State Legislation and Actions on Health Savings Accounts (HSAs)and Consumer-Directed Health Plans, 2004-2013

Updated: June, 2011; material added April 2013 

Health Savings Accounts (HSAs) were established in federal law in December 2003, when President Bush signed the Medicare Prescription Drug Improvement and Modernization Act of 2003 (P.L. 108-173). HSAs are tax-free financial accounts that are designed to help individuals save for future health care expenses.  HSAs also are an expansion and evolution of Medical Savings Accounts (MSAs), which were launched in over 20 states and in a federal pilot program in the mid-1990s.

State laws and regulations passed in 2004-09 now play a role in the use of health savings accounts, through insurance regulation, measures that encourage development or offering of HSAs and/or laws that provide state tax exemptions to parallel federal tax treatment.  HSA laws and commercial marketing usually are closely tied to High-Deductible Health Plans and are referred to jointly as "Consumer-Directed Health Plans (CDHPs)."¹

Who is eligible for HSAs? What are the contrubution and out-of-pocket limits? 

There are four federal requirements to be eligible for HSAs:

1. A person must be covered simultaneously by a qualified “high-deductible” health insurance policy (HDHP). 
   For 2012, participants in qualified HDHPs are required to pay the first $1,250 of their medical expenses ($2,500 for family coverage) before insurance benefits begin. (Conventional insurance plans, whose participants cannot contribute to HSAs, typically have deductibles of about one-third to one-half these amounts.)
2. The HSA enrollee cannot be covered by any other health insurance plan, such as a spouse’s plan.
3. The HSA enrollee must be under age 65.
4. The HSA enrollee cannot be claimed as a dependent on someone else’s federal income tax return.

There are no income, employment or other age limits in the federal law.

By comparison, for 2010:

What is Covered or Allowable for HSA Payments?

Traditional medical costs such as diagnosis and treatment of disease are allowable, as well as routine medical visits. In addition, many expenses that may not be covered by traditional health insurance can be paid for through HSA accounts. These include prescription drugs and some non-prescription drugs, eye care, dental care, COBRA premiums, acupuncture, Braille books, midwife services, seeing-eye dogs, qualified long-term care services, and more. If an enrollee uses HSA money for non-medical expenses and is under the age of 65 or not disabled, he or she will incur a 10 percent penalty in addition to owing regular federal income tax on such amounts.
An employer may elect to contribute financially to an employee HSA as much or as little as they choose (while staying below the annual legal limit on the account of $2,850 or $5,650 for employees with family coverage).

Federal Health Reform Creates New Rules for HSAs

The federal law, PPACA, eliminated the use of HSA dollars to pay for over-the-counter drugs, unless obtained with a prescription or doctor's orders. An additional provision increased the penalty for early withdrawal from 10% to 20%.

The reform law requires that health plans pay at least 60% of the actuarial value of covered benefits. Actuarial value generally includes deductibles, copayments and coinsurance. But high-deductible health plans typically have lower actuarial values than do more traditional types of coverage because they don’t cover medical expenses until the annual deductible is met. To pay for those costs, enrollees can tap their HSA.  Beginning in 2014, employee contribtions may not be counted in the autuarial value -- unless future HHS guidance or regulations specify that they do count. 

• CMS Bulletin updates HSAs and Federal Reforms.  In a release Feb. 24, 2012 titled Actuarial Value and Cost-Sharing Reductions Bulletin by CMS’s Center for Consumer Information and Insurance Oversight, a bulletin  gave proponents of account-based health plans some good news by suggesting that employer contributions to health reimbursement arrangements (HRAs) and health savings accounts (HSAs) could be taken into account when determining actuarial value of qualified health plans (QHPs) and nongrandfathered small-group and individual policies. But it doesn’t look like contributions made by account owners will be included in the calculation.

Recent Reports and Articles
To read portable document format (.pdf) files, use Adobe Acrobat Reader.

• Why You May Want To Reconsider That Plan With A Health Savings Account.  Health plan deductibles keep getting higher — the proportion of workers with a deductible that topped $1,000 for single coverage nearly tripled in the past five years, to 34 percent.

  Since high-deductible plans often mean you pay more out of pocket for medical care, it might seem like a no-brainer to sign up for a plan that links to a health savings account so you can sock away money tax free to cover your medical expenses. But there are good reasons to think twice before making that choice.

