Health Savings Accounts: Participation Increased and Was More	 
Common among Individuals with Higher Incomes (01-APR-08,	 
GAO-08-474R).							 
                                                                 
With health care spending increasing in the United States, you	 
enacted legislation effective in 2004 establishing tax advantaged
health savings accounts (HSA) to be coupled with high-deductible 
health insurance plans. HSA-eligible high-deductible health plans
typically have lower premiums than traditional health plans and  
HSAs allow account holders to accumulate tax-free savings to pay 
for medical expenses. The novel structure of HSA-eligible plans  
coupled with HSAs has raised questions about who selects them and
how they use the accounts. Proponents contend that the low	 
premiums of HSA-eligible plans and the tax-free savings potential
of HSAs appeal to many consumers, while the high deductibles	 
encourage them to be more astute health care consumers. However, 
some critics are concerned that HSA-eligible plans may attract	 
enrollees who seek lower premiums but lack the resources to	 
contribute to an HSA, and wealthy enrollees who may seek to use  
the HSA primarily to accumulate tax-advantaged savings rather	 
than pay for medical expenses. In a 2006 report, GAO described	 
individuals' early experiences with HSA-eligible plans and HSAs  
and certain characteristics of HSA account holders. You asked us 
to update certain information from that report with more recently
available data. For this report, GAO examined: (1) participation 
in HSA-eligible high-deductible health plans and HSAs, (2) the	 
income characteristics of HSA account holders, and (3)		 
contributions made to and withdrawals made from HSAs.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-474R					        
    ACCNO:   A81484						        
  TITLE:     Health Savings Accounts: Participation Increased and Was 
More Common among Individuals with Higher Incomes		 
     DATE:   04/01/2008 
  SUBJECT:   Cost analysis					 
	     Cost control					 
	     Cost effectiveness analysis			 
	     Eligibility determinations 			 
	     Funds management					 
	     Health care cost control				 
	     Health care costs					 
	     Health care policies				 
	     Health care programs				 
	     Health insurance					 
	     Medical expense claims				 
	     Program evaluation 				 
	     Program management 				 
	     Strategic planning 				 
	     Surveys						 
	     Cost estimates					 
	     Program goals or objectives			 
	     Health Savings Accounts				 

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GAO-08-474R

   

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GAO-08-474R: 

Health Savings Accounts: Participation Increased and Was More Common 
among Individuals with Higher Incomes: 

April 1, 2008: 

The Honorable Henry A. Waxman: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Pete Stark: 
Chairman: 
Subcommittee on Health Committee on Ways and Means: 
House of Representatives: 

Subject: Health Savings Accounts: Participation Increased and Was More 
Common among Individuals with Higher Incomes: 

With health care spending increasing in the United States, Congress 
enacted legislation effective in 2004 establishing tax advantaged 
health savings accounts (HSA) to be coupled with high-deductible health 
insurance plans.[Footnote 1] HSA-eligible high-deductible health plans 
typically have lower premiums than traditional health plans and HSAs 
allow account holders to accumulate tax-free savings to pay for medical 
expenses.[Footnote 2] 

The novel structure of HSA-eligible plans coupled with HSAs has raised 
questions about who selects them and how they use the accounts. 
Proponents contend that the low premiums of HSA-eligible plans and the 
tax-free savings potential of HSAs appeal to many consumers, while the 
high deductibles encourage them to be more astute health care 
consumers. However, some critics are concerned that HSA-eligible plans 
may attract enrollees who seek lower premiums but lack the resources to 
contribute to an HSA, and wealthy enrollees who may seek to use the HSA 
primarily to accumulate tax-advantaged savings rather than pay for 
medical expenses. 

In a 2006 report, we described individuals' early experiences with HSA- 
eligible plans and HSAs and certain characteristics of HSA account 
holders.[Footnote 3] You asked us to update certain information from 
that report with more recently available data. For this report, we 
examined: 

1. participation in HSA-eligible high-deductible health plans and HSAs, 

2. the income characteristics of HSA account holders, and: 

3. contributions made to and withdrawals made from HSAs. 

