Report finds families worse off with health savings accounts

03/27/2005

Monday, March 21, 2005
Workday Minnesota
Originally Published 3/18/05

ST. PAUL — Seven of eight Minnesota families would be worse off with a health savings account (HSA), according to a report released Thursday by SEIU Local 113, Minnesota’s largest health care union.

The report, entitled “Hazardous Health Care: The Impact of Health Savings Accounts on Minnesota Health Care,” also found that the U.S. financial services industry stands to gain substantially from the emergence of HSAs, with between $10.8 billion and $30.8 billion going into mutual fund and broker fees annually.

“Minnesota is in the midst of a health care crisis, but HSAs are not the answer,” said Julie Schnell, president of SEIU Local 113, which represents more than 14,000 hospital, clinic and nursing home workers across the state. “These risky accounts are hazardous for working families and the only people who will benefit are bankers and Wall Street brokers – not Minnesotans.”

Eight hypothetical working families from around the state were analyzed for the report, which showed how each would fare under a good Minnesota HMO plan, a typical Minnesota PPO plan and an HSA. According to this analysis, the only scenario that fared better with an HSA was the family that had relatively few health problems. In the remaining seven scenarios, with moderate to high health care spending, the family faced significantly higher health care bills with an HSA.

“HSAs will leave working families shouldering more of their increasing health care costs,” said Mary Kay Henry, SEIU International Executive Vice President. “These plans will leave people faced with the choice between paying for health care and putting food on the table for their families.”

Prepared for SEIU Local 113 by Sally Covington and Tom Moore, Jr. of the Project for Strategic Health Purchasing, the report found that HSAs do nothing to bring down long-term health care costs, shift those costs onto working families, and benefit bankers and Wall Street brokers more than they do Minnesotans.

The report also found that Minnesota hospitals will face in excess of $28 million more dollars in bad debt if HSAs dominate the health care market, which amounts to 6.5 percent of their operating incomes.

“Cost shifting is not cost containment,” said Covington. “HSAs do nothing to address the real health care cost drivers, like rising prices, premiums and physician-driven utilization. These accounts simply shift the burden to working families.”

Governor Pawlenty recommended HSAs and supports them through changes in Minnesota’s tax law. In addition, President Bush’s 2006 federal budget proposes $122 billion over 10 years in tax deductions for HSAs.

The report also suggested that HSAs further aggravate the health care crisis. These accounts remove the ability to negotiate lower prices for health care services, dilute the group insurance pool by attracting younger, healthier workers and leaving sicker, more expensive people in traditional insurance, and expose families to substantial financial risk with annual deductibles of up to $5,100 for a single person and $10,200 for a family.

Covington outlined specific recommendations for addressing the high cost of health care. Among these suggestions were setting cost and quality standards and improving access to this information, building purchasing coalitions, aligning public and private reimbursement through restructured networks, and promoting controlled competition to prevent price inflation.

HSAs were enacted by Congress and signed into law by President Bush in the 2003 Medicare Modernization Act. It’s estimated that by 2006, 54 percent of Minnesota employers will offer HSAs. The state Legislature is currently hearing legislation that would provide tax deductions for contributions to these accounts by employers, a provision that SEIU opposes.

“The governor and his supporters should take this opportunity to make HSAs a better deal for Minnesotans,” said Schnell. “We need leadership on this issue and so far all we’ve seen is a great example of how to pass the buck onto working families.”

SEIU Local 113 represents more than 14,000 hospital, clinic and nursing home workers across the state of Minnesota.