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Health Savings Accounts are the latest hot item at the Office of Personnel Management, but according to agency officials, the new accounts are simply one step in a larger plan to develop a broad consumer-driven health insurance system for federal employees.

Federal workers who open the accounts must also be enrolled in a high deductible health insurance plan to guard against catastrophic injury. The accounts are generally available to people who are not enrolled in Medicare, and federal workers will be able to contribute pretax earnings, plus employer contributions, to the accounts. What sets this apart from Flexible Spending Accounts is the employee contributions will stay in HSAs and roll over at the end of the year. Federal workers can use their accounts to pay for noncatastrophic medical visits, but withdrawing funds for nonmedical expenses would incur a penalty and tax liability.

On Tuesday, OPM Director Kay Coles James said that while HSAs are not the ultimate answer, they are a tool employees can use to gain more control over health-care costs.

"I don't think it's revolutionary, I think it's the next step," James said. "HSAs are not the end all be all, and they are not for everyone."

The effort to put medical spending decisions in the hands of employees is "one of the hallmarks of our policy," she added.

James pointed to the current debate in America about the direction of health care, and noted that "there is a great deal of support in the health policy arena" for OPM's consumer-driven policy. She quickly added, however, that the driving force behind the policy is a desire to improve health-care options for federal workers.

OPM has received praise from some quarters for its consumer-driven health-care crusade. In a recent press release, former House Speaker Newt Gingrich lauded James for the direction she is taking federal health insurance.

"Kay Coles James ... has opened the floodgates for federal employees to take control of their own health and health-care spending by adding Health Savings Account options for federal employees," said Gingrich, who is also the founder of the Center for Health Transformation. "Health Savings Accounts will work in cooperation with information-rich resources that allow individuals to compare care providers based on quality and price, and will transform healthcare by inserting more rational market dynamics into the system."

As HSAs have rolled out, however, some lawmakers and union leaders have expressed concern that an adverse selection process will occur - with healthy federal employees leaving the standard Federal Employees Health Benefits Plan offering and weakening the pool of contributors for the remaining participants.

James said OPM officials have studied the issue and do not believe FEHBP will be weakened.

"Of course, we'll keep an eye on that," James said. "If I didn't think it was a value to federal workers, we would not have introduced it."

COMMENTS

• "drop your current health insurance coverage and continue with a high deductible plan you can take with you into retirement... see what happens" What will happen is that Polly will elect the same retirement health plan as you elect when you retire. The difference is that she will have a tax-free savings account to use for her co-pays, deductibles, prescription drugs, vision, dental, over-the-counter drugs,etc. Or, Polly may decide to pay taxes on the funds contributed to her savings account by the federal gov't and use those funds to pay for travel during retirement. Either way, Polly will probably have the same health insurance plan as you have when you retire from federal service. GovExec.com reader Posted October 1, 2004 8:52 PM
• Polly, Yes, not thinking does appear to be your problem. Of course health insurance premiums will continue to increase. The question is, how fast? Like I said, go ahead, drop your current health insurance coverage and continue with a high deductible plan you can take with you into retirement... see what happens. Georgie really likes people like you ;) GovExec.com reader Posted September 24, 2004 1:04 PM
• I went from the low option health plan to a high option because I wanted to have increased benefits. What I got was MINIMALLY increased benefits and an increased co-payment as of Jan 04. Once out of 30 years I needed a new dental bridge which was estimated at $2300. How much was my high option plan willing to pay? $420. Now we government employees are offered "supplemental" dental and vision plans to cover those costs not covered by our already expensive health/dental benefit plans. Prior to all this, HSAs didn't have any appeal to me and seemed risky. The risk, now I believe, lies within our personal ability to discipline ourselves to make regular financial contributions to the HSA. Just for myself, I pay almost $200 a month for health insurance and get relatively zip for my hard-earned dollar. More and more, I am thinking that maybe I should give HSAs more than a passing thought. I think we are getting financially raked over the coals and, I believe, the insurance companies are doing it en masse - much like airline companies do with ticketing. GovExec.com reader Posted September 24, 2004 10:40 AM