To examine participation in HSA-eligible high-deductible health plans 
and HSAs, we analyzed industry data and Internal Revenue Service (IRS) 
data. We obtained estimates of the number of lives covered by HSA- 
eligible health plans from 2004 through 2007 from America's Health 
Insurance Plans (AHIP), a health insurance trade association. We 
analyzed 2004 and 2005 tax filer data from the IRS Statistics of Income 
(SOI) sample to estimate the number of individuals who reported HSA 
activity in those years.[Footnote 4] We reviewed various estimates of 
the number of HSAs in 2006 and 2007 that were reported in health care 
and financial industry publications.[Footnote 5] We used data from 
nationally representative surveys of HSA-eligible plan enrollees, 
conducted from 2005 through 2007, to examine the extent to which they 
opened HSAs.[Footnote 6] To examine the income characteristics of HSA 
account holders, we analyzed IRS tax data from the 2005 SOI sample. We 
compared the adjusted gross income (AGI) for tax filers who reported 
HSA activity with data for all other tax filers.[Footnote 7] To examine 
contributions made to and withdrawals made from HSAs, we examined IRS 
and employer survey data. We used IRS tax data from the 2005 SOI sample 
to examine HSA contributions and withdrawals in aggregate and by tax 
filers' AGI and age. We used data from nationally representative 
employer surveys conducted by Mercer and the Kaiser Family Foundation 
and Health Research Educational Trust from 2005 through 2007 to examine 
the extent to which employers contributed to their employees' 
HSAs.[Footnote 8] 

Important differences among the various estimates of participation in 
HSA-eligible plans and HSAs may limit or preclude their comparability. 
For example, AHIP estimates of HSA-eligible plan participation count 
all policy holders and dependents covered by an HSA-eligible health 
plan at a single point in time--regardless of whether the health plan 
is coupled with an HSA. In contrast, our estimates of tax filers 
reporting HSA activity are limited to filers between the ages of 19 and 
64 reporting any HSA activity during an entire year and do not include 
dependents covered by the accounts.[Footnote 9] Therefore the rates of 
growth over time of these two sets of estimates are not directly 
comparable, and the estimates should not be compared to determine the 
extent to which individuals eligible to open an HSA have done so. In 
addition, our estimates of tax filers reporting HSA activity are not 
directly comparable to industry estimates of HSA prevalence. Industry 
estimates may overstate the number of individuals or families who have 
or use HSAs by including multiple accounts owned by the same 
individual. Industry estimates may also include accounts not reported 
to IRS and accounts carrying balances from prior years but not active 
in the current year. We reviewed the estimation, sampling, and survey 
methodologies of the survey and tax data we used; reviewed the data for 
reasonableness and consistency; and determined that the data were 
sufficiently reliable for our purposes. We performed our work from 
September 2007 through February 2008 in accordance with generally 
accepted government auditing standards. 

Results in Brief: 

The number of individuals participating in HSA-eligible health plans 
and HSAs increased significantly between 2004 and 2007; however, in all 
years, many HSA-eligible plan enrollees did not open an HSA. The number 
of individuals covered by HSA-eligible plans increased significantly 
between September 2004 and January 2007--from about 438,000 to 
approximately 4.5 million, according to industry estimates. Despite the 
growth, these plans represented a small share of individuals with 
private health coverage--about 2 percent in 2006. The number of tax 
filers reporting HSA activity also increased, nearly tripling between 
2004 and 2005, from about 120,000 to about 355,000. Industry estimates 
suggest continued growth in HSA participation in 2006 and 2007. Despite 
the growth in HSA participation, nationally representative survey 
estimates from 2005, 2006, and 2007 found that more than 40 percent of 
HSA-eligible health plan enrollees did not open an HSA. 

Tax filers who reported HSA activity in 2005 had higher incomes on 
average than other tax filers. Among tax filers between the ages of 19 
and 64, the average AGI for filers reporting HSA activity was about 
$139,000 compared with about $57,000 for all other filers. The income 
differences existed across all age groups. 

The total value of all HSA contributions reported to IRS in 2005 was 
about twice that of withdrawals--$754 million compared with $366 
million. Among all filers reporting HSA activity in 2005, average 
contributions were about $2,100, compared to average withdrawals of 
about $1,000. Survey estimates of the contributions employers made to 
employees' HSAs in 2007 varied. One employer survey reported average 
contributions for single coverage of $626 among large employers, while 
another employer survey reported average contributions for single 
coverage of $806 among small and large employers. More than a third of 
surveyed employers that offered HSA-eligible plans made no HSA 
contributions. 

