	Introduction

		Background

Health Savings Accounts (HSAs), as authorized by the Medicare Prescription Drug, Improvement, and Modernization Act ( P.L. 108-173 , MMA) of 2003, are tax-preferred savings accounts used to pay for unreimbursed qualified medical expenses such as health insurance deductibles, copayments, and services not covered by insurance. To open or contribute to an HSA, the insured must have a high-deductible health plan (HDHP), and generally no other health insurance coverage. One of a number of the stated goals of the HSA enabling legislation is to encourage workers to better save for their health care in retirement. Moreover, the HDHP/HSA combination is thought to provide incentives for consumers to be more active in their care, and purchase the best possible medical services for the lowest possible price. Also in this report, a preferred provider organization (PPO) not associated with an HDHP is used as the baseline to which an HDHP is compared. HSA Basics

The HSA is one type of savings account associated with consumerism in health care. HSAs are a particularly generous form of health-related savings account. Premiums, Deductibles, and Enrollment in HDHPs and HSAs

This section of the report discusses insurance premiums and deductibles for those with HDHPs and perhaps HSAs. The GAO report concluded that, between 2005 to 2007, between 51% and 58% of HDHP plan holders opened an HSA. To preview the results of the literature review:
HDHPs are designed to change consumer behavior by providing incentives for consumers to be more concerned with the cost and quality of their health care. HSAs could encourage individuals to save for their health expenses in retirement by increasing the balance in their HSAs. Because HDHPs have lower premiums than other policies, previously uninsured individuals might purchase these plans. There is little evidence, however, that the widespread adoption of HDHPs would lower the aggregate uninsurance rate or affect the operations of insurance markets. Aggregate health expenditures could fall if most policy holders moved from standard PPO plans to HDHP/HSA plans. A single-employer study compared individuals who switched into an HDHP with those who remained in a standard PPO. Conclusion

Enrollment in HDHPs, as measured by covered lives, has been increasing since HSAs were authorized in 2003, although the growth rate of this increase is slowing (see Figure 2 ). It is estimated that between 51% and 58% of HDHP holders go on to open an HSA. According to recent research, not all individuals seem to be saving for their health expenses in retirement because only about half of those who are eligible to open an HSA do so. Nevertheless, the empirical evidence backing many of these results is weak, and much remains unknown about the effects of HDHPs and HSAs on uninsurance, utilization of health care, and aggregate health expenditures.
Health Savings Accounts (HSAs), as authorized by the Medicare Prescription Drug, Improvement, and Modernization Act (P.L. 108-173, MMA) of 2003, are tax-preferred savings accounts used to pay for unreimbursed qualified medical expenses such as health insurance deductibles, copayments, and services not covered by insurance. To contribute to an HSA, the insured must have a high-deductible health plan (HDHP), and generally no other health insurance coverage. One of a number of the stated goals of the 2003 legislation is to encourage workers to better save for their health care in retirement. Moreover, the HDHP/HSA combination is thought to provide incentives for the consumers to be more active in their care, and purchase the best possible medical services for the lowest possible price. This report analyzes existing data and reviews the current literature to discuss whether HDHPs and HSAs have begun to meet some of these objectives.
Enrollment in HDHPs has been increasing since HSAs were introduced in 2004. Nevertheless, the HDHP enrollment growth rate is slowing. Individuals who have an HDHP may or may not open an HSA; it is estimated that between 51% and 58% of HDHP holders go on to open an HSA. Whether opening an HDHP/HSA is financially advantageous is a complicated issue. In fact, those at many levels of the health spending distribution might save money by opening an HDHP/HSA instead of enrolling in a standard preferred provider organization (PPO) plan (the most common type of health insurance plan).
A review of the literature on HDHPs and HSAs suggests the following:
HSAs are designed to change consumer behavior by providing incentives for consumers to be more concerned with the cost and quality of their health care. Although a few studies suggest this is happening, the literature in this area reports mixed and inconclusive results. HSAs could encourage individuals to save for their health expenses in retirement. However, because only about half of HDHP plan holders open an HSA, the remaining half are not saving for their health expenses in this tax-preferred account. Among those with HSAs, some may be using the account as a tax benefit and not saving for health care in retirement. The uninsurance rate could potentially decrease with the advent of HDHPs as previously uninsured individuals purchased these plans because of their relatively low premiums. There is little evidence, however, that the currently uninsured are transitioning into HDHPs. Some hoped that a change from standard PPO plans to HDHP/HSA plans would lower aggregate health expenditures. They maintain that expenditures would fall if most of those insured in a standard PPO plan actually moved to an HDHP/HSA.
The empirical evidence backing many of these results is weak or limited, and much remains unknown about the effects of HDHPs and HSAs on uninsurance, the utilization of health care, and aggregate health expenditures.