United States Government Accountability Office

GAO Report to the Ranking Minority 

Member, Committee on Finance, U.S. 

Senate 

CONSUMERDIRECTED HEALTH 

PLANS 

Early Enrollee 

Experiences with 

Health Savings 

Accounts and Eligible 

Health Plans 

August 2006 

 

GAO-06-798 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

August 2006

CONSUMER-DIRECTED HEALTH PLANS

Early Enrollee Experiences with Health 

Savings Accounts and Eligible Health 

Plans 

Highlights of GAO-06-798, a report to the 

Ranking Minority Member, Committee on 

Finance, U.S. Senate 

Health savings accounts (HSA) and 

the high-deductible health 

insurance plans that are eligible to 

be coupled with them are a new

type of consumer-directed health 

plan attracting interest among

employers and consumers.

Employers and plan enrollees may 

contribute to tax-advantaged HSAs, 

and enrollees can use the accounts 

to pay for health care expenses.

Because HSAs and HSA-eligible

plans are new, there is interest in

the experiences of plan enrollees, 

as well as in comparing the plan 

features and enrollee

characteristics with those of

traditional plans, such as preferred 

provider organization (PPO) plans. 

GAO reviewed (1) the financial 

features of HSA-eligible plans in 

comparison with those of 

traditional plans, (2) the

characteristics of HSA-eligible plan

enrollees in comparison with those 

of traditional plan enrollees, 

(3) HSA funding and use, and 

(4) enrollees’ experiences with 

HSA-eligible plans. GAO analyzed

data regarding HSA-eligible and 

traditional plans and enrollees from 

national employer health benefits

surveys, three selected employers, 

and a national broker of health

insurance. GAO compared Internal

Revenue Service (IRS) data for tax 

filers reporting HSA contributions

with corresponding data for all tax

filers under 65 years old. GAO also 

conducted focus groups with 

employees of the three employers. 

In 2005, HSA-eligible plans had different financial features than traditional 

plans—such as lower premiums and higher deductibles—but both plan types 

covered similar health care services, including preventive services, and used 

similar provider networks. For the three employers’ health plans GAO 

reviewed to illustrate enrollees’ potential health care costs, GAO estimated 

that HSA-eligible plan enrollees would incur higher annual costs than PPO 

plan enrollees for extensive use of health care, but would incur lower annual 

costs than PPO plan enrollees for low to moderate use of health care. 

HSA-eligible plan enrollees generally had higher incomes than comparison 

groups, but data on age differences were inconclusive. In 2004, 51 percent of 

tax filers reporting an HSA contribution had an adjusted gross income of 

$75,000 or more, compared with 18 percent of all tax filers under 65 years 

old. Two of the three employers GAO reviewed and a national broker of 

health insurance also reported that HSA-eligible plan enrollees had higher 

incomes than traditional plan enrollees in 2005. GAO’s data sources did not 

conclusively indicate whether HSA-eligible plan enrollees were older or 

younger than individuals and enrollees in comparison groups. 

Just over half of all HSA-eligible plan enrollees and most employers 

contributed to HSAs, and account holders used their HSA funds to pay for 

current medical care and to accumulate savings. About 55 percent of HSAeligible plan enrollees reported HSA contributions to IRS in 2004. Tax filers 

claimed an average deduction of about $2,100 for their HSA contributions in 

2004, and the average amount increased with income. About two-thirds of 

employers offering HSA-eligible plans contributed to their employees’ HSAs, 

and the average employer HSA contribution was about $1,064 in 2004. About 

45 percent of tax filers reporting 2004 HSA contributions also reported that 

they withdrew funds in 2004, and 90 percent of these funds were withdrawn 

for qualified medical expenses. The other 55 percent of those reporting HSA 

contributions in 2004 did not withdraw any funds from their HSA in 2004. 

HSA-eligible plan enrollees who participated in GAO’s focus groups 

generally reported positive experiences, but most would not recommend the 

plans to all consumers. Participants enrolled in the plans generally 

understood the key attributes of their plan. Few participants reported 

researching cost before obtaining health care services, although many 

researched the cost of prescription drugs. Most participants were satisfied 

with their HSA-eligible plan and would recommend these plans to healthy

consumers, but not to those who use maintenance medication, have a 

chronic condition, have children, or may not have the funds to meet the high 

deductible. 

GAO received technical comments from IRS and a national broker of health 

insurance and incorporated the comments as appropriate. 

www.gao.gov/cgi-bin/getrpt?GAO-06-798.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John E. Dicken 

at (202) 512-7119 or dickenj@gao.gov. 
Contents 

Letter 1

Results in Brief 4

Background 6

Financial Features of HSA-Eligible Plans Differed from Those of 

Traditional Plans, but Covered Services Were Similar 11 

HSA-Eligible Plan Enrollees Had Higher Incomes Than Comparison 

Groups, but Data on Age Differences Were Inconclusive 18 

Just over Half of Enrollees and Most Employers Contributed to 

HSAs, and Account Holders Used HSA Funds to Pay for Medical 

Care and to Accumulate Savings 22 

Focus Group Participants Generally Understood and Were 

Satisfied with HSA-Eligible Plans, but Would Not Recommend 

These Plans to All Consumers 26 

Concluding Observations 30 

Agency Comments 31 

Appendix I Scope and Methodology 32 

Appendix II GAO Contact and Staff Acknowledgments 38 

Related GAO Products 39 

Tables 

Table 1: Key Features of HSA-Eligible Plans and HSAs for 2006 10 

Table 2: Financial Features of HSA-Eligible and Traditional Plans 

Offered by Employers, 2005 14 

Table 3: Financial Features of HSA-Eligible and Traditional Plans 

Offered in the Individual Market through 

eHealthInsurance, 2005 16 

Table 4: Average Age of HSA-Eligible Plan Enrollees and 

Comparison Groups 21 

Page i GAO-06-798 Health Savings Accounts
Figures 

Figure 1: Adjusted Gross Income of Tax Filers Reporting HSA 

Contributions and All Tax Filers, 2004 19 

Figure 2: Average Deduction Claimed for HSA Contribution, 2004 24 

Abbreviations 

CDHP consumer-directed health plan 

FEHBP Federal Employees Health Benefits Program 

FSA flexible spending arrangement 

HSA health savings account 

IRS Internal Revenue Service 

PPO preferred provider organization 

SOI Statistics of Income 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page ii GAO-06-798 Health Savings Accounts
United States Government Accountability Office

Washington, DC 20548 

August 9, 2006 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

Dear Senator Baucus: 

Health savings accounts (HSA) and the high-deductible health insurance 

plans that are eligible to be coupled with them are a new type of 

consumer-directed health plan (CDHP) attracting interest among 

employers and consumers.1

 Both employers and plan enrollees may 

contribute to tax-advantaged HSAs, and enrollees can use the accounts to 

pay for their health care expenses.2

 The high-deductible health plans 

typically have lower premiums than other types of health plans because 

high-deductible health plan enrollees bear a greater share of the initial 

costs of care.

