When monthly health insurance premiums for the Sames family topped $1,000 last year, Krista Sames and her husband abandoned their traditional health plan in favor of a new form of high-deductible coverage that cost far less. The new, cheaper insurance policy enabled them to put aside savings in a tax free account to pay their out-of-pocket medical expenses.

	This is one in an occasional series of articles leading up to November's election about economic issues being put forth by President Bush and Democratic candidate John Kerry.

Although the premium for the new policy -- which carries a $5,000 deductible -- has since risen 20 percent, to $368 a month, it still has not approached the level that led them to switch. They're happy they dropped their former coverage, said Sames, a certified public accountant who described herself and her husband, both in their late 40s, as relatively healthy.

Not so for Eileen Anderson and her husband, owners of Red Clay Tile Works in Bellevue, Also healthy and in their early 50s, the Andersons signed up in 1997 for a high deductible policy and a tax-free savings account to cover themselves and their two children. They ultimately ditched it. Not only did their overall health care costs balloon, they also found themselves mired in paperwork and haggling with insurers to cover their claims.

The Sames and the Andersons were pioneers. The high deductible plans they chose were forerunners of a new kind of health coverage called Health Savings Accounts, or HSAs. The new plans -- ushered in under the sweeping Medicare legislation that Congress passed last year -- are the backbone of the Bush administration's platform for stemming runaway health care costs and expanding coverage to more of the nation's 45 million uninsured.

Presidential rival John Kerry hasn't taken a position on HSAs, but the new plans next year will be among the health benefit options federal employees and Congress are given under the Federal Employees Health Benefits Program. Kerry wants to open those options to other employers and individuals while expanding Medicaid to cover more people with lower incomes. He also wants the federal government to help employers cover the costs of catastrophic care for their employees.

Bob Donaldson, Post-Gazette Eileen and Andy Anderson, owners of Red Clay Tile Works in Bellevue, were among the pioneers who switched to a new form of health care coverage when it was made available to small business owners. Click photo for larger image.

Like Medical Savings Accounts -- health plans that federal legislation made available on a limited basis to small business owners such the Sames and Andersons -- HSAs combine high deductible insurance policies with tax-free savings accounts. HSAs allow consumers, their employers or both, to set aside money tax-free to pay out-of-pocket medical expenses. Whether through individual or group plans, beneficiaries can roll unused deposits into future years as savings.

Once wary of the new plans, which initially are expected to reduce premiums, insurers are rushing to market their HSA products. For example, the region's dominant insurer, Highmark Inc., said at least a dozen of its major corporate clients will try new HSA plans in January.

Proponents see HSAs as the country's best hope for taming health care cost increases. In their view, the new plans will put consumers back in the driver's seat -- encouraging them to choose healthier lifestyles and getting them to shop for medical treatments and tests in much the same way as they shop for expensive computers, cars or home entertainment systems.

The incentive, of course, is to preserve the savings they are setting aside. It's a way to start "letting consumers control the resources for routine, low-value services and making their own judgments about whether the service is worth the price," said Greg Scandlen, director of the conservative Galen Institute's Center for Consumer Driven Healthcare in Washington, D.C.

Scandlen said he is well aware that any widespread use of the plans could have significant long-term implications for health policy and more immediate ones for consumers. He does not disagree, for example, with critics who contend HSAs could be the beginning of the end of employer-sponsored health coverage and that HSAs are so complex that consumers likely will need legal or other professional help to evaluate the insurance policies and tax implications.

	HSA primer Health Savings Accounts let consumers put aside money tax-free to purchase routine medical services, and are coupled with high-deductible insurance policies that cover higher-cost procedures. But there are some issues to consider: Just because the Internal Revenue Service considers an out-of-pocket medical bill eligible for tax-free withdrawal from a Health Savings Account does not mean the bill counts against the deductible on a consumer's insurance policy. To count against the deductible, the bill must be for a "covered benefit" of the policy. For example, the IRS might consider a dental bill eligible for tax-free treatment. But, if there are no dental benefits under the policy, it wouldn't count toward the deductible. Some high-deductible insurance policies might not cover all the medical services and treatments consumers have come to expect from their managed care plans. Some plans might set financial limits on coverage for specific kinds of care, such as rehabilitation. Like other health insurance policies, high-deductible also puts caps on lifetime benefits. Consumers should carefully check any limits on their coverage. It is not enough to read sales or marketing literature that insurers use to describe their high-deductible health plans. Consumers need to look at actual copies of the policies and compare coverage between insurers. -- Pamela Gaynor

Critics see the new health plans as yet another way of enabling employers and insurers to divest more of the costs of health care. In addition, they contend HSAs will end up providing savings and tax benefits for healthier and wealthier consumers at the expense of less affluent health plan members and ones with health problems.

