Similarly, in the individual market, HSA-eligible plans had  lower premiums and higher deductibles than traditional plans in 2005. Enrollee Costs Would Be Higher for HSA-Eligible Plans Than for PPO Plans When Extensive Care Is Used, but Lower When Low to Moderate Care Is Used

Our illustration of enrollees’ potential health care costs—including  premiums, deductibles, and other out-of-pocket costs for covered  services—for the three employers’ 2005 health plans we reviewed showed  that HSA-eligible plan enrollees would incur higher annual costs than PPO  plan enrollees for extensive use of health care, but would incur lower  annual costs than PPO plan enrollees for low to moderate use of health  care. HSA-Eligible Plan Enrollees Had Higher Incomes Than Comparison Groups, but Data on Age Differences Were Inconclusive

HSA-eligible plan enrollees generally had higher incomes than comparison  groups, but age differences varied depending on the data reviewed. Two of the three employers we reviewed and  eHealthInsurance reported that HSA-eligible plan enrollees had higher  incomes than did traditional plan enrollees in 2005. Moreover,  51 percent of tax filers reporting HSA contributions had an adjusted gross  income of $75,000 or more, compared with 18 percent of all tax filers  under age 65. Actively employed  HSA-eligible plan enrollees also had higher incomes than traditional plan  enrollees in 2005 for two of the three employers we reviewed. Just over Half of Enrollees and Most Employers Contributed to HSAs, and Account Holders Used HSA Funds to Pay for Medical Care and to Accumulate Savings

Just over half of HSA-eligible plan enrollees, and most employers,  contributed to HSAs, and account holders used their HSA funds to pay for  current medical care and to accumulate savings. Most employers  offering HSA-eligible plans contributed to their employees’ HSAs, and the  average employer HSA contribution was about $1,064 in 2004. About 45 percent of those reporting 2004 HSA  contributions also reported withdrawing funds in 2004, and 90 percent of  these funds were withdrawn for qualified medical expenses. The  remaining 55 percent of those reporting HSA contributions in 2004  reported that they did not withdraw any funds from their HSA in 2004. Tax filers claimed an average deduction of about $2,100 for HSA  contributions in 2004, and the average amount increased with income. About 55 percent  of those reporting HSA contributions to IRS in 2004 did not withdraw any  funds from their account in 2004. Focus Group Participants Generally Understood and Were Satisfied with HSA- Eligible Plans, but Would Not Recommend These Plans to All Consumers

Participants in our focus groups who were enrolled in HSA-eligible plans  generally reported positive experiences, but most would not recommend  these plans to all consumers. Participants generally understood the key  attributes of their plan, such as low premiums, high deductibles, and the  mechanics of using the HSA, but were confused about certain other  features. Few participants researched the cost of hospital or physician  services before obtaining care, although many participants researched the  cost of prescription drugs. Participants said they would recommend HSA- eligible plans to healthy consumers, but not to people who use  maintenance medication, have a chronic condition, have children, or may  not have the funds to meet the high deductible. We received technical  comments from IRS and eHealthInsurance by email and incorporated  these comments as appropriate. Appendix I: Scope and Methodology

To respond to our study objectives regarding health savings accounts  (HSAs) and HSA-eligible plans, we examined (1) the financial features,  covered services, and enrollees’ annual costs of HSA-eligible plans in  comparison with those of traditional plans; (2) the characteristics of HSA- eligible plan enrollees in comparison with those of other individuals and  traditional plan enrollees; (3) the funding and use of HSAs; and (4) the  experiences of enrollees with HSA-eligible plans. Characteristics of HSA-Eligible Enrollees

To compare the characteristics of HSA-eligible and traditional plan  enrollees, we compared demographic data provided by the Internal  Revenue Service (IRS) on adjusted gross income and age for tax filers who  reported HSA contributions on their 2004 tax returns with the  corresponding data for all tax filers less than 65 years of age. Federal Employees Health Benefits Program: Early Experience with a  Consumer-Directed Health Plan.
Why GAO Did This Study

Health savings accounts (HSA) and the high-deductible health insurance plans that are eligible to be coupled with them are a new type of consumer-directed health plan attracting interest among employers and consumers. Employers and plan enrollees may contribute to tax-advantaged HSAs, and enrollees can use the accounts to pay for health care expenses. Because HSAs and HSA-eligible plans are new, there is interest in the experiences of plan enrollees, as well as in comparing the plan features and enrollee characteristics with those of traditional plans, such as preferred provider organization (PPO) plans. GAO reviewed (1) the financial features of HSA-eligible plans in comparison with those of traditional plans, (2) the characteristics of HSA-eligible plan enrollees in comparison with those of traditional plan enrollees, (3) HSA funding and use, and (4) enrollees' experiences with HSA-eligible plans. GAO analyzed data regarding HSA-eligible and traditional plans and enrollees from national employer health benefits surveys, three selected employers, and a national broker of health insurance. GAO compared Internal Revenue Service (IRS) data for tax filers reporting HSA contributions with corresponding data for all tax filers under 65 years old. GAO also conducted focus groups with employees of the three employers.

What GAO Found

In 2005, HSA-eligible plans had different financial features than traditional plans--such as lower premiums and higher deductibles--but both plan types covered similar health care services, including preventive services, and used similar provider networks. For the three employers' health plans GAO reviewed to illustrate enrollees' potential health care costs, GAO estimated that HSA-eligible plan enrollees would incur higher annual costs than PPO plan enrollees for extensive use of health care, but would incur lower annual costs than PPO plan enrollees for low to moderate use of health care. HSA-eligible plan enrollees generally had higher incomes than comparison groups, but data on age differences were inconclusive. In 2004, 51 percent of tax filers reporting an HSA contribution had an adjusted gross income of $75,000 or more, compared with 18 percent of all tax filers under 65 years old. Two of the three employers GAO reviewed and a national broker of health insurance also reported that HSA-eligible plan enrollees had higher incomes than traditional plan enrollees in 2005. GAO's data sources did not conclusively indicate whether HSA-eligible plan enrollees were older or younger than individuals and enrollees in comparison groups. Just over half of all HSA-eligible plan enrollees and most employers contributed to HSAs, and account holders used their HSA funds to pay for current medical care and to accumulate savings. About 55 percent of HSA-eligible plan enrollees reported HSA contributions to IRS in 2004. Tax filers claimed an average deduction of about $2,100 for their HSA contributions in 2004, and the average amount increased with income. About two-thirds of employers offering HSA-eligible plans contributed to their employees' HSAs, and the average employer HSA contribution was about $1,064 in 2004. About 45 percent of tax filers reporting 2004 HSA contributions also reported that they withdrew funds in 2004, and 90 percent of these funds were withdrawn for qualified medical expenses. The other 55 percent of those reporting HSA contributions in 2004 did not withdraw any funds from their HSA in 2004. HSA-eligible plan enrollees who participated in GAO's focus groups generally reported positive experiences, but most would not recommend the plans to all consumers. Participants enrolled in the plans generally understood the key attributes of their plan. Few participants reported researching cost before obtaining health care services, although many researched the cost of prescription drugs. Most participants were satisfied with their HSA-eligible plan and would recommend these plans to healthy consumers, but not to those who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible. GAO received technical comments from IRS and a national broker of health insurance and incorporated the comments as appropriate.