The novel structure of HSA-eligible plans has raised questions regarding 

how the plans and HSAs will affect enrollees’ health care purchasing 

decisions and costs. Proponents of HSA-eligible plans believe that the 

plans will encourage enrollees to become more astute health care 

consumers and thus restrain health care spending increases. Proponents 

argue that the high deductibles give enrollees an incentive to seek lowercost health care services and that the ability to carry over unspent HSA 

funds from year to year gives enrollees an incentive to obtain services only 

when necessary. However, some critics contend that the high deductibles 

associated with HSA-eligible plans may discourage enrollees from 

obtaining necessary health care services. Some critics are also concerned

 1

In addition to HSAs, other types of accounts associated with CDHPs include health 

reimbursement arrangements, which differ from HSAs in that they are owned by the

employer, not the enrollee, and medical savings accounts, which are enrollee owned and 

have lower allowable contributions than HSAs. Since December 31, 2005, medical savings 

accounts can no longer be opened. 

2

Tax advantages for HSAs were authorized by the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 for individuals covered by high-deductible

health insurance plans that meet certain criteria. Pub. L. No. 108-173, § 1201, 117 Stat. 2066,

2469. 

Page 1 GAO-06-798 Health Savings Accounts
that the plans may attract a disproportionate share of wealthier enrollees 

who seek to use the HSA primarily as a tax-advantaged savings vehicle or 

healthier or younger individuals who use fewer health care services. If 

these plans do attract a larger share of individuals who are likely to use 

fewer health care services, premiums for traditional health insurance 

plans, such as preferred provider organization (PPO) plans,3

 could rise 

faster than they otherwise would because of the disproportionate share of

enrollees with higher health care expenses remaining in those plans. 

Because HSAs and HSA-eligible plans are a relatively new concept in 

health insurance coverage, there is interest in the plan features and the 

characteristics and experiences of early plan enrollees.4

 For example, 

there is interest in who is enrolling in HSA-eligible plans, and whether they 

differ from enrollees in traditional health plans, such as PPO plans. In 

response to your request, we examined the following questions: 

1. How do financial features, covered services, and enrollees’ annual 

costs compare between HSA-eligible and traditional plans? 

2. How do the characteristics of enrollees compare between HSA-eligible 

and traditional plans? 

3. How are HSAs funded, and how are HSA account holders using their 

funds? 

4. What are enrollees’ experiences with HSA-eligible plans? 

To compare the financial features of HSA-eligible plans with those of 

traditional plans, we summarized 2005 data from national employer health

benefits surveys. We also reviewed the financial features of plans offered 

 3

PPO plans generally allow enrollees to select their own health care providers and 

reimburse either the provider or the enrollee for the cost of covered services. Enrollees’ 

costs are generally lower if they obtain care from the plan’s network of preferred providers.

For the purposes of this report, unless noted otherwise, traditional plans refers to PPO

plans. 

4

We have recently reported on the features of CDHPs and HSAs offered to federal 

employees and others. See GAO, Federal Employees Health Benefits Program: Early

Experience with a Consumer-Directed Health Plan, GAO-06-143 (Washington, D.C.: 

Nov. 21, 2005); Federal Employees Health Benefits Program: First-Year Experience with

High-Deductible Health Plans and Health Savings Accounts, GAO-06-271 (Washington, 

D.C.: Jan. 31, 2006); and Consumer-Directed Health Plans: Small but Growing Enrollment 

Fueled by Rising Cost of Health Care Coverage, GAO-06-514 (Washington, D.C.: Apr. 28, 

2006). 

Page 2 GAO-06-798 Health Savings Accounts
in 2005 by three large employers in the public, utility, and insurance 

sectors, as well as those of plans sold for 2005 by eHealthInsurance, a 

large, national broker of individual and small business health insurance.5

To compare the covered health care services and provider networks of 

HSA-eligible plans with those of traditional plans, we reviewed plan 

brochures provided by the three large employers and spoke with employer 

and insurance carrier officials and industry experts. To illustrate the 

potential health care costs faced by HSA-eligible and traditional plan 

enrollees, we examined the total annual costs to enrollees of the three 

employers’ HSA-eligible and PPO plans in 2005. We compared the total 

costs for enrollees who used extensive and low to moderate amounts of 

health care.

To compare the characteristics of HSA-eligible and traditional plan 

enrollees, we analyzed demographic data provided by the Internal 

Revenue Service (IRS) on adjusted gross income and age reported by tax 

filers who reported an HSA contribution on their returns for 20046

 and 

compared them with the corresponding data for all tax filers under 

65 years old.7,8

 We also compared 2005 income and age data for HSAeligible and traditional plan enrollees who purchased coverage from the 

three employers we reviewed and from eHealthInsurance.9

To examine how HSAs are funded and used, we analyzed data on 

individual and employer contributions and account withdrawals. To 

determine the share of enrollees that opened HSAs, we analyzed survey 

data on HSA-eligible plan enrollment and IRS data on HSA contributions. 

We also conducted interviews with industry experts regarding the share of 

enrollees that opened HSAs. To examine individuals’ HSA contributions, 

 5

Traditional plans offered through eHealthInsurance include both PPO plans and other 

major medical plans that do not meet the federal criteria for HSA-eligible plans.

6

The first year that individuals could contribute to HSAs was 2004. 

7

The IRS data set we used is a random sample of 200,295 individual income tax returns in

2004 from IRS’s Statistics of Income (SOI) individual tax return file. The findings from the

IRS data that we report were estimates derived from the SOI sample, which was weighted 

to represent an estimated population of about 132 million tax returns. IRS uses the SOI file 

to develop annual statistics on the population of individual taxpayers. 

8

Individuals 65 and older are generally enrolled in Medicare and are ineligible to contribute 

to an HSA. 

