What Lies Ahead for HSAs?

It was just a few years ago that health savings accounts and high-deductible health plans were hailed as the future of healthcare and considered the tools for fixing the system through consumer-driven reforms. And it was just a few months ago that HSAs were on the brink of extinction as the target of an amendment in proposed healthcare reform legislation.

So now that HSAs have survived a brush with death but are no longer the priority they once were, what does the future hold for the accounts and similar health reimbursement arrangements?

Some think they are doomed to a death by a thousand cuts. Although provisions that would have completely gutted HSAs were ultimately dropped before healthcare reform passed, there were a few changes to how HSAs operate in the final bill. Consumers can no longer use them to purchase over-the-counter drugs, and the tax penalty for spending the funds on nonqualified expenses was raised.

But given all the changes that were made in this law, "having two minor changes like that made to HSAs was pretty small," said Martin Trussell, senior VP of business development at First Horizon Msaver, in a recent HealthLeaders Media audio feature.

It's the potential regulatory changes, rather than the explicit ones, that could have the most impact on the accounts. Each year the Secretary of Health and Human Services will have authority to determine the minimum required benefits for all health plans, which "opens the door to death by regulation," according to John C. Goodman, president of the National Center for Policy Analysis.

All HHS has to do is establish minimums that effectively exclude HSA-funded high-deductible plans from the government-approved health insurance options, and they're done for. But at this point, there really has been no indication that this administration wants to eliminate them altogether, and predictions about how HHS will set the bar for health plans are just speculation.

The fate of HSAs could actually swing in the other direction. Health savings accounts could become more popular now that reform has passed.

The number of lives covered by HSAs increased 25% last year to 10 million, and the plans have seen the steady addition of about 2 million consumers every year, according to a recent AHIP survey. The growth has come primarily from the group markets, as rising healthcare costs have made high-deductible plans much more attractive to employers struggling to pay for healthcare. If healthcare costs continue to climb unabated, there's really no reason for this trend to change.

The new mandate for health insurance coverage might even open up a new customer base for HSAs. The portion of the population that is uninsured because they can't afford coverage will like turn to Medicaid and other forms of federal assistance to meet the new requirement. But the young, relatively healthy segment of the population that is uninsured by choice—often because they consider themselves too healthy to need it—will now have to pick a plan or pay a penalty.

Some may opt to pay the fine, and others may just go ahead and buy a traditional plan. But with lower premiums and incentives that reward consumers who utilize few healthcare services, high-deductible plans coupled with HSAs seems like a natural fit for this group.

Although consumer-directed health plans will no longer be a central pillar in the plan to fix healthcare, as they were under the Bush administration, they aren't likely to go away anytime soon. Other than that, it's just too early to tell how HSAs will fare under the new healthcare system.