"It's a straight cost shift onto workers," said Edwin Park, senior health policy analyst for the liberal-leaning Washington-based Center on Budget and Policy Priorities. Even for people of moderate income, the savings accounts likely will prove sufficient only "to offset the greater cost sharing. They're not going to build up balances.'

Philosophical debates aside, there are huge practical considerations for consumers and employers as HSAs move into the market.

In the face of persistent double-digit premium increases, the cost savings from HSAs can be significant. Small groups with two to 50 employees can cut premiums by as much as 50 percent, said Ralph Borzillo, vice president of sales and marketing for insurer Aetna Inc.'s mid-Atlantic region. He believes such savings also might attract individuals who lack group coverage or who can't afford the contributions required to participate in their employers' health plans.

How many employers or consumers actually will adopt HSAs is still a guess. Scandlen, at the Galen Institute, said 1.5 million people were covered last year under high deductible plans with tax-free savings accounts that came along before HSAs. "Most people are looking for three million to five million [to adopt HSAs or similar plans] by the end of 2004 and then, in 2005, I think you'll see pretty substantial market gains."

Many health analysts and even some insurers also think it's too early to predict whether HSAs ultimately will bring down medical spending -- the Holy Grail in the battle against premium increases. But in a study of business clients who fully replaced their traditional health coverage with plans similar to HSAs, the Hartford, Conn.-based Aetna found medical costs dropped 11 percent in the first year because employees used fewer medical services.

That is not to say HSAs will stand the test of time, or that large employers will want their employees to skimp on necessary medical care in order to avoid out-of-pocket expenses. Big corporate interests actually lobbied to ensure that preventive care wouldn't be subject to insurance deductibles if companies chose to pay for them.

Dan O'Malley, a benefits consultant with Towers Perrin, said big corporations have an interest in seeing employees get preventive care and will take a cautious approach in introducing HSAs. Some might hold back entirely and others will offer them only as an option alongside other traditional health plans.

O'Malley said HSAs pose plenty of concerns for consumers, particularly those without the support of big human resource departments equipped to provide thorough information about benefit plans. "The devil is in the details," he said.

"The crux of this whole thing is ... you'll have the responsibility of buying right, knowing what it will cost if you go in-network or out-of-network, if you go to a specialist versus a primary care physician," he said.

One misconception among some consumers is that they'll have more freedom choosing doctors and hospitals than they did under managed care. Most plans being offered still come with "networks" of hospitals and physicians that members must use or pay more -- in some cases more than they did under their previous health plans. Some HSAs might not offer "out-of-network" reimbursements at all.

The possibility that consumers end up with less in their accounts than they need to meet their deductible in any given year is another possible pitfall. The insurance policies associated with HSAs must have minimum deductibles of $1,000 for an individual and $2,000 for a family, although deductibles can be as high as $5,000 for an individual and $10,000 for a family.

Consumers are not required to set aside those amounts, and there also are limits on how much they can set aside tax free. Annual tax-free contributions to HSAs can be as high as $2,600 for single coverage or $5,150 for family coverage, but no higher than the plan deductible.

It was the inability to fully fund their original deductibles that left the Andersons in Bellevue with a combination of outstanding medical bills to pay, on top of their premiums and continued contributions to replenish their savings account. At one point last year, the total was eating up nearly a third of the couple's annual income, which usually ranges between $30,000 and $40,000 .

Eileen Anderson said getting prices from doctors and hospitals also was difficult at best -- and often impossible. Even for minor surgery, the surgeon, hospital and an anesthesiologist might all bill separately, Anderson said. "It was a genuine paperwork nightmare."

Insurers said they are moving to provide far more information to consumers than they've ever had about purchasing health care, but they almost universally agree thatHSAs aren't for everyone. HSAs "are definitely complicated. In my opinion, these are more complicated than 401(k) plans." said Ron Vance, vice president of sales and marketing for UPMC Health Plan.

For their part, the Sames, in Monongahela, know they are exposed to a lot more liability for their care than they had been, but "that's the gamble we've chosen to take at this time in our lives," said Krista Sames.