9

Data from the three employers excluded retirees, and data from eHealthInsurance

excluded enrollees 65 or older. 

Page 3 GAO-06-798 Health Savings Accounts
we analyzed IRS data on the average tax deduction for 2004 HSA 

contributions and reviewed data provided by the three employers on the 

2005 contributions of employees enrolled in HSA-eligible plans. To 

examine employer HSA contributions, we analyzed IRS data on the 

average employer contribution in 2004 and summarized 2005 data reported 

by two national employer health benefits surveys and the three large 

employers we reviewed. To determine how account holders use HSA 

funds, we analyzed IRS data on reported HSA withdrawals in 2004 and 

conducted a series of focus groups with employees of the three large 

employers we reviewed regarding HSA-eligible plan enrollees’ use of 

accounts in 2005. 

To determine enrollees’ experiences with HSA-eligible plans, we gathered

information from focus groups of employees of the three large employers 

regarding enrollee education, plan comprehension, experience with 

obtaining care, use of decision-support tools, and plan satisfaction in 2005. 

Unless otherwise noted, the participant experiences we report reflect 

multiple focus groups. 

Much of the data we present cannot be generalized to all HSA-eligible 

plans and enrollees or HSA account holders. For example, the IRS data for 

tax filers reporting an HSA contribution cannot be generalized to all HSAeligible plan enrollees because the sample is not designed to capture 

individuals enrolled in a high-deductible health plan who did not have an 

associated HSA. The results of the focus groups and the data obtained 

from the three employers cannot be generalized to all HSA-eligible plan 

enrollees or employers because they represent only the experiences of the

focus group participants and the benefit offerings of the three employers. 

We reviewed all data for reasonableness and consistency and determined 

that the data were sufficiently reliable for our purposes. We performed our 

work from November 2004 through July 2006 in accordance with generally 

accepted government auditing standards. Appendix I provides more 

detailed information on our methodology and the characteristics and 

limitations of the data we report. 

The financial features of HSA-eligible plans differed from those of 

traditional plans, but both plan types covered similar health care services.

HSA-eligible plans had lower premiums, higher deductibles, and higher 

out-of-pocket spending limits than traditional plans in 2005. For example, 

a 2005 national employer health benefits survey reported HSA-eligible plan 

premiums that were, on average, 35 percent less than traditional plan 

premiums for single coverage and 29 percent less for family coverage. The 

Results in Brief 

Page 4 GAO-06-798 Health Savings Accounts
same survey found that employers’ HSA-eligible plan deductibles were, on 

average, nearly six times greater than those for employers’ traditional 

plans. The HSA-eligible plans offered by the three employers we reviewed 

covered the same broad categories of health care services as did 

traditional plans in 2005, including preventive, diagnostic, maternity, 

surgical, and emergency services, and also used similar provider networks. 

For the three employers’ health plans we reviewed to illustrate enrollees’ 

potential health care costs—including premiums, deductibles, and other 

out-of-pocket costs for covered services—we estimated that HSA-eligible

plan enrollees would incur higher annual costs than PPO plan enrollees for 

extensive use of health care, but would incur lower annual costs than PPO 

enrollees for low to moderate use of health care.

HSA-eligible plan enrollees generally had higher incomes than comparison 

groups, but data on age differences were inconclusive. In 2004, 51 percent 

of tax filers reporting an HSA contribution to IRS had an adjusted gross 

income of $75,000 or more, compared with 18 percent of all tax filers 

under age 65. Two of the three employers we reviewed and 

eHealthInsurance also reported that HSA-eligible plan enrollees had higher 

incomes than did traditional plan enrollees in 2005. IRS data also suggest 

that the average age of tax filers who reported HSA contributions was 

about 9 years higher than the average age of all tax filers under age 65 in 

2004. Similarly, eHealthInsurance reported that in the individual market 

the average age of its HSA-eligible plan enrollees was 5 years higher than 

that of its traditional plan enrollees in 2005. In contrast, data from several 

employer groups indicate that the average age of HSA-eligible plan 

enrollees, excluding retirees, was 2 to 6 years lower than that of other 

groups of enrollees. 

Just over half of HSA-eligible plan enrollees and about two-thirds of 

employers contributed to HSAs, and account holders used HSA funds to 

pay for medical care and to accumulate savings. About 55 percent of HSAeligible plan enrollees reported HSA contributions in 2004, according to 

our analysis of data obtained from IRS and a publicly available survey. 

Among tax filers who claimed a deduction for an HSA in 2004, the average

deduction was about $2,100, and the average amount increased with 

income. About two-thirds of employers offering HSA-eligible plans 

contributed to their employees’ HSAs in 2005, according to national 

surveys. In 2004, the average employer HSA contribution was about $1,064.

About 45 percent of tax filers reporting an HSA contribution in 2004—

made by themselves, others on their behalf, or their employers—also 

reported withdrawing funds in 2004, and the average annual amount 

withdrawn by these tax filers was about $1,910. About 90 percent of these 

Page 5 GAO-06-798 Health Savings Accounts
withdrawn funds were used to pay for expenses identified under the 

Internal Revenue Code as eligible medical expenses. Fifty-five percent of 

tax filers reporting HSA contributions withdrew no money from their 

account in 2004. 

HSA-eligible plan enrollees who participated in focus groups at the three 

employers we reviewed generally reported positive experiences with their 

plan, but most would not recommend these plans to all consumers. While 

focus group participants enrolled in HSA-eligible plans understood the key 

attributes of their plan, such as low premiums, high deductibles, and the 

mechanics of using the HSA, they were confused about certain other 

features. For example, many participants were unsure what medical 

expenses qualified for payment using their HSA. Few participants 

researched the cost of hospital or physician services before obtaining care, 

although many participants researched the cost of prescription drugs. 

Most participants reported satisfaction with their HSA-eligible plan, but 

said they would not recommend these plans to everyone. Participants said

they would recommend HSA-eligible plans to healthy consumers, but not 

to people who use maintenance medication, have a chronic condition, 

have children, or may not have the funds to meet the high deductible. 

We provided pertinent portions of a draft of this report to IRS and 

eHealthInsurance and incorporated their technical comments as 

appropriate.

The majority of Americans receive their health coverage through the 

private health insurance market. In 2004, as many as 177 million enrollees 

and dependents—up to 84 percent—of the nearly 210 million individuals 

under age 65 with health insurance coverage received coverage through 

the private health insurance market.10 Since 2004, insurance carriers selling 

coverage in this market have added HSA-eligible plans to their portfolio of 

insurance products. 