  In order to get the tax advantages of a health savings account, the health plan it’s linked to has to meet certain criteria. In 2013, for instance, an HSA-qualified plan has to have a deductible of at least $1,250 for single coverage and $2,500 for family coverage, and the maximum out-of-pocket limits can be no higher than $6,250 and $12,500, respectively, for single and family coverage.

  But HSA-qualified plans have other limitations that consumers often aren’t aware of. For one thing, even though the Affordable Care Act allows parents to keep their adult children on their policies until they reach age 26, they can’t use funds from their HSA to pay for the child’s care after age 24. That’s because “dependent” is defined differently for HSA purposes than it is under the ACA provisions that extend dependent coverage to adult children.

  In addition, except for preventive care, which is generally covered at 100 percent and is not subject to the deductible, consumers in an HSA-qualified plan may be on the hook for the entire cost of medical care — including doctor visits, medications, tests and treatments — until they reach their deductible. (They will be charged the negotiated rate their insurer has agreed to pay providers for services, however, not the “rack” rate paid by the uninsured.)

  Regular high-deductible plans, on the other hand, offer many more options. In addition to covering preventive care at 100 percent, some function like traditional plans, requiring only a copayment for doctor visits and medicines even before the deductible is met. Or they may offer a limited number of doctor visits with a copayment before people meet their deductible, says Carrie McLean, senior manager of customer care at eHealthInsurance.com, an online vendor.  Consumers need to evaluate the full spectrum of costs and benefits for HSA plans, but the advantages may have nothing to do with medical expenses, she advises. “The true benefit you get from these accounts is because you’re putting money away and you get that tax [savings],” says McLean.  [Read full commentary online, posted April 2, 2013]

• Patients in Consumer Driven Health Plans Show More Cost-Conscious Behavior - According to the 2011 EBRI/MGA Consumer Engagement in Health Care Survey, those in CDHPs were more likely to say that they had checked whether their plan would cover care; asked for a generic drug instead of a brand name drug; talked to their doctor about treatment options and costs; talked to their doctor about prescription drug options and costs; developed a budget to manage health care expenses; checked a price of service before getting care; and used an online cost-tracking tool. Published by EBRI, January 2012.
• Consumer-Directed Health Plans: Health Status, Spending, and Utilization of Enrollees in Plans Based on Health Reimbursement Arrangements - July 16, 2010 GAO-10-616 - [Read summary below]
• Health Savings Account Enrollment Reaches Ten Million - AHIP survey, June 2010.
• "Hoosiers and Health Savings Accounts: An Indiana experiment that is reducing costs for the state and its employees." - By Mitch Daniels in the Wall Street Journal, 3/2/2010.
• 2009 Census Shows 8 Million People Covered By HSA Qualified High-Deductible Health Plans - report by AHIP, published 5/13/09.
• Missing HSA Money Raises Questions - National Public Radio, 2/19/10
• Consumer Directed Health Care Flourishing, The Heartland Institute, June 2009. by Jillian Melchior. 
• "More Choice For Consumers Is Always Healthy," Boston Herald/Heartland Institute, June 14, 2009.
• Indiana First to Expand Medicaid Coverage via Health Accounts - The Healthy Indiana Plan (HIP), which began January 1, 2008, is designed to cover up to 130,000 uninsured residents.  Published by Commonwealth Fund, 3/08.

