Feds promote new health accounts, but think workers will stay away

In an apparent contradiction, federal personnel officials are extolling the benefits of Health Savings Accounts while claiming the new plan will not draw young, healthy participants away from the existing Federal Employee Health Benefits Program.

HSAs-which were created in the 2003 Medicare Modernization Act-are being promoted for use in the federal government and in the private sector workforce. Unlike other flexible spending accounts, health savings accounts do not require participants to spend their accumulated money in a particular calendar year.

The Office of Personnel Management is developing a plan that could potentially offer the new accounts to federal employees who are younger than 65 and are enrolled in health plans with high deductibles. The program is designed to guard against catastrophic medical expenses and allow more flexibility for routine expenditures. Both employers and employees will be able to contribute pre-tax money to the accounts.

At several forums last month, federal officials promoted the benefits of the plans and said they would improve the quality of service available to participants because employees choose where to spend their money.

Health Savings Accounts "encourage greater attention to health-care value," said Dan Blair, OPM's deputy director, during a March 24 congressional subcommittee hearing.

Lawmakers at that same hearing expressed concern that if the federal government offered HSAs, large numbers of federal workers would move away from FEHPB, leaving an older, less affluent pool of participants. If the only federal employees left in FEHBP were older than 65, saddled with high routine medical costs, or unable to afford high deductibles, health care premiums could shoot up rapidly, according to the lawmakers.

"The assumption of those entering our plan, and most such plans…is that the strong and weak will both benefit. If you pull the strong out, you are undoing that," Del. Eleanor Holmes Norton, D-D.C., said in an interview Monday.

At the hearing, Norton described federal employees as "rational economic beings" who will most likely "respond to the immediate economic incentive" of health savings accounts.

Federal personnel officials insist prior experience shows workers will not stampede toward HSAs. At the subcommittee hearing, Blair said that previous "consumer-driven options" have not produced a "mass migration." Senior federal officials, however, are depicting HSAs as a dramatic and unprecedented overhaul, designed to fix a troubled national health care system.

"HSAs are an historic change in the way we look at health care," said Treasury Secretary John Snow at a March 30 press conference. "At a time when health care costs are rising rapidly, and individuals, families and employers are struggling to find lower-cost alternatives, HSAs are a terrific option that I think every American ought to consider."

More than 30 percent of current health care spending in the United States is wasteful or inefficient, according to Michael Parkinson, the chief medical officer at health insurance company Lumenos and a member of a March 30 Treasury Department panel on HSAs.

Treasury officials have said they are doing everything they can to promote the new accounts. A Web site and a hotline have been established to answer questions about the plan.

"We will work closely with those who, like we at Treasury, are interested in making sure HSAs are as widely used and available as permitted by law," Snow said.

Norton said Monday that OPM officials have not provided a sufficient explanation on why federal employees would not flock to the new accounts.

OPM has said "we don't have any evidence that people would in fact, leave the system," according to Norton. "That's not a rational answer."