Background 

Private Health Insurance 

Markets 

Private health plans are offered in two primary markets—the group and

the individual markets. The group market includes health plans offered by

 10Employee Benefit Research Institute, “Sources of Health Insurance and Characteristics of 

the Uninsured: Analysis of the March 2005 Current Population Survey,” Issue Brief No. 287 

(Washington, D.C.: November 2005). 

Page 6 GAO-06-798 Health Savings Accounts
employers to employees, either by purchasing the coverage from an 

insurance carrier or by funding their own health plans, and health plans 

offered by other groups, such as professional associations. About 

159 million individuals and their dependents under age 65 received health 

coverage through the group market in 2004.11 The individual market 

includes health plans sold by insurance carriers to individuals who do not 

receive coverage through an employer or other group. In this market, 

health insurance brokers may link individuals with an insurance carrier, 

and the enrollee pays a premium for coverage. About 17 million 

individuals and their dependents under age 65 received health coverage 

through the individual market in 2004.12 Most employers subsidize a share 

of employees’ health coverage purchased in the group market, whereas 

individuals purchasing coverage in the individual market typically pay the 

full cost. 

HSA-Eligible Plans and 

HSAs 

HSA-eligible plans constitute a small but growing share of the private 

health insurance market. As we noted in our April 2006 report, the number 

of enrollees and dependents covered by an HSA-eligible plan increased 

from about 438,000 in September 2004 to about 1 million in March 2005 

and to about 3 million in January 2006.13 In 2004 and 2005, more than half 

of these enrollees and dependents were covered by an HSA-eligible plan 

purchased in the individual insurance market, rather than obtained from 

an employer.

14

HSA-eligible plans are required to meet certain statutory criteria. The 

plans must have a minimum deductible amount of $1,050 for single 

coverage and $2,100 for family coverage in 2006 and a maximum limit on 

enrollee out-of-pocket spending15 of $5,250 for single coverage and $10,500 

 11Employee Benefit Research Institute, “Sources of Health Insurance and Characteristics of 

the Uninsured: Analysis of the March 2005 Current Population Survey.” 

12Employee Benefit Research Institute, “Sources of Health Insurance and Characteristics of 

the Uninsured: Analysis of the March 2005 Current Population Survey.” 

13GAO-06-514.

14Preliminary data for 2006 suggest that the number of HSA-eligible plan enrollees in the 

group market is growing faster than in the individual market. 

15An out-of-pocket spending limit represents the maximum amount an enrollee is required

to pay toward the cost of covered services. The out-of-pocket spending limit includes

deductibles and other payments, but does not include premiums. 

Page 7 GAO-06-798 Health Savings Accounts
for family coverage in 2006.16 Most HSA-eligible plan enrollees are covered 

by plans that operate similarly to traditional plans. HSA-eligible plan 

enrollees pay premiums to access covered services. As with traditional 

plans, rates negotiated by insurance carriers provide incentives for HSAeligible plan enrollees to access in-network care. However, HSA-eligible 

plan enrollees are subject to higher-than-average deductibles. Preventive

care services may be exempted from the deductible requirement, but 

coverage of most other services, including prescription drugs, is subject to

the deductible.17 After meeting the deductible, the HSA-eligible plan pays 

for most of the cost of covered services until the enrollee meets the out-ofpocket spending limit, at which point the plan pays 100 percent of the cost

of covered services. Insurance carriers offer HSA-eligible plans to both 

employers in the group market and individuals in the individual market. 

An HSA is a tax-advantaged savings account established for paying 

qualified medical expenses.18 Individuals are eligible to open an HSA if 

they are enrolled in an HSA-eligible plan and have no other health 

coverage, with limited exceptions.19 However, HSA-eligible plan enrollees 

are not required to open or contribute to an HSA and can use non-HSA 

funds to pay for medical expenses. HSA-eligible plan enrollees who choose 

to pay for medical expenses from their HSA may access their account 

funds by check, by debit card, or by authorizing the insurance carriers to 

allow the providers to directly debit their account funds. HSAs are owned 

by the account holder, and the accounts are portable—individuals may 

keep their accounts if they switch jobs or enroll in a non-HSA-eligible 

health plan. Both employers and individuals may contribute to HSAs, and 

individuals may claim a deduction on their federal income taxes for their 

 16These amounts are annually adjusted for cost-of-living increases. In 2005, the minimum 

deductible amount was $1,000 for single coverage and $2,000 for family coverage, and the 

maximum limit on enrollee out-of-pocket spending was $5,100 for single coverage and 

$10,200 for family coverage. 

17The IRS definition of preventive care includes periodic health evaluations, including tests 

and diagnostic procedures ordered in connection with routine examinations, routine

prenatal and well-child care, immunizations, tobacco cessation programs, obesity weightloss programs, and various screening services. Through 2006, IRS allows certain plans to be

treated as HSA eligible, where, in order to comply with state requirements, the plans cover 

certain services (such as prescription drugs) before enrollees meet the deductible. After 

2006, no such transitional relief will be available. 

18Qualified medical expenses are identified under the Internal Revenue Code. 

19Limited coverage (including specific injury or accident, disability, dental care, or vision 

care) in addition to the HSA-eligible plan is permissible.

Page 8 GAO-06-798 Health Savings Accounts
HSA contributions regardless of whether they itemize deductions or claim 

the standard deduction. HSA balances can earn interest; roll over from 

year to year; and be invested in a variety of financial instruments, such as

mutual funds. HSA balances may also accumulate subject only to annual 

limits on contributions. In 2006, contributions were limited to 100 percent 

of the deductible, but not more than $2,700 for single coverage or $5,450 

for family coverage.

20 Contributions, earned interest, and withdrawals for 

qualified medical expenses are not federally taxed. Withdrawals for 

nonqualified expenses are subject to income tax and, if made before age 

65, a tax penalty. A financial institution, such as a bank or insurance 

company, typically administers the account. Table 1 describes the key 

features of HSA-eligible plans and HSAs. 

 20The annual contribution limit is adjusted annually for cost-of-living increases. In 2005,

contributions were allowed up to 100 percent of the deductible, but not more than $2,650 

for single or $5,250 for family coverage. 