Background: 

Most Americans--about 202 million in 2006--receive health coverage 
through private health plans. Over the past several years, insurers 
have expanded their portfolio to include insurance plans with high 
deductibles, low premiums, and, generally, an associated savings 
account to pay for services up to the deductible. The plans are 
designed to reduce health care spending and encourage more consumer 
control. Beginning in 2004, insurers began to market HSA-eligible 
plans--high-deductible health plans that were eligible to be coupled 
with HSAs. 

HSA-eligible health plans are required to meet certain statutory 
criteria, including minimum deductible amounts, which are higher than 
health plan deductibles on average, and maximum limits on enrollee out- 
of-pocket spending.[Footnote 10] These amounts are annually adjusted 
for cost-of-living increases.[Footnote 11] HSA-eligible plans are sold 
either to an individual or through group plans, such as those offered 
by employers. 

HSAs are tax-advantaged savings accounts established to pay for 
qualified medical expenses.[Footnote 12] Individuals are eligible to 
open an HSA and contribute funds if they are enrolled in an HSA- 
eligible plan and have no other health coverage, with limited 
exceptions.[Footnote 13] Both employers and individuals may--but are 
not required to--contribute to HSAs, up to an annual limit. Individuals 
may claim a deduction on their federal income taxes for their HSA 
contributions not exceeding the limit, regardless of whether they 
itemize deductions or claim the standard deduction. Although HSA 
withdrawals for qualified medical expenses are not federally taxed, 
withdrawals for nonqualified expenses are subject to tax and, when 
withdrawn before age 65, an additional tax penalty. 

Although annual HSA contributions are limited, unused balances may 
accumulate from year to year without limit and earn interest. HSAs are 
owned by the account holder and the accounts are portable--individuals 
may keep their accounts if they switch jobs or are no longer enrolled 
in an HSA-eligible health plan. An employer may partner with a 
financial institution, such as a bank or insurance company, to offer an 
HSA with the HSA-eligible plan; however, employees may choose to open 
accounts with other financial institutions. 

Participation in HSA-Eligible Plans and HSAs Increased Significantly, 
but Many HSA-Eligible Plan Enrollees Did Not Open an HSA: 

Industry estimates indicate that the number of individuals covered by 
HSA-eligible health plans increased significantly between 2004 and 
2007. HSA participation also increased between 2004 and 2005 with 
estimates of continued growth through 2007. Nevertheless, many HSA- 
eligible health plan enrollees have not opened HSAs. 

Participation in HSA-Eligible Health Plans Increased Significantly: 

Industry estimates indicate significant increases in the number of 
individuals covered by HSA-eligible health plans. For example, a series 
of insurance carrier surveys conducted by AHIP found that the number of 
lives covered by HSA-eligible plans increased significantly from about 
438,000 in September of 2004 to an estimated 4.5 million in January 
2007.[Footnote 14] (See fig. 1.) Despite the growth, HSA-eligible plan 
coverage represented only about 2 percent of individuals with private 
health coverage in 2006.[Footnote 15] 

Figure 1: Estimated Lives Covered by HSA-Eligible Plans, September 2004 
to January 2007: 

This figure is a timeline of estimated lives covered by HSA-eligible 
plans, September 2004 to January 2007. 

January 2004-March 2007: 

September 2004: 438,000 Covered lives; 
March 2005: 1,031,00 Covered lives; 
January 2006: 3,168,000 Covered lives; 
January 2007: 4, 532,000 Covered lives. 

[See PDF for image] 

Source: America's Health Insurance Plan. 

[End of figure] 

Participation in HSAs Also Increased, but Many HSA-Eligible Health Plan 
Enrollees Did Not Open an HSA: 

Participation in HSAs also increased significantly between 2004 and 
2007. IRS data show that the number of tax filers between the ages of 
19 and 64 reporting HSA activity nearly tripled from about 120,000 in 
2004 to about 355,000 in 2005. In addition, although industry estimates 
varied, all indicated continued growth in HSA participation in 2006 and 
2007. For example, one industry publication estimated that the number 
of HSAs managed by major financial institutions more than doubled 
between 2006 and 2007.[Footnote 16] 