NCSL Resources

• "State Legislation Relating to Disclosure of Hospital and Health Charges" -  NCSL report on price transparency, a useful feature for HSA users.  updated 12/09.
• Indiana Places HSAs at the Center of Coverage Expansion - feature in NCSL State Health Notes, May 14, 2007.
• Consumer-Driven Health Care, HSAs and States - PowerPoint by Richard Cauchi for NCSL Fiscal Analysts, 9/6/06.
• "Power to the Patient: Can high-deductible plans and health savings accounts lower premium costs and replace the traditional goal of comprehensive insurance?" State Legislatures Magazine, 5/06. 
• "NCSL session: "Consumer Driven Health Insurance: New State Solutions in 2006?" at Spring Forum, April 7, 2006.  From corporate boardrooms to the President's State of the Union, the idea of health savings accounts has attracted attention, support and nagging concerns.  In 2005 at least 26 states enacted laws directly affecting health savings accounts and their associated high-deductible health insurance plans.  At least three states hope to integrate "CDHPs" into Medicaid via legislation and federal waivers. These market-based tools are aimed at lowering premium costs and requiring increased consumer responsibility. Yet the "bare bones" policies often associated with such plans may leave a family with hefty charges for routine or not-so-routine medical services. This "mini-summit" 2 hour session examined facts, opinions and some unknowns.  Funded in part by the Robert Wood Johnson Foundation and the NCSL Critical Health Areas Project (CHAP).
  • Speakers:
    • Paul Fronstin [PowerPoint download] Director, HRET, Employee Benefit Research Institute
    • Tracy Cassidy Watts [PowerPoint download], Principal, Healthcare and Group Benefits, Mercer Co.
    • Simmi Singh [PowerPoint download], VP, Cognizant Technology Solutions, Chicago, IL

2005-10 Activities

Six years after the federal HSA authorization, the commercial market has become far more involved in offering and promoting HSA accounts to the general public.  Many technical issues were not resolved until the summer of 2004, when the US Treasury developed formal guidelines.   "Insurers are going crazy to get products out," according to Medscape, a professional news service, quoting Dan Perrin, Executive Director of the HSA Coalition, a Washington, DC group that has worked to promote the accounts.  In late 2004, Humana, UnitedHealth Group, and the Blue Cross network all announced new or expanded entries into the market of "consumer-driven health plans."   

"By the Numbers: 2008-10 Surveys":

Map of States with HSA Laws and Resolutions passed in 2007-2008

MAP KEY  This map includes HSA-related state laws and resolutions enacted: > in 2007 (blue)

Map of States with HSA Laws and Resolutions passed in 2004-2006

MAP KEY  This map includes HSA-related state laws enacted: > in 2004 (dark green) > in 2005 (bright green) > in 2006 (light green) For states with laws passed in multiple years, generally the earliest law is coded on the map.   Medical Savings Account Laws (1994-2003) are not color-coded.

State Laws and State Obstacles to HSAs
According to an analysis of existing laws conducted by insurers, there are three broad categories of state laws related to state tax treatment of HSAs.  An updated analysis including NCSL data shows the following:

NOTES: A) Although HSA contributions are exempt from federal taxes, as of the 2005 tax year, six states — Alabama, California, Maine, New Jersey, Pennsylvania and Wisconsin — did not exempt HSA dollars from state taxes,  [5]
B) See STATE INDIVIDUAL INCOME TAXES, 2006 ; HSA State Income Tax Chart, 1/2007 
C) NH State Income Tax is Limited to Dividends and Interest Income Only.
D) PA excludes from taxation HSA contributions by employers but not by individual employees, based on language in their 2005 law, HB 107
E) Wisconsin comforming law enacted in 2011, effective 2012.

State Conformity: An evolving Issue
On Jan. 1, 2004, when HSA-based health plans became available, laws in 17 states included "structural impediments" that made it difficult to pair an HDHP with an HSA, says Larry Akey, a spokesperson for America's Health Insurance Plans (AHIP), the trade association for health insurers. 

As of October 2006, "Inside Consumer-Directed Care" Newsletter reported that "just four" states have structural impediments to HSA-HDHP pairing: Alabama, California, New Jersey and Wisconsin.   Three other states - Illinois, Missouri and New York - have "HMO deductible limitations and/or mandated benefit impediments to offering an HSA-based plan according to AHIP spokesperson Mohit Ghose. 

Earlier, in August 2005,  Inside Consumer-Directed Care reported that, "Insurance commissioners in Rhode Island, Pennsylvania and Florida reported that lawmakers in their states recently removed legal roadblocks that would have made it impossible, or at least difficult, to pair a health savings account (HSA) with a high-deductible health plan (HDHP). But the clock is ticking for legislators in several states that still have laws on the books that could prevent or impede the adoption of HSA-based health plans on Jan. 1, 2006, when a two-year "transition period" granted by the Treasury Dept. comes to a close."

