Health savings accounts are being made available to federal employees who are younger than 65 and have health plans with high deductibles. Such plans are intended to guard against catastrophic medical expenses. Health savings accounts are funded by pre-tax employer and employee money and would cover more routine medical costs. Unlike other flexible spending accounts, health savings accounts do not require participants to spend their accumulated money in a particular calendar year.
The accounts were created in the 2003 Medicare Modernization Act.
Health savings accounts "encourage greater attention to health care value," said Dan Blair, deputy director of the Office of Personnel Management, at the hearing. "The account can accumulate funds tax-free from year to year, can help cover medical expenses and premiums when between jobs, and is portable across different employers."
Blair told members of the House Government Reform Subcommittee on Civil Service and Agency Organization that about 3.1 million FEHBP members would be eligible for the accounts, if they enrolled in high deductible plans.
Several lawmakers said they were concerned that the new option would draw large numbers of federal employees away from the standard FEHBP offerings-a phenomenon known as "adverse selection"-which could weaken the federal program for those participants who do not or cannot start a health savings account. The plan might present an enticing alternative to federal employees who do not have regular medical bills, who would like to choose their own health care provider and who need protection in case of catastrophic events.
Del. Eleanor Holmes Norton, D-D.C., said because federal employees are "rational economic beings," they would "respond to the immediate economic incentive" of health savings accounts.
Rep. Chris Van Hollen, D-Md., said he was concerned the accounts would draw healthy participants away from the primary plan and would increase premiums across the FEHBP.
The National Association of Retired Federal Employees also criticized the plan.
The accounts "are a bad deal for federal employees and retirees of any age who have moderate-to-high health care costs or who are living from paycheck to paycheck," said NARFE President Charles Fallis. "As a result, premiums for comprehensive plans would increase because relatively healthy enrollees with higher incomes could be siphoned off into [health savings accounts]. Any plan that would divide and conquer our risk pool is a mistake."
Blair said he does not foresee a "mass migration." In his testimony, he said OPM analysts had considered other consumer-driven options in the FEHBP and "this experience leads us to believe that the movement by large numbers of enrollees to raise a concern about adverse selection is not likely."
Blair told the subcommittee that his agency would remain focused on the issue and will be "doing everything we can" to prevent adverse selection.
"We're all on the same page here," Blair said. "We don't want to see the program spiral."