Despite the growth in HSA participation, many HSA-eligible plan 
enrollees did not open an HSA. IRS data do not allow a direct 
comparison between HSA-eligible plan covered lives and individuals 
reporting HSA activity.[Footnote 17] However, nationally representative 
surveys conducted in 2005, 2006, and 2007 found that 42 percent to 49 
percent of HSA-eligible plan enrollees reported that they had not 
opened an HSA. The surveys also found that 20 percent to 24 percent of 
respondents did not plan to open one. Reasons survey respondents cited 
for not planning to open an HSA included that they lacked information 
or knowledge about them, they could not afford them, and they did not 
believe they needed them.[Footnote 18],[Footnote 19] Similarly, 
industry representatives we spoke with told us that many HSA-eligible 
plan enrollees did not have an HSA. The representatives also said that 
they expect that there would always be some share of eligible consumers 
who would choose not to open an HSA.[Footnote 20] 

HSA Account Holders Reported Higher Incomes than Other Tax Filers: 

Tax filers who reported HSA activity had higher incomes on average than 
other tax filers. Among tax filers between the ages of 19 and 64, the 
average adjusted gross income for those reporting HSA activity in 2005 
was about $139,000, compared with about $57,000 for other filers. 
Income differences between HSA and other filers existed across all age 
groups. (See fig. 2.) Moreover, about 59 percent of HSA filers had AGIs 
of $60,000 or more, compared with 26 percent of other tax filers. (See 
fig. 3.)[Footnote 21] 

Figure 2: Comparison of HSA and Other Tax Filers' Average Adjusted 
Gross Income by Age, 2005: 

This figure is a combination bar graph showing comparison of HSA and 
other tax filers' average adjusted gross income by age, 2005. The X 
axis represents the age category, and the Y axis represents the 
adjusted gross income (dollars). 
		
Age category: 19 to 34; 
HSA filers: $67,064; 
Other filers: $29,454. 

Age category: 35 to 44; 
HSA filers: $143,681; 
Other filers: $63,943. 

Age category: 45 to 54; 
HSA filers: $153,404; 
Other filers: $77,646. 

Age category: 55 to 64; 
HSA filers: $189345; 
Other filers: $81,495. 

[See PDF for image] 

Source: GAO analysis of IRS data. 

Notes: Analysis was limited to tax filers between the ages of 19 and 
64. HSA filers included those reporting any contributions to or 
withdrawals from an HSA. Contributions include those made by individual 
tax filers or by employers or other individuals on their behalf, but do 
not include any funds that were transferred to an HSA from a medical 
savings account. Withdrawals did not include those made to avoid a tax 
penalty by removing contributions that were in excess of the allowable 
limits, or those made to transfer funds from one HSA to another. For 
returns of married couples filing jointly, returns were categorized 
based on the age of the primary tax filer, and the AGI included the 
combined AGIs of both filers. 

[End of figure] 

Figure 3: Comparison of the Adjusted Gross Income Distribution of HSA 
and Other Tax Filers, 2005: 

This figure is a combination of two pie charts showing the adjusted 
gross income distribution of HSA and other tax filers, 2005. 

HSA filers (percentage): 
			
Under $15,000: 4%; 
$15,000 to $29,000: 11%; 
$30,000 to $59,000: 25%; 
$60,000 or more: 59% of HSA filers had AGIs of $60,000 or more. 

Other filers (percentage): 

Under $15,000: 28%; 	
$15,000 to $29,000: 22%; 
$30,000 to $59,000: 25%; 
$60,000 or more: 26% of other filers had AGIs or $60,000 or more. 

[See PDF for image] 

Source: GAO analysis of IRS data. 

Notes: Analysis was limited to tax filers between the ages of 19 and 
64. HSA filers included those reporting any contributions to or 
withdrawals from an HSA. Contributions include those made by individual 
tax filers or by employers or other individuals on their behalf, but do 
not include any funds that were transferred to an HSA from a medical 
savings account. Withdrawals did not include those made to avoid a tax 
penalty by removing contributions that were in excess of the allowable 
limits, or those made to transfer funds from one HSA to another. For 
returns of married couples filing jointly, the AGI included the 
combined AGIs of both filers. 

[End of figure] 

HSA Contributions Exceeded Withdrawals: 

The total value of account holder and employer HSA contributions in 
2005 was about twice that of account holder withdrawals. Among filers 
reporting HSA activity, the average value of contributions was about 
$2,100 compared with the average withdrawal of about $1,000. Average 
contributions and withdrawals generally increased with income and age. 