(Note that there are differing interpretations of what change is needed.)  While some states — including Illinois, Maine and Missouri — allow insurers to pair high-deductible PPOs with HSAs, they can't couple the accounts with a high-deductible HMO. "Our HMOs cannot be used with an HSA because the deductibles are too low. By our definition, a plan that has a high deductible is not an HMO," says Sue Hofer, a spokesperson for the Illinois Division of Insurance. "We expect that employers that want to offer HSA-qualified plans will do so by offering a [high-deductible] PPO."

For a 2006 analysis of state laws, especially the impact of existing state mandate and "first-dollar coverage" requirements, see HSA State Implementation Issues Report by CAHI, January 2006.

State Fiscal Impacts of HSA Tax Law Changes
When a state adds an HSA-specific income tax exemption the resulting tax savings for the individuals also mean loss of state revenue.  In the start-up phase of 2005-2006 it has been relatively difficult for states to know the tax impact of HSA exemptions.  However, for the NCSL study of 2005 State Tax Actions, staff author Bert Waisanen reported the following:

Medicaid: Health Opportunity Accounts (HOA)
The federal Deficit Reduction Act (DRA) enacted in February 2006,  provides states with "much of the flexibility they have been seeking over the years to make significant reforms to their Medicaid Programs."  CMS provides the following summary: "Section 6082 of the DRA allows for States to operate Medicaid demonstrations programs to test alternative systems to deliver Medicaid benefits through a Health Opportunity Account (HOA) in combination with a high deductible health plan (HDHP)."  Since HOAs were designed for Medicaid recipients, the maximum out-of-pocket costs in HOAs are relatively low: $250 for adults and $100 for children.  Once the deductible is reached, Medicaid covers the cost of health care services.  

The financial structures of these accounts have several parallels to the private market HSAs. CMS has restated that only ten states will be approved to operate HOA Medicaid State Plan Amendments for the first five years of the program. The demonstrations will provide States with the option of allowing individuals to voluntarily assume greater responsibility for their own care by enrolling in flexible consumer-based accounts. Beneficiaries are given the tools to take a greater role and responsibility in their health care."

• Full Text of federal "Health Opportunity Accounts" Section 6082, P.L. 109-171
• Health Opportunity Accounts: What Are They, and Why Should State Advocates Care? - Families USA advocacy memo, 2007 [10 pages  PDF]
• Medicaid Reform Strategies for Texas: HSAs and HOAs - Feb. 2007

South Carolina was the first state to receive a HOA demonstration grant and the only state reporting a planned HOA demonstration in the Kaiser/HMA survey released 10/07. In FY 2008, South Carolina plans to implement two one-county pilots each limited to 1000 beneficiaries: a voluntary HOA demonstration for healthy adults and children and a voluntary “Health Savings Account” plan using DRA benefit flexibility (discussed in the benefits section). Once a beneficiary’s HOA has been depleted, the member will have out-of-pocket responsibility for 10 percent of costs up to a maximum of $250 for an adult or $100 for a child.  No additional cost-sharing is applied thereafter.  

Medicare Offers Medical Savings Accounts 
In 2007, for the first time, "virtually every" Medicare beneficiary was able to select a Medical Savings Account" (MSA) within Medicare.  For the 2008 enrollment period (11/15/07-12/31/07) HSA supporters are spreading the word on this less-publicized option.  Greg Scandlen, head of Consumers for Health Care Choices provided a feature in "Health Care News" for January 2008, describing the somewhat difficult-to-navigate web site sponsored by CMS/HHS, that provides the details.  Note that most Medicare MSAs do not cover prescription drugs. SEE Medicare MSAs online (state level data.) 

News, Opinions, Reports and Useful Links 

High-Deductible Health Plan Study Finds Cost Savings, Less Preventive Care  [March 2011]

Largest study of its kind paints a mixed picture

The largest-ever study of high-deductible health plans finds that such plans, while leading consumers to significantly curtail health spending, also prompt them to cut back on preventive care. The RAND Corporation study, co-funded by CHCF and the Robert Wood Johnson Foundation, appears in the March issue of the American Journal of Managed Care.

Researchers studied more than 800,000 U.S. families and found that for those who shifted into health insurance plans with deductibles of at least $1,000 per person, health spending dropped an average of 14% when compared to families with lower deductibles. The study also found that families in high-deductible plans cut back on preventive services such as childhood immunizations, cancer screenings, and routine tests for diabetes. The net result is that people are cutting back on both necessary and unnecessary care.

