NU Online News Service, March 25, 2004, 2:44 p.m. EST – A federal retiree group is opposing efforts to offer a health savings account option to federal employees.[@@]

Adding an HSA option to the Federal Employees Health Benefits Program could end up helping healthier enrollees at the expense of older, sicker enrollees, according to Charles Fallis, president of the National Association of Retired Federal Employees, Alexandria, Va.

“NARFE believes it is wrong to use the best employer-sponsored program in the country as a guinea pig by introducing a scheme that is untested in a large, multiple-option, group health plan,” Fallis testified Wednesday at a hearing of the House Subcommittee on Civil Service and Agency Reorganization, according to a prepared version of his remarks.

An HSA is a personal health account for taxpayers who buy high-deductible health insurance coverage.

President Bush brought HSAs to life Dec. 8, 2003, when he signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003. A provision of MPDIMA lets eligible taxpayers deduct HSA contributions from taxable income and spend HSA cash on qualified expenses without paying income taxes on the distributions.

Kay Coles James, director of the U.S. Office of Personnel Management, announced earlier this year that her office was looking into the possibility of adding an HSA option to the federal benefits program.

Adding an HSA option could give employees an incentive to hold health care costs and reward employees who use the program with more control over routine health care expenditures, federal officials say.

But Fallis argued at the House hearing that HSAs would be a bad deal for federal employees and retirees who have moderate to high health care costs or who are living from paycheck to paycheck and cannot afford to pay a high deductible or adequately fund their HSAs.

“Premiums for comprehensive plans would increase because relatively healthy enrollees with higher incomes could be siphoned off into HSAs,” Fallis said.