Reported HSA Contributions Were about Twice Withdrawals: 

Tax filers' reported HSA contributions in 2005 totaled about $754 
million, including those made by account holders and employers. This 
was about twice the value of reported withdrawals--which totaled about 
$366 million. Among all filers reporting HSA activity, the average HSA 
contribution was about $2,100 and the average HSA withdrawal was about 
$1,000. Among filers who reported HSA contributions in 2005, about 41 
percent did not withdraw any HSA funds that year, while about 22 
percent withdrew as much or more than their reported 
contributions.[Footnote 22] About 93 percent of reported withdrawals 
were for qualified medical expenses.[Footnote 23] 

Estimates of employer contributions to employees' HSAs vary. One annual 
employer survey reported an average employer contribution for single 
coverage of $626 among large employers in 2007.[Footnote 24] Another 
survey reported an average contribution for single coverage of $806 
among small and large employers in 2007.[Footnote 25] Many employers 
that offered HSA-eligible plans did not contribute to their employees' 
HSAs. For example, a series of surveys reported that, in 2005, 2006, 
and 2007, more than a third of large employers offering HSA-eligible 
plans did not contribute to their employees' HSAs.[Footnote 26] Another 
survey reported that 47 percent of small and large employers offering 
HSA-eligible plan coverage for families did not contribute to their 
employees' HSAs in 2007.[Footnote 27] 

HSA Contributions and Withdrawals Generally Increased with Income and 
Age: 

HSA contributions and withdrawals reported by tax filers in 2005 
generally increased with income. Average contributions ranged from 
about $1,400 for filers reporting AGIs of under $30,000 to about $2,800 
for filers with AGIs of $100,000 or more. Average withdrawals ranged 
from about $600 for filers reporting AGIs of under $30,000 to about 
$1,300 for filers reporting AGIs of $100,000 or more. (See fig. 4.) 

Figure 4: Average HSA Contributions and Withdrawals by Income, 2005: 

This figure is a combination vertical bar graph showing average HSA 
contributions and withdrawls by income, 2005. The X axis represents the 
adjusted gross income, and the Y axis represents the dollars. 
	
Adjusted gross income: Under|$30,000; 
Average HSA contributions: $1,370; 
Average HSA withdrawals: $561. 

Adjusted gross income: $30,000 to|$59,999; 
Average HSA contributions: $1,822; 
Average HSA withdrawals: $967. 

Adjusted gross income: $60,000 to|$99,999; 
Average HSA contributions: $1,930; 
Average HSA withdrawals: $955. 

Adjusted gross income: $100,000|or more; 
Average HSA contributions: $2,780; 
Average HSA withdrawals: $1,324. 

[See PDF for image] 

Notes: Analysis was limited to tax filers between the ages of 19 and 
64. HSA filers included those reporting any contributions to or 
withdrawals from an HSA. Contributions include those made by individual 
tax filers or by employers or other individuals on their behalf, but do 
not include any funds that were transferred to an HSA from a medical 
savings account. Withdrawals did not include those made to avoid a tax 
penalty by removing contributions that were in excess of the allowable 
limits, or those made to transfer funds from one HSA to another. For 
returns of married couples filing jointly, the AGI included the 
combined AGIs of both filers. 

[End of figure] 

Similarly, average contributions and withdrawals generally increased 
with age. Average contributions ranged from about $1,400 for filers 
ages 19 to 34, to about $3,000 for filers ages 55 to 64. Average 
withdrawals ranged from about $600 for filers ages 19 to 34, to about 
$1,200 for filers ages 55 to 64. (See fig. 5.) 

Figure 5: Average HSA Contributions and Withdrawals by Age, 2005: 

This figure is a combination bar graph showing average HSA 
contributions and withdrawals by age, 2005. The X axis represents the 
age, and the Y axis represents the dollars. 
		
Age: 19 to 34; 
Average HSA contributions: $1,398; 
Average HSA withdrawals: $551. 

Age: 35 to 44; 
Average HSA contributions: $2,070; 
Average HSA withdrawals: $932. 

Age: 45 to 54; 
Average HSA contributions: $2,179; 
Average HSA withdrawals: $1,318. 