The finding on preventive care is especially interesting given what's ahead for national health reform. The Affordable Care Act (ACA) is expected to further encourage enrollment in high-deductible health plans, as such plans are expected to be a central offering in the health benefit exchanges being set up by the states to help the uninsured find health coverage. At the same time, the ACA waives deductibles for preventive services, so consumer awareness will be key.

The study tracked the experiences of families insured during 2004 and 2005 through one of 53 large employers, about half of which offered a high-deductible option.

Some key findings are: 

• "Consumers Know the Time Is Right for Market-Based Health Care Reform" article by Heartland Institute, 7/1/08
• "Health Savings Accounts: Participation Increased and Was More Common among Individuals with Higher Incomes" - General Accountability Office (GAO), Released online 4/30/08. 
• "January 2008 Census shows 6.1 million people covered by HSA/high-deductible health plans" - AHIP report released April 2008
• "A Survey of Preventive Benefits in Health Savings Account (HSA) Plans, July 2007" - AHIP Center for Policy and Research, (November 2007).
• "Consumerism in Health Care Survey, 2007" Enrollment in consumer-driven plans with a tax-advantaged account represented 2 percent of privately insured adults in 2007, up from 1 percent in 2006. One of 10 insured adults had high-deductible health plans without accounts.  The Employee Benefit Research Institute and The Commonwealth Fund, Released 3/18/08.
• Consumerism in Health Care Survey, 2006: Early Experience With High-Deductible and Consumer-Driven Health Plans - study by EBRI/Commonwealth, 5/07.  [48 pages PDF ]
• I'm Not Going to Pay a Lot for This MRI: Navigating the Brave New World of consumer-directed health care.  Article by Michael F. Cannon, Cato Institute, 06/15/07
• Consumer Directed Health Plan (CDH) Compared to Commercial Insurance Plans, 2004-2005 published by Definity Health, 4/23/07. [4 pages PDF 
• Consumer-Driven Healthcare: Current Practices, Future Upgrades - by The Conference Board Consumer-Driven Healthcare Working Group.  Purchase required. 3/07. 
• "Consumer-Directed Health Plans: Small but Growing Enrollment Fueled by Rising Cost of Health Care Coverage" published by U.S. GAO-06-514, 4/28/06. [38 pages ]
• "Communication Challenges Loom Large in Benefit Enrollment Process", Watson Wyatt Survey Finds.  1/31/07.
• High-Deductible Health Plans Cost More for Women, Study Finds [4/6/07] - as reported by Kaiser Network.
• Congress Passes Legislation To Expand, Encourage Use of Health Savings Accounts
  The House Ways and Means Committee on 9/27/06 voted 24-14 along party lines to approve a bill that seeks to expand enrollment in health savings accounts. The legislation increases the limit on HSA contributions, which is currently capped at the amount of the deductible, to $2,700 for individuals and $5,450 for families. The increase would take effect in the 2006 tax year. In addition, the bill would allow individuals to transfer funds from health reimbursement arrangements and flexible spending accounts to HSAs. The legislation also would allow a one-time transfer of funds from individual retirement accounts to HSAs without a tax penalty. According to estimates by the Joint Committee on Taxation, the bill would increase the number of individuals who have HSAs by 300,000 at a cost of $1 billion over 10 years. Committee Chair Bill Thomas (R-Calif.) said that the legislation has "a very great possibility of being one of the few" to pass before the midterm elections and that the Senate is "very excited" about the bills.  (Blinkhorn, CQ Today, 9/27/06).
• Study: 'Consumer-Driven' Coverage Often Reduces Consumer Cost-Sharing - Health Affairs, July/August 2006 [9 pages ]
• Consumer-Directed Health Plans: Small but Growing Enrollment Fueled by Rising Cost of Health Care Coverage U.S. GAO-06-514, 4/28/06 [38 pages ].
• Avoiding necessary care: A Kaiser Family Foundation survey of individuals enrolled in Consumer-Driven Health Plans found that while greater cost-sharing made consumers more price-conscious, they couldn't differentiate between frivolous or necessary care, causing them to avoid both. Individuals in CDHPs were twice as likely to avoid care because of cost than were individuals in traditional plans.
• Health Savings Accounts: Do the Critics Have a Point?, by Michael F. Cannon, Cato Institute, 5/30/06.
• Informing the Debate about Health Savings Accounts: An Examination of Some Misunderstood Issues (Center on Budget and Policy Priorities, 6/13/06)
• Health Savings Accounts Unlikely to Significantly Reduce Health Care Spending (Center on Budget and Policy Priorities, 6/12/06)
• Health Savings Accounts: Why They Won't Cure What Ails US Health Care(Washington: Commonwealth Fund, 6/06)
• Tutorial: Consumer-Directed Health Plans (kaiserEDU.org, 6/06)
• "Early Experience With High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey | PDF download" This Issue Brief presents results of the first EBRI/Commonwealth Fund Consumerism in Health Care Survey, which was conducted to provide reliable national data on the growth of high deductible plans and their impact on the behavior and attitudes of health care consumers. The survey—the first national one of its kind—found lower satisfaction with consumer-driven plans. 12/7/2005.
• HealthCare Symposium Survey 2006 results, according to healthcare executive survey by America Re HealthCare, 4/10/06.
• HSA for America - example of a for-profit company whose goal is "We can help you find a High Deductible Health Plan insurance policy, as well as a Health Savings Account to meet your needs."  Fort Collins, CO. 2006.

