WSJ: Consumers Having a Tough Time with HSAs

An article  in today’s Wall Street Journal will no doubt have opponents of health savings accounts (HSAs) hyperventilating about how HSAs have failed.  But the difficulties that consumers are experiencing are predictable, if not welcome, and some dissatisfaction with HSAs is no doubt a good thing.

Vanessa Fuhrmans writes [$]:

President Bush and many big employers have hailed “consumer-directed” health plans and savings accounts as an effective weapon in the battle against runaway medical costs. But several years after the plans got off to a fast start, the approach appears to be stumbling – largely because of consumers’ unease in using them…

[L]ow enrollment and low satisfaction among workers who are offered them raise the question of whether consumer-directed plans will stall before they ever hit the mainstream.

In a paper responding to common criticisms of HSAs, I argued that some of the inevitable consumer dissatisfaction is necessary, but much of it can be mitigated by expanding HSAs:

There are good reasons not to draw any firm conclusions based on current survey research…First…none of the surveys measures consumer satisfaction with HSAs alone, or at their full potential. Second, some dissatisfaction inevitably stems from unfamiliarity…This source of dissatisfaction can be expected to dissipate over time…

Finally, HSAs may be unpopular for reasons that should not sway policymakers… HSAs are designed to eliminate inefficiencies and hidden cross-subsidies. If that causes some dissatisfaction, it means that HSAs are achieving their purpose, not that they should be abandoned. If we stop robbing Peter to pay Paul, Paul’s dissatisfaction should not persuade us to change course…

Nonetheless, HSA supporters should be very concerned about the frustration HSA holders feel with (1) the lack of information to help them be cost conscious consumers and (2) the complex rules and restrictions that come with HSAs…

HSAs will have to reach a critical mass in the marketplace before they can be expected to effect a systemic change like widespread transparent price competition…The quickest and surest way to build that critical mass and a political constituency for HSAs would be to allow them to be coupled with any type of health insurance…

To open an HSA, millions of Americans would have to give up their current health insurance. HSA supporters can and should make HSAs simpler by removing that requirement.

None of the consumer satisfaction surveys tells us what we need to know most: the types of insurance and medical care consumers would choose if they controlled all their health care dollars and all their health care decisions. To find those answers requires expanding HSAs and removing all restrictions on HSA holders’ insurance choices.

It’s also worth noting that lots of people love their HSA:

A survey by the Blue Cross Blue Shield Association found that individuals with HSA-compatible insurance were consistently more satisfied with their coverage than those in traditional plans.

And many people support the HSA concept even if they’re dissatisfied with their particular HSA product.  I fit squarely in that camp.

But the most telling line in Fuhrman’s article might be this one:

Enrollment [in HSAs] is growing faster on the individual market and among sole proprietors, but that may be because the plans are often the only affordable option.

And what might that tell us?