Page 9 GAO-06-798 Health Savings Accounts
Table 1: Key Features of HSA-Eligible Plans and HSAs for 2006 

Feature Description

HSA-eligible plan features 

Deductible requirementsaMinimum of $1,050 for single and $2,100 for family coverage; to be adjusted for cost-ofliving increases in future years.b

Maximum out-of-pocket limitsaMaximum of $5,250 for single and $10,500 for family coverage; to be adjusted for 

inflation in future years. 

HSA features

Ownership Accounts are owned by the individual. 

Portability Accounts are fully portable—individuals can retain their HSA balances if they change 

jobs or obtain other health coverage. 

Who may contribute Individuals, family members, employers, and other entities may contribute on behalf of 

the individual. 

Annual contribution limits Contributions are allowed up to 100 percent of deductible, but not more than $2,700 for 

single or $5,450 for family coverage; however, account holders aged 55 or over and not 

enrolled in Medicare can contribute an additional $700. 

Unspent funds Unspent funds may roll over from year to year without limit. 

Definition of qualified medical expenses Included are expenses intended to alleviate or prevent a physical or mental condition or 

illness, including vision and dental services, and premiums for long-term care insurance, 

certain continuation coverage, coverage while receiving unemployment benefits, and 

coverage after age 65 (except Medigapc

). 

Tax treatment Withdrawals for qualified medical expenses and earned interest are exempt from federal 

income taxes; employer contributions are excluded from gross income, and employee 

contributions are deductible from federal income taxes. 

Nonmedical withdrawals Nonmedical withdrawals are subject to income tax, and an additional 10 percent penalty 

is assessed if these withdrawals are made before age 65. 

History Tax advantages for HSAs were authorized in December 2003 and made available 

beginning January 1, 2004. 

Source: GAO analysis of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and IRS guidance on HSAs. 

a

Services not covered by the insurance plan do not count toward the deductible or out-of-pocket 

maximum. 

b

Through 2006, IRS allows certain plans to be treated as HSA eligible, where, in order to comply with

state requirements, they cover certain services (such as prescription drugs) prior to meeting the 

deductible. After 2006, no such transitional relief will be available. 

c

Medigap is a private supplemental insurance available to Medicare enrollees. It helps to pay for 

some of Medicare’s deductibles, copayments, and coinsurance amounts, as well as some benefits 

Medicare does not cover. 

HSA-eligible plans typically provide, to some extent, information on the 

cost of health care services and the quality of health care providers. This 

information may help enrollees to become more actively engaged in

making health care purchasing decisions. Experts suggest that in order to

assess the price competitiveness of different providers or the cost of 

different treatment options, enrollees need reliable, specific information 

Page 10 GAO-06-798 Health Savings Accounts
about the cost of services. Experts also suggest that in order to make 

informed provider choices, enrollees need data on key quality measures to 

assess the quality of different providers. These quality measures may 

include the volume of procedures performed, the outcomes of those 

procedures, and certain process indicators demonstrating whether 

providers followed certain recommended treatment guidelines. Insurance 

carriers offering HSA-eligible plans may also provide online access to 

health accounts for enrollees to manage their health care spending. 

These tools may be provided by health insurance carriers to all health 

insurance plan enrollees, but are likely to be more important to enrollees 

of HSA-eligible plans and other CDHPs, who have a greater financial 

incentive to make informed decisions about the quality and costs of health 

care providers and services. However, insurance carriers have faced 

challenges in obtaining or presenting quality and cost data. As we noted in 

our April 2006 report, the decision-support tools provided with CDHPs 

were limited and did not provide sufficient information to allow enrollees 

to fully assess cost and quality trade-offs of health care purchasing 

decisions.21

The financial features—premiums, deductibles, and out-of-pocket 

spending limits—of HSA-eligible plans differed from those of traditional 

plans in 2005, but both plan types covered similar health care services. 

HSA-eligible plans had lower premiums, higher deductibles, and higher 

out-of-pocket spending limits than traditional plans in 2005. The HSAeligible plans we reviewed covered the same broad categories of services 

as traditional plans and used similar provider networks in 2005. Our 

illustration of enrollees’ potential health care costs for the three 

employers’ health plans we reviewed showed that HSA-eligible plan 

enrollees would incur higher annual costs than PPO plan enrollees for 

extensive use of health care, but would incur lower annual costs than PPO 

plan enrollees for low to moderate use of health care. 

Financial Features of 

HSA-Eligible Plans 

Differed from Those 

of Traditional Plans, 

but Covered Services 

Were Similar 

 21GAO-06-514. 

Page 11 GAO-06-798 Health Savings Accounts
In the group market, HSA-eligible plans had lower premiums, higher 

deductibles, and higher out-of-pocket spending limits than traditional 

plans in 2005. Similarly, in the individual market, HSA-eligible plans had 

lower premiums and higher deductibles than traditional plans in 2005. 

In the group market, HSA-eligible plans had lower premiums, higher 

deductibles, and higher out-of-pocket spending limits than traditional 

plans in 2005. Premiums for HSA-eligible plans were lower than those for 

traditional plans in 2005. According to a national employer health benefits

survey, monthly premiums for HSA-eligible plans averaged $225 for single

coverage and $659 for family coverage in 2005.

22 These HSA-eligible plan 

premiums were, on average, 35 percent less than surveyed employers’ 

traditional plan premiums for single coverage and 29 percent less than 

surveyed employers’ traditional plan premiums for family coverage. On 

average, surveyed employers paid about the same share of the premiums 

for their HSA-eligible plans as for their traditional plans. Monthly 

premiums for the HSA-eligible plans offered by the three employers we 

reviewed ranged from $231 to $319 for single coverage and from $612 to 

$995 for family coverage in 2005.23 These HSA-eligible plan premiums were

13 to 27 percent less than the employers’ traditional plan premiums for 

single coverage and 18 to 23 percent less for family coverage. In contrast 

to data from the national employer health benefits survey, data from the 

three employers we reviewed showed that the employers paid a greater 

share of the premium for their HSA-eligible plan enrollees than for their 

traditional plan enrollees. 

HSA-Eligible Plans Had 

Lower Premiums, Higher 

Deductibles, and Higher 

Out-of-Pocket Spending 

Limits Than Traditional 

Plans 

Group Market 

HSA-eligible plan deductibles were higher than traditional plan 

deductibles in 2005.24 For example, one national employer health benefits 

survey reported that annual deductibles for HSA-eligible plans averaged 

 22See Kaiser Family Foundation and Health Research and Educational Trust, Employer 

Health Benefits: 2005 Annual Survey (Menlo Park, Calif., and Chicago, Ill.: 2005). In this 

survey, family coverage refers to coverage of four individuals. 

