Opinion, Berkeley Blogs

Do Health Savings Accounts Lower Costs?

By Ken Jacobs

Consumer directed health care has been touted as an important means of achieving health cost savings. The theory is that the more people pay out of pocket for health care, the more prudent purchasers they will become. One of the major tools to achieve this has been high deductible health plans with Health Savings Accounts (HSA).

HSA skeptics have argued that since 80 percent of health costs in any given year are from 20 percent of the consumers, whose costs go well beyond the high deductible, high deductible health plans cannot have a dramatic effect on overall health spending.  (There is also good reason to believe high deductible plans discourage needed care for low- and moderate-income families).  Many of us scratched our heads as insurance brokers told employers that they could save a lot of money by switching to high deductible plans and putting the difference between the deductibles  into an HSA for their employees. The only way this could work is if HSAs attracted a much healthier pool than the rest of the market, which would drive up costs in more traditional plans.

Today's front page article in the San Francisco Chronicle should give HSA advocates pause.   Blue Shield of California sent out notices this week to small business, raising rates as much as 76 percent.

"We were paying out more in claims than we were collecting in premiums," said Aron Ezra, spokesman for Blue Shield, which is a nonprofit insurer based in San Francisco. Ezra said he didn't know how large the increases were or how many customers were affected.

Ezra said Blue Shield regrets having to raise rates.

"We lose membership because fewer people can afford to get it," he said. "It does not help us. We only do it to be able to collect enough money to pay out."

California insurance experts say other health insurers have had to raise their small-group rates, particularly for HSAs.

"Every carrier has been mispricing the product because we don't have the data," said Steven Lindsay, a lobbyist for the California Association of Health Underwriters and an insurance broker.

Some of the savings from  health savings accounts turns out to have been illusory after all.