PROs AND CONs OF HSAs

Insurers will need to change with the times and be able to provide the high-deductible health plans and HSAs defined within the new legislation," said Karin Landry, Managing Partner, Spring Consulting Group, LLC, who has more than 17 years of experience in the insurance, healthcare, risk financing and benefits industries.

Despite recent publicity about HSAs, most U.S. workers have neither heard of HSAs nor understand how they work, according to a 2005 survey by Watson Wyatt Worldwide. HSAs connect with consumer-driven health plans to offer an important alternative to employers seeking to hold the line on costs and engage the consumer in healthcare decision-making. **

HRAs: An Alternative Health Account

HRAs are medical care reimbursement plans established by employers that can be used by employees to pay for health care. HRAs are funded solely by employers. Employers typically commit to make up to a specified amount of money available in the HRA for expenses incurred by employees or their dependents. HRAs are accounting devices, and employers are not required to expend funds until an employee incurs expenses that would be covered by the HRA. Employees may use the HRA to pay for medical expenses and premiums. Unspent funds in the HRA usually can be carried over to the next year (sometimes with a limit). Employees cannot take their HRA balances with them if they leave their job, although an employer can choose to make the remaining balance available to former employees to pay for health care.

HRAs often are offered along with a HDHP. In such cases, the employee pays for health care first out of his or her HRA and then out-of-pocket until the health plan deductible is met. Sometimes certain preventive services are paid for by the plan before the employee meets the deductible. (Source: Employer Health Benefits 2005 Annual Survey by Kaiser & HRET, 9/14/05)