23For these employers, family coverage refers to coverage of three or more individuals. 

24Deductibles may vary depending on whether the enrollee seeks care from a provider that 

is part of the insurance carrier’s provider network. For the purposes of this report, if the 

plans or data we reviewed reported separate deductibles for services received from innetwork and out-of-network providers, we discuss only the deductibles for services

received from in-network providers. 

Page 12 GAO-06-798 Health Savings Accounts
$1,901 for single coverage and $4,070 for family coverage in 2005—nearly

six times greater than those of surveyed employers’ traditional plans.25

Another national employer health benefits survey reported that the median 

annual deductible for HSA-eligible plans offered by large employers was 

$1,200 for single coverage in 2005, four times greater than those of 

surveyed employers’ traditional plans.

26 Annual deductibles for the HSAeligible plans offered by the three employers we reviewed ranged from 

$1,250 to $3,000 for single coverage and from $2,500 to $6,000 for family 

coverage in 2005. In contrast, deductibles for two of the three employers’ 

traditional plans were zero and for the other employer were $350 for single

coverage and $700 for family coverage. 

Out-of-pocket spending limits for HSA-eligible plans were higher than 

those of traditional plans in 2005.27 According to a national employer 

health benefits survey, the median annual out-of-pocket spending limit for 

HSA-eligible plans offered by large employers was $3,500 for single 

coverage in 2005, which was higher than the median out-of-pocket 

spending limit of $1,960 reported for traditional plans.28 Out-of-pocket 

spending limits for HSA-eligible plans offered by the three employers we 

reviewed ranged from $3,750 to $5,000 for single coverage and from $7,500 

to $10,000 for family coverage in 2005, in contrast to the limits among the 

employers’ traditional plans of $1,000 to $2,350 for single coverage and 

$2,000 to $4,700 for family coverage.29 Table 2 summarizes the financial 

features of HSA-eligible and traditional plans offered by employers in 2005. 

 25Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey. 

26Mercer Human Resource Consulting, National Survey of Employer-Sponsored Health

Plans: 2005 Survey Report (New York, N.Y.: 2006). 

27Out-of-pocket spending limits may vary depending on whether the enrollee seeks care 

from a provider that is part of the insurance carrier’s provider network. For the purposes of

this report, if the plans or data we reviewed reported separate out-of-pocket spending

limits for services received from in-network and out-of-network providers, we discuss only 

the limits for services received from in-network providers.

28Mercer Human Resource Consulting, National Survey of Employer-Sponsored Health

Plans: 2005 Survey Report. 

29The employers’ plans we reviewed may not be comparable because some plans excluded 

certain covered services from the calculation of their out-of-pocket spending limit. 

Page 13 GAO-06-798 Health Savings Accounts
Table 2: Financial Features of HSA-Eligible and Traditional Plans Offered by Employers, 2005 

Kaiser Family 

Foundation

Surveya Mercer Surveyb

Employer 1 Employer 2 Employer 3 

Feature 

Coverage 

type 

HSAeligible Traditional 

HSAeligibleTraditionalHSAeligibleTraditionalHSAeligible Traditional HSAeligibleTraditional

Monthly 

premium 

Single $225 $346 N.A. $339c$231 $315 $319 $365 $251 $318

Enrollee 

share of 

premium 

16% 15% N.A. 23%c4% 30% 18% 28% 2%d25%e

Employer 

share of 

premium 

84% 85% N.A. 77%c96% 70% 82% 72% 98%d75%e

Familyf$659 $924 N.A. $879c$612 $798 $995 $1,208 $758 $969

Enrollee 

share of 

premiumf

21% 25% N.A. 33%c18% 37% 13% 28% 2%d24%e

Employer 

share of 

premiumf

79% 75% N.A. 67%c82% 63% 87% 72% 98%d76%e

Single $1,901 $323 $1,200h$300hAnnual $3,000 $350 $1,800 $0 $1,250 $0

deductibleg

Family $4,070 $679 N.A. $750h$6,000 $700 $3,600 $0 $2,500 $0

Single $2,551jN.A. $3,500h$1,960hAnnual out- $5,000 $2,350 $4,800 $1,000 $3,750 $1,000

of-pocket 

spending 

limiti

Family $4,661jN.A. N.A. N.A. $10,000 $4,700 $9,600 $2,000 $7,500 $3,000

Single $553 N.A. $100kN.A. $0 N.A. $1,400lAnnual N.A. $100 N.A.

employer 

contribution 

to HSA 

Family $1,185 N.A. N.A. N.A. $0 N.A. $2,300l

N.A. $200 N.A.

Source: GAO analysis of data reported by Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey; Mercer Human Resource Consulting, National Survey of Employer-Sponsored Health Plans: 2005

Survey Report; and the three employers we reviewed. 

Notes: N.A. indicates that the data were not available. Family coverage refers to coverage of four 

individuals for the survey data and coverage of three or more individuals for the three employers. 

a

Data represent average values of surveyed employers. 

b

Data represent average or median values, as noted, for large employers. 

c

Data represent average values among surveyed employers that required enrollee premium 

contributions. 

d

If HSA-eligible plan enrollees participated in an employer-sponsored wellness program, the 

employee share of the premium was 0 percent, and the employer share was 100 percent. 

e

If traditional plan enrollees participated in an employer-sponsored wellness program, the employee

share of the premium was 22 percent, and the employer share was 78 percent. 

Page 14 GAO-06-798 Health Savings Accounts
f

Premium data are reported for families where a covered spouse does not have access to medical 

benefits through his or her employer. 

g

If the plans or data we reviewed reported separate deductibles for services received from in-network 

and out-of-network providers, we reported only the deductibles for services received from in-network 

providers. 

h

Data represent median values among surveyed employers. 

i

An out-of-pocket spending limit represents the maximum amount an enrollee is required to pay 

toward the cost of covered services. The out-of-pocket spending limit includes deductibles and other 

payments, but does not include premiums. If the plans or data we reviewed reported separate out-ofpocket spending limits for services received from in-network and out-of-network providers, we 

reported only the limits for services received from in-network providers. 

j

Kaiser was unable to determine for all survey respondents whether the annual out-of-pocket 

spending limits were inclusive or exclusive of the deductible. 

k

Data represent the median values among surveyed employers offering HSA contributions. 

l

If HSA-eligible plan enrollees participated in employer-sponsored wellness programs, the employer

contributed up to $250 in excess of the base contribution amount listed. 

