOLKS begin to shop for health insurance this fall, they’ll discover that insurance companies are seeking rate increases from 20 to 40 percent or more. Regulators in some states are ordering insurers to hike premiums even further to avoid going bankrupt.
But according to a new study from the National Bureau of Economic Research, there’s one area of the market where consumers are actually saving money. Over three years, researchers examined 13 million people at 54 firms with high-deductible consumer-directed plans paired with tax-advantaged Health Savings Accounts. In all three, health spending declined — with no evidence of worse outcomes.Federal and state officials are failing to make insurance more affordable by regulating its price directly. It’s time for a different approach. To drive health costs down over the long term, our leaders must expand the availability of HSAs.
Consumers can deposit cash tax-free into HSAs — and then spend the proceeds on routine out-of-pocket health expenses. The accounts are paired with low-premium, high-deductible insurance policies to protect consumers in the event of a health care catastrophe. Any money left at the end of the year rolls over to the next, earning interest along the way.
Because consumers retain ownership of their health care dollars from year to year, they have a powerful incentive to use them wisely.
Previous research has shown that HSA plans save folks significant money in their first year.
The new NBER study compared costs for workers who opted for HSAs with those who chose conventional insurance — and confirmed that those savings persist. Costs were “significantly lower in each of the first three years” after a company included an HSA plan in its benefits mix.Simply offering an HSA plan reduced employers’ health spending by an average of 5 percent each year.
The study also suggests that consumers did not have to sacrifice their health to realize these savings. Outpatient care and prescription drug spending declined among the HSA crowd, but the report noted that “by the third year there are no differences in either emergency department or inpatient spending.”
It’s no wonder HSAs are the fastest-growing type of health plan in the market. In a decade, their share of the employer-sponsored insurance market has jumped from 2 percent to 24 percent.
As of last year, more than 17 million people were enrolled in HSA plans. That’s an increase of 12 percent since 2013. Enrollment gains have averaged 15 percent annually since 2011.
If HSAs were to achieve a 50 percent share of the employer-sponsored market, U.S. health costs could decline by as much as $60 billion, according to the RAND Corporation.
In the past, critics have claimed that HSAs would discourage people from getting preventive or necessary care. Minor health problems would fester into big, expensive ones — or so the thinking went.
That’s exactly what the late Sen. Ted Kennedy, the undisputed Democratic leader on health care reform during his time in office, predicted. He argued that HSAs would “discourage preventive care” and “threaten the very existence of conventional health insurance.”
Scary stuff — but none of it turned out to be true.
HSAs don’t discourage preventive care — they make it more accessible. The overwhelming majority of employers provide beneficiaries with free preventive care before they reach their deductible.
What’s more, consumers armed with HSAs are demanding that healthcare providers deliver care in more convenient and lower-cost ways. Providers have responded with things like walk-in clinics with posted prices, free-standing urgent-care clinics, “Doc in the Box” outlets, email consultation, and more.
HSAs do indeed “threaten the very existence of conventional health insurance” — by harnessing the power of market competition to deliver higher-quality care at lower prices. What’s wrong with that?