Age: 55 to 64; 
Average HSA contributions: $2,964; 
Average HSA withdrawals: $1,194. 

[See PDF for image] 

Source: GAO analysis of IRS data. 

Notes: Analysis was limited to tax filers between the ages of 19 and 
64. HSA filers included those reporting any contributions to or 
withdrawals from an HSA. Contributions include those made by individual 
tax filers or by employers or other individuals on their behalf, but do 
not include any funds that were transferred to an HSA from a medical 
savings account. Withdrawals did not include those made to avoid a tax 
penalty by removing contributions that were in excess of the allowable 
limits, or those made to transfer funds from one HSA to another. For 
returns of married couples filing jointly, the age refers to the age of 
the primary filer. 

[End of figure] 

Agency Comments: 

We received technical comments on a draft of this report from the 
Department of the Treasury and from IRS, and incorporated these 
comments as appropriate. 

As arranged with your offices, unless you publicly announce the 
contents of this report earlier, we plan no further distribution until 
30 days from the date of this report. At that time, we will send copies 
to interested parties upon request. The report will also be available 
at no charge on GAO's Web site at [hyperlink, http://www.gao.gov]. If 
you or your staffs have any questions regarding this report, please 
call me at 202- 512-7114. Contact points for our Offices of: 

Congressional Relations and Public Affairs may be found on the last 
page of this report. Randy DiRosa, Assistant Director; Gerardine 
Brennan; John Mingus; Stephen Ulrich; and Margaret Weber were major 
contributors to this report. 

Signed by: 

John E. Dicken: 

Director, Health Care: 

[End of section] 

Related GAO Products: 

Employer-Sponsored Health and Retirement Benefits: Efforts to Control 
Employer Costs and the Implications for Workers. GAO-07-355. 
Washington, D.C.: March 30, 2007. 

Health Savings Accounts: Early Enrollee Experiences with Accounts and 
Eligible Health Plans. GAO-06-1133T. Washington, D.C.: September 26, 
2006. 

Consumer-Directed Health Plans: Early Enrollee Experiences with Health 
Savings Accounts and Eligible Health Plans. GAO-06-798. Washington, 
D.C.: August 9, 2006. 

Consumer-Directed Health Plans: Small but Growing Enrollment Fueled by 
Rising Cost of Health Care Coverage. GAO-06-514. Washington, D.C.: 
April 28, 2006. 

Federal Employees Health Benefits Program: First-Year Experience with 
High-Deductible Health Plans and Health Savings Accounts. GAO-06-271. 
Washington, D.C.: January 31, 2006. 

Federal Employees Health Benefits Program: Early Experience with a 
Consumer-Directed Health Plan. GAO-06-143. Washington, D.C.: November 
21, 2005. 

[End of section] 

Footnotes: 

[1] HSA-related tax advantages were authorized by the Medicare 
Prescription Drug, Improvement and Modernization Act of 2003 for 
individuals covered by HSA-eligible health plans--plans that meet 
minimum deductibles and maximum out-of-pocket spending limits. Pub. L. 
No. 108-173, ï¿½1201, 117 Stat. 2066, 2469. Both employers and 
individuals may--but are not required to--contribute to HSAs, up to an 
annual limit. 

[2] HSA contributions up to annual limits are exempt from income tax, 
and withdrawals for qualified medical expenses are not federally taxed. 
Contributions exceeding the limit are subject to federal tax. 
Withdrawals for nonqualified expenses are also subject to federal tax, 
and--if withdrawn before age 65--an additional tax penalty. 

[3] See GAO, Consumer-Directed Health Plans: Early Enrollee Experiences 
with Health Savings Accounts and Eligible Health Plans, GAO-06-798 
(Washington, D.C.: Aug. 9, 2006). A list of other related GAO products 
is included at the end of this report. 

[4] The most recently available SOI data were from tax year 2005. We 
defined HSA activity for a given year as any reported contributions to 
or withdrawals from an HSA in that year. Contributions to HSAs included 
those made by individual tax filers or made on their behalf by their 
employers or other individuals, but did not include any funds that were 
transferred to an HSA from a medical savings account. Withdrawals did 
not include those made to avoid a tax penalty by removing contributions 
that were in excess of the allowable limits, or those made to transfer 
funds from one HSA to another. 