Premiums and deductibles for HSA-eligible plans sold in the individual 

market by eHealthInsurance followed a pattern similar to that of plans 

sold in the group market, with lower premiums and higher deductibles 

than traditional plans.30 According to eHealthInsurance, the average

monthly premiums for HSA-eligible plans were $111 for single coverage 

and $277 for family coverage in 2005.

31 Premiums for traditional health 

plans were, on average, 24 percent more for single coverage and 

31 percent more for family coverage.32 The average annual deductible for 

an HSA-eligible plan was $3,190 for single coverage and $5,213 for family 

coverage in 2005, compared with deductibles for traditional plans of 

$1,597 for single coverage and $2,025 for family coverage. (See table 3.) 

Individual Market 

 30Data on annual out-of-pocket spending limits were not available. 

31Family coverage refers to coverage of three or more individuals. 

32Traditional plans offered through eHealthInsurance include both PPO plans and other 

major medical plans that do not meet the federal criteria for HSA-eligible plans. 

Page 15 GAO-06-798 Health Savings Accounts
Table 3: Financial Features of HSA-Eligible and Traditional Plans Offered in the 

Individual Market through eHealthInsurance, 2005 

Feature Coverage type HSA-eligible Traditional

Monthly premium Single $111 $138

Family 277 363

Annual deductible Single 3,190 1,597 a

Family 5,213 2,025

Source: eHealthInsurance. 

Notes: Data represent average values for HSA-eligible and traditional plans. Traditional plans offered 

through eHealthInsurance include both PPO plans and other major medical plans that do not meet 

the federal criteria for HSA-eligible plans. Family coverage refers to coverage for three or more 

individuals. 

a

Reported for in-network services only. 

HSA-Eligible Plans 

Covered Similar Health 

Care Services and Used 

Similar Provider Networks 

as Traditional Plans 

HSA-eligible plans offered in 2005 by the three employers we reviewed 

covered health care services similar to those covered by the traditional 

plans offered by the same employers. The HSA-eligible and traditional 

plans offered by the same employer covered the same broad categories of

services, such as preventive, diagnostic, maternity, surgical, outpatient, 

and emergency care, and typically covered the same services within these 

categories.33 While each HSA-eligible plan defined preventive services 

differently, each plan covered, and paid 100 percent of the cost of, certain 

core services, including annual physical exams, routine immunizations for 

children, routine mammograms, routine Pap tests, and well-child care.34

These services were generally also covered by the traditional plans offered 

by the employers.35

The provider networks used by HSA-eligible plans and traditional plans 

were similar. Two of the three employers we reviewed used the same 

insurance carrier and the same provider network for the HSA-eligible plan 

and the traditional plan it offered to its employees in 2005. One employer 

used different insurance carriers for its HSA-eligible and traditional plan in

 33The HSA-eligible and traditional plans we reviewed generally covered the same categories 

of services for all plan enrollees and dependents. Both plan types covered maternity 

services for only the primary enrollee and spouse, and generally not for female dependents.

34One employer’s HSA-eligible plan required a copayment (a fixed payment generally made 

at the time of service) before paying 100 percent of the cost of covered preventive services. 

35One employer did not cover annual physical exams under its traditional plan. 

Page 16 GAO-06-798 Health Savings Accounts
2005, and in this case, the HSA-eligible plan network was broader than the 

traditional plan network. Other evidence suggests that the provider 

networks used by CDHPs and traditional plans are similar. For instance, 

industry experts told us that insurance carriers that offer both CDHPs and 

traditional plans typically use the same provider networks for both 

products. Insurance carriers we spoke with told us that they used the 

same provider network for their CDHP and traditional plan products. 

Additionally, as we noted in our November 2005 report, the provider 

networks used throughout the country by a national CDHP in the Federal

Employees Health Benefits Program (FEHBP) were the same or 

comparable to those used by the program’s traditional plans.36

Enrollee Costs Would Be 

Higher for HSA-Eligible 

Plans Than for PPO Plans 

When Extensive Care Is 

Used, but Lower When 

Low to Moderate Care Is 

Used 

Our illustration of enrollees’ potential health care costs—including 

premiums, deductibles, and other out-of-pocket costs for covered 

services—for the three employers’ 2005 health plans we reviewed showed 

that HSA-eligible plan enrollees would incur higher annual costs than PPO 

plan enrollees for extensive use of health care, but would incur lower 

annual costs than PPO plan enrollees for low to moderate use of health 

care.37 For example, we estimated that in the event of an illness or injury 

resulting in a hospitalization costing $20,000, the total costs incurred by 

the three employers’ HSA-eligible plan enrollees would be 47 to 83 percent 

higher than those faced by the employers’ PPO plan enrollees. Specifically,

the total costs of health coverage paid by HSA-eligible plan enrollees 

would range from $3,710 to $5,111, while the costs paid by PPO plan 

enrollees would range from $2,136 to $3,472. In contrast, we estimated that 

the total costs paid by HSA-eligible plan enrollees who used low to 

moderate amounts of health care, visiting the doctor for illnesses or 

injuries six times in one year, would be 48 to 58 percent lower than the 

 36GAO-06-143. 

37We assumed that enrollees had single coverage and used in-network services. We also

assumed that enrollees used the funds their employers contributed to their HSA in 2005 

and paid for the rest out of pocket. We assumed that enrollees did not have HSA funds 

carried over from a prior year, which, if used, could have lowered enrollees’ out-of-pocket

costs. We considered only the costs associated with medical care provided by a physician 

and did not consider any other costs that could be incurred by an enrollee, such as

prescription drug costs. We also did not consider the tax implications associated with 

enrollee spending for health care services; if HSA-eligible plan enrollees used taxadvantaged funds they, or someone other than their employer, contributed to their HSA,

their costs could have been lower. 

Page 17 GAO-06-798 Health Savings Accounts
costs paid by the PPO plan enrollees.38 Specifically, the total annual costs 

of health coverage for HSA-eligible plan enrollees would range from $440 

to $679, compared with $1,056 to $1,317 for PPO plan enrollees. 

