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Home / Legislative Action Center / Issues - Health Care / Health Savings Accounts Can Save Money for Washington Taxpayers |
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Health Savings Accounts Can Save Money for Washington Taxpayers |
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Written On: April 21, 2006 |
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Since their inception two years ago, Health Savings Accounts (HSAs) have grown by leaps and bounds. According to a study published in the April edition of Health Care News, more than 820,000 HSAs were opened across the nation in the last two years and 60,000 new accounts are opened each month. In all, employers and employees have invested nearly $1 billion in HSAs as a way to fight health care inflation and better direct their medical and dental expenditures.
HSAs are similar to a 401(k) retirement account. Employers provide high deductible medical insurance that covers catastrophic illnesses at premiums far less than traditional health insurance. The savings are then deposited in the employee’s savings account to cover co-pays and deductibles. Each employee controls his or her savings account and, most importantly, people can allow those savings to accumulate indefinitely.
Today, the average HSA balance is $1,181—not bad for a two-year savings account.
HSAs are working in the private sector and now are available to Washington state employees thanks to legislation sponsored by Rep. Cary Condotta (R-Wenatchee), a small business owner who offers HSAs to his workers.
As an employer, the state of Washington – meaning the taxpayer – pays the same high health care premiums that plague the rest of the nation. By approving HSAs, the Legislature gave public employees more choice over their health care purchases and the ability to open their own medical 401(k). Taxpayers benefit as well from those tax savings which could be used to fund education and other essential services now being robbed by skyrocketing health care inflation.
While health savings accounts are not a panacea, they are an important way for the state to curb its fastest rising expense. In 2000, Washington spent $2.7 from the general fund for health care. This year, we will spend nearly double that or $4.5 billion. In fact, since 2000, the share of the state budget going to health care has increased from 22 percent to 28 percent. Gov. Chris Gregoire rightly points out that this growth is not sustainable, because state health care costs are growing three times faster than state revenues.
In the private sector, health savings accounts are working for large and small employers and are reducing the number of uninsured, as well. More than one third of HSA purchasers were previously uninsured and 40 percent were families with less than $50,000 in annual income.
For example, Health Care News reports that more than 9,000 employees of the Wendy’s restaurant chain have HSAs. At the end of the first year, more than 90 percent of those employees had positive balances in their savings accounts. More importantly, medical claims decreased by 17 percent after more than five years of double-digit rate increases. After implementing HSAs, Wendy’s overall health care costs rose by only 1 percent last year, and the company passed on those savings in higher contributions to their employees’ savings accounts.
Small companies see the same benefits as national chains. Along with Condotta, Wilbert Precast, a small Spokane employer celebrating its 100th anniversary, provides a high deductible insurance plan and puts the savings into health reimbursement accounts for each employee to pay co-pays, deductibles and other health-related expenses. The savings are rolled over in the HSAs each year. Company owner Dan Houk estimates the costs of the HSAs are half that of a traditional insurance program.
Houk believes that when people have incentives to control their medical expenses they will make better choices. In contrast, people have no incentive to use their health care dollars wisely when somebody else – the government or insurance companies – is paying the bills.
A recent poll of the 5,700 members of the Association of Washington Business confirms that health care costs are reaching a crisis level. Of the 92 percent of employees who provide health insurance for their workers, half experienced rate increases between 10 and 20 percent last year. One-quarter of AWB members saw their rates jump by more than 30 percent.
AWB members range from the state’s largest employers to the smallest, and nearly half of them say that curbing health care costs is their highest priority. Like Gov. Gregoire, they realize that double-digit cost increases are not sustainable, and they’re looking for innovative ways to reduce costs.
One of the most promising innovations is health savings accounts, and all employees – from Wendy’s workers and Wilbert Precast employees to teachers and L&I claims adjusters – now have the right to choose one.
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