[5] We also interviewed officials from the organizations that prepared 
the estimates--Atlantic Information Services, Financial Research 
Corporation, and Information Strategies Incorporated--however, we did 
not verify the reliability of the estimates. 

[6] Blue Cross Blue Shield Association, CDHP Member Experience Surveys, 
2005, 2006, and 2007. 

[7] AGI is based on the combined income for joint filers and the 
individual income for single filers. 

[8] We did not use IRS data to examine employer contributions to HSAs 
because the data reported as employer contributions include pre-tax 
contributions made by employees. 

[9] Tax filers under age 19 and over age 64 were excluded because 
individuals who can be claimed as dependents and individuals enrolled 
in Medicare are not eligible to contribute to HSAs. 

[10] An out-of-pocket spending limit is the most an enrollee is 
required to pay toward the cost of covered services. The out-of-pocket 
spending limit includes deductibles and other payments, but not 
premiums. 

[11] The minimum deductible amount in 2007 was $1,100 for single 
coverage and $2,200 for family coverage. The maximum limit on enrollee 
out-of-pocket spending in 2007 was $5,500 for single coverage and 
$11,000 for family coverage. 

[12] Qualified medical expenses are generally identified under the 
Internal Revenue Code (26 U.S.C. ï¿½ 213(d)). 

[13] Limited coverage (including specific injury or accident, 
disability, dental care, or vision care) in addition to the HSA- 
eligible plan is permissible. 

[14] America's Health Insurance Plans, January 2007 Census Shows 4.5 
Million People Covered by HSA/High-Deductible Health Plans (Washington, 
D.C.: Apr. 2007). The estimates included plans from the individual and 
group markets. 

[15] GAO analysis of America's Health Insurance Plans' 2006 and 2007 
estimates of lives covered by HSA-eligible health plans, and the U.S. 
Census Bureau's 2006 Current Population Survey estimate of lives 
covered by private health insurance. 

[16] Atlantic Information Services, Inc., "Number of HSAs Doubles Over 
Past Year; Firms Now Hold Nearly $2 Billion, ICDC Finds," Inside 
Consumer-Directed Health Care (Mar. 9, 2007). 

[17] Industry estimates of lives covered by HSA-eligible plans are not 
directly comparable to our estimates of tax filers reporting HSA 
activity. Industry estimates count all policy holders and dependents 
covered by a health plan eligible to be coupled with an HSA at a single 
point in time--regardless of whether the health plan is coupled with an 
HSA. Our estimates of tax filers reporting HSA activity were limited to 
filers between the ages of 19 and 64 reporting any HSA activity during 
an entire year and do not include any dependents also covered by the 
accounts. 

[18] Blue Cross Blue Shield Association, CDHP Member Experience 
Surveys, 2005, 2006, and 2007. 

[19] We previously reported that, on the basis of an analysis of 
publicly available survey data and data obtained from IRS, roughly 45 
percent of HSA-eligible plan enrollees in 2004 did not report 
contributions to an HSA (see GAO-06-798). 

[20] Industry representatives gave varying estimates of the share of 
HSA-eligible plan enrollees who did not open HSAs--ranging from about 9 
percent to 60 percent. 

[21] Other tax filers include both insured and uninsured individuals. 
The uninsured tend to have lower incomes than those with health 
insurance coverage. 

[22] HSA withdrawals may exceed contributions in a given year if 
balances are carried over from prior years. 

[23] The remaining 7 percent of withdrawals were for nonqualified 
expenses, which are subject to tax and, if withdrawn before age 65, an 
additional tax penalty. 

[24] Mercer, "U.S. Employers' Health Benefit Cost Continues to Rise at 
Twice Inflation Rate, Mercer Survey Finds" (press release), National 
Survey of Employer-Sponsored Health Plans (New York, N.Y.: Nov. 19, 
2007). 

[25] Kaiser Family Foundation and Health Research and Educational 
Trust, Employer Health Benefits: 2007 Annual Survey (Menlo Park, 
Calif., and Chicago, Ill.: 2007). 

[26] Mercer, National Survey of Employer-Sponsored Health Plans, 2005, 
2006, and 2007. 

[27] Kaiser Family Foundation and Health Research and Educational 
Trust, Employer Health Benefits: 2007 Annual Survey. 

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