Archive:  Articles and Opinions, 2004-2007

•  Employers have been changing the structure of health benefits in order to control the cost of providing health benefits. Participation in so-called “consumer-driven” health plans, which include high-deductible health plans and a tax-preferred savings or spending account, grew to an estimated 7.5 million adults ages 21–64 with private health insurance in 2007, according to Employee Benefit Research Institute (EBRI),at the U.S. Senate Finance Committee’s Health Reform Summit.  EBRI Research on Employment-Based Health Coverage, June 16, 2008.
• The General Accountability Office (GAO), an investigative arm of Congress, found the plans do indeed attract the wealthier, those with an average income of $139,000, compared with about $57,000 among others plans, an analysis based on income tax records. The plans are typically coupled with a tax-favored savings account to help patients pay for medical bills. About 40 percent of those in the plans chose that option, GAO found.   "Health Savings Accounts: Participation Increased and Was More Common among Individuals with Higher Incomes"  GAO-08-474R, April 1, 2008.
• [Reuters: "Wealthier pick high-deductible health plans-US GAO" 5/1/08].
• Enrollment in consumer-driven plans with a tax-advantaged account represented 2 percent of privately insured adults in 2007, up from 1 percent in 2006. This represents 2.3 million adults ages 21-64 with private insurance. More than 30% nnrolled in Consumer-Driven Plans have household incomes over $100,000 a year.  One of 10 HDHP insured adults had high-deductible health plans without accounts.  "Consumerism in Health Care Survey, 2007" The Employee Benefit Research Institute and The Commonwealth Fund, released 3/18/08.
• About one percent of the privately insured U.S. population ages 21–64 (or 1.3 million individuals) were enrolled in a plan with either an HSA or HRA, collectively known as consumer-driven health plans (CDHPs), as of September 2006, according to the second annual Employee Benefit Research Institute (EBRI)-Commonwealth Fund Consumerism in Health Care Survey. Another 7 percent, or 8.5 million adults, had plans with deductibles high enough to qualify for health savings account, but of these only 2.6 million were offered or aware of the option to open an HSA.  . The survey showed that among individuals with a CDHP, 57 percent of respondents had an account for less than one year. Overall, 14 percent had no money in their account and another 32 percent had less than $500.  EBRI Issue Brief  http://www.ebri.org/ December 2006.
• "HSA Penetration Reaches 5% But Varies by State, ISI Study Shows."  Health Savings Accounts (HSAs) have had varying levels of adoption when taken on a state-by-state but are approaching 5% of all healthcare insurance users on a nation-wide basis, according to an analysis by Information Strategies, Inc. (ISI).  Among the states with the highest penetration, 5-7% were Wisconsin, Texas, Georgia, Florida, Illinois, Ohio, Tennessee and Kentucky. Amongst the lowest with penetration levels below 2% are New York, New Jersey, Rhode Island, Hawaii and Vermont."  [50-state map] Published by hsafinder.com, 5/07.
• The "Qualified High Deductible Health Plan (HDHP) Atlas" - provides "a snapshot of the HDHP market with independent statistics, and allows viewers to interactively navigate around the country to see currently available prices, premiums and HDHP product features." A companion Market Report with supplementary information on HDHP availability for 44 states and the District of Columbia, can be downloaded at no charge.  HDHP Atlas  | HDHP Market Report  [PDF]

• What are "Medical Savings Accounts" (MSAs)?

  MSAs are accounts established during the earlier decade, 1993-2003,  for covered individuals and their families.  They helped finance part of the cost of the deductibles, co-payments, and other medical expenses that are not covered by a person's health insurance plan.  These earlier plans generally are not preempted or eliminated by the new federal law.

  Which States have had MSA laws (pre-HSA)?

  In the early to mid-1990's several states, including Arizona, Colorado, Idaho, Illinois, Michigan, Mississippi, and Missouri pioneered Medical Savings Accounts state laws.  Congress responded in 1996 with a federal pilot program, contained within HIPAA.  This led to at least 15 additional states enacting their own MSA laws, for a total of 26 states with MSA laws as of December 2003.  These states are: Arizona, Arkansas, California, Colorado, Florida, Idaho, Illinois, Indiana, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Utah, Virginia, Washington, West Virginia and Wisconsin. 

  What is the difference between a Medical Savings Account (MSA) and a Health Savings Account?

  • Lower deductibles; for example, HSAs are combined with "high deductible insurance" with deductibles of $1,100 for individuals and $2,200 for families. The MSA accounts usually required combination with high deductible health insurance no lower than $1,700 for an individual and $3,450 for families.
  • HSAs allow contributions of 100 percent of the full deductible up to a limit of $2,850 for individuals and $5,650 for family coverage. MSAs allowed for 65 percent of an individual’s health insurance deductible, and 75 percent of a family’s.
  • With HSAs, unused balances roll over from year to year.  HSAs also can move with an employee from one employer to another. 
  • HSAs apply to all employers. Most MSAs only apply to small employers of 50 employees or less.
  • HSAs can be funded by employer and/or employee contributions. MSAs had to be only employee contribution or only employer contributions, not both. 
  • HSAs apply an extra tax penalty of 10 percent for non-health distributions made before death, disability or age 65. The penalty was 15 percent for MSAs.
  •  

• Compiled by Richard Cauchi, NCSL Health Program, Denver,
  with additional material from NCSL researchers Brittany Howe (2007), Shira Gitomer (2004), Madeline Kriescher (2006) in Denver and Kala Ladenheim (2000-D.C. office).