NU Online News Service, Jan. 5, 2005, 4:22 p.m. EST

Sellers and buyers of health savings account programs continue to face serious obstacles.[@@]

Tony Novak, the organizer of Freedom Benefits Association, Narbeth, Pa., presents those conclusions in an analysis of the 1-year-old HSA market.

The HSA provision of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 lets consumers deduct thousands of dollars in HSA contributions from taxable income each year. To qualify to set up the health accounts, consumers are supposed to buy special, HSA-compatible, high-deductible health insurance plans.

Novak argues that one problem with the current HSA system is the lack of systems for verifying which health insurance plans are really compatible with the HSA program or whether consumers are eligible to set up HSA accounts.

Many insurers do not give any clear information about whether their high-deductible plans are HSA-compatible, and banks now have no legal obligation to verify HSA holder eligibility, Novak writes in his analysis.

Here are some of the other problems Novak cites:

- The lack of any law requiring HSA holders to deposit money into their HSAs.

In the real world, the balance in most HSAs is much lower than the owner’s insurance policy deductible, Novak writes.

- The lack of access for consumers with health problems.

Novak says he has found only 5 states where consumers with diabetes or other chronic health problems can buy HSA-compatible health coverage on a guaranteed-issue basis.

- The high cost of high-deductible coverage for individuals and families in many states.

The average price of HSA-compatible coverage is $200 per month for an individual with a $2,500 deductible and $400 per month for a family with a deductible of about $5,000, Novak writes.