WASHINGTON, DC – House Democratic Whip Steny H. Hoyer (MD) recently sent the attached letter to the Director of the Office of Personal Management Kay Coles James expressing deep reservations regarding the inclusion of Health Savings Accounts in the Federal Employee Health Benefits Program:
February 23, 2004
The Honorable Kay Coles James
Office of Personnel Management
1900 E Street, NW
Washington, DC 20415-1400
Dear Director James:
I am writing to express my deepest reservations about proposals being discussed at the Office of Personnel Management to include Health Savings Accounts (HSAs), in connection with high-deductible catastrophic insurance, in the Federal Employees Health Benefits Program (FEHBP), perhaps as early as this year.
Previously known as Medical Savings Accounts, HSAs can be attractive to younger and healthier enrollees since the plans reward them with tax-free cash balances in subsequent years if they do not go to the doctor or a hospital. The problem is that healthy individuals are siphoned into the new option and premiums in the comprehensive plans they left must be increased in response. Consequently, HSAs circumvent the fundamental principles of group health insurance by dividing healthy and sick persons into different coverage options.
The Congressional Budget Office says that legislation making the combination of the savings accounts and catastrophic health insurance available in the FEHBP would cost taxpayers nearly $1 billion over five years. Moreover, research by the RAND Corporation, the Urban Institute, and the American Academy of Actuaries indicates that premiums for coverage under a traditional health insurance policy could at least double, depending on the degree of adverse selection that HSAs trigger in the insurance market. Given the persistent increase of health insurance premiums across FEHBP over the past several years, I am very concerned about the negative effect that HSAs might have on federal employees and annuitants.
President Bush and you have frequently held up the FEHBP as a model for other employers and health care systems to emulate. I have long maintained that the federal government should serve as an example to other employers, and that competitive compensation packages are necessary to recruit and retain a skilled and talented workforce. Unfortunately, the imposition of HSAs on the FEHBP will have the opposite effect, by encouraging employers to replace traditional health insurance with less comprehensive HSAs. As a result, traditional health insurance may no longer be an affordable option for those most in need of comprehensive coverage – older and sicker enrollees – and the risk of these individuals becoming underinsured or uninsured will only grow as HSAs become more dominant.
To be sure, HSAs would provide federal employees and annuitants with another alternative in making their health care decisions. However, federal employees and annuitants already have more health care choices in FEHBP than any other enrollee in a health insurance program in America. Consequently, I hope that your consideration of this matter does not result in the introduction of HSAs in FEHBP.
Thank you for your attention to this matter.