HSA-eligible plan enrollees generally had higher incomes than comparison 

groups, but age differences varied depending on the data reviewed. Fiftyone percent of tax filers reporting HSA contributions had an adjusted 

gross income of $75,000 or more, compared with 18 percent for all tax 

filers under age 65 in 2004. Two of the three employers we reviewed and

eHealthInsurance reported that HSA-eligible plan enrollees had higher 

incomes than did traditional plan enrollees in 2005. Regarding age 

differences, data from IRS for tax filers and from eHealthInsurance for 

individual market enrollees indicate that the average age of HSA-eligible 

plan enrollees was higher than that of individuals from comparison 

groups. In contrast, data from several employer groups indicate that the 

average age of HSA-eligible plan enrollees was lower than that of 

comparison groups of enrollees. 

HSA-Eligible Plan 

Enrollees Had Higher 

Incomes Than 

Comparison Groups, 

but Data on Age 

Differences Were 

Inconclusive 

HSA-Eligible Plan 

Enrollees Had Higher 

Incomes Than Comparison 

Groups 

HSA-eligible plan enrollees had higher incomes than comparison groups. 

The average, or mean, adjusted gross income of the estimated 108,000 tax 

filers reporting HSA contributions in 2004 was about $133,000,39 compared 

with $51,000 for all tax filers under age 65, according to IRS data. 

Similarly, the median adjusted gross income for these tax filers was about 

$76,000, compared with $30,000 for all tax filers under age 65. Moreover, 

51 percent of tax filers reporting HSA contributions had an adjusted gross 

income of $75,000 or more, compared with 18 percent of all tax filers 

under age 65.40 (See fig. 1.)

 38We assumed that the negotiated rate for each doctor’s visit was $80. We developed this 

assumption based on our analysis of one insurer’s negotiated rates for office visits for low 

to moderate problems in the regions in which the three employers’ plans were offered. 

39To receive a deduction, tax filers must report HSA contributions to IRS. Those reporting 

HSA contributions in 2004 represented about 0.1 percent of the 115 million tax filers less 

than 65 years of age. 

40All tax filers includes both insured and uninsured individuals. The uninsured tend to have

lower incomes than those with health insurance coverage. 

Page 18 GAO-06-798 Health Savings Accounts
Figure 1: Adjusted Gross Income of Tax Filers Reporting HSA Contributions and All 

Tax Filers, 2004 

Percentage of tax filers

Source: GAO analysis of IRS data. 

Adjusted gross income (in dollars) 

Tax filers reporting HSA contributions

All tax filers

Under 

30,000

0 

5 

10 

15 

20 

25 

30 

35 

40 

45 

50 

55 

30,000 

to 49,999

50,000

to 74,999 

75,000 

or more 

Notes: Data are based on a sample of 2004 tax returns processed by IRS. For the all tax filers 

category, we excluded those 65 years and older because they are generally enrolled in Medicare and

are ineligible to contribute to an HSA. 

We also found similar income differences between HSA-eligible plan and 

traditional plan enrollees when we examined other data sources from the 

group and individual markets. As we previously reported, among FEHBP 

enrollees actively employed by the federal government, 43 percent of HSAeligible plan enrollees earned federal incomes of $75,000 or more, 

compared with 23 percent for all enrollees in 2005.

41 Actively employed 

HSA-eligible plan enrollees also had higher incomes than traditional plan

enrollees in 2005 for two of the three employers we reviewed. One 

employer reported that the average salary of its HSA-eligible plan 

 41GAO-06-271. 

Page 19 GAO-06-798 Health Savings Accounts
enrollees was $75,000, compared with $61,000 for its traditional plan 

enrollees, and the second employer reported that the average salary of its 

HSA-eligible plan enrollees was $91,000, compared with $81,000 for its 

traditional plan enrollees. The third employer reported that about the 

same share (4 percent) of its actively employed HSA-eligible plan and 

traditional plan enrollees had incomes of $75,000 or more in 2005. In the 

individual market, eHealthInsurance reported that 35 percent of its HSAeligible plan enrollees had incomes of $75,000 or more, compared with 

21 percent of its traditional plan enrollees in 2005.

42

Data Sources Did Not 

Show Consistent Age 

Differences between HSAEligible Plan Enrollees and 

Comparison Groups 

The data sources we examined did not conclusively indicate whether HSAeligible plan enrollees were older or younger than comparison groups. IRS 

data indicate that the average age of tax filers reporting HSA contributions 

was about 9 years higher than that of all tax filers under age 65 in 2004.43

Similarly, eHealthInsurance reported that the average age of its individual 

market HSA-eligible plan enrollees was 5 years higher than that of its 

individual market traditional plan enrollees in 2005.44 In contrast, several 

data sources from the group market in 2005 suggest that the average age of

HSA-eligible plan enrollees was lower than that of the traditional plan 

enrollees or the average of all enrollees. As we previously reported, the 

average age of FEHBP’s HSA-eligible plan enrollees, excluding retirees, 

was about 3 years lower than that of all FEHBP enrollees.45 The three 

employers we reviewed reported that the average age of HSA-eligible plan 

enrollees, excluding retirees, was 2 to 6 years lower than that of their 

traditional plan enrollees. (See table 4.) 

 42Traditional plans offered through eHealthInsurance include both PPO plans and other 

major medical plans that do not meet the federal criteria for HSA-eligible plans. 

43All tax filers include both insured and uninsured individuals. The uninsured tend to be

younger than those with health insurance coverage. 

44Traditional plans offered through eHealthInsurance include both PPO plans and other 

major medical plans that do not meet the federal criteria for HSA-eligible plans. 

45GAO-06-271. 

Page 20 GAO-06-798 Health Savings Accounts
Table 4: Average Age of HSA-Eligible Plan Enrollees and Comparison Groups

Source 

Average age of

HSA-eligible 

plan enrollees

Average age 

of comparison

group Comparison group

All Markets 

IRS a,b 47c39 All tax filers under 65 years 

of age 

eHealthInsuranced38 33 Traditional plan enrolleese

Group market 

FEHBPf 44 47gAll FEHBP enrollees 

Employer 1f40 46 Traditional plan enrollees 

Employer 2f44 50 Traditional plan enrollees 

Employer 3f42 44 Traditional plan enrollees 

Source: GAO analysis of data from IRS, eHealthInsurance, the Office of Personnel Management, and three employers we reviewed. 

Note: All data are for 2005 unless otherwise noted.

a

Data are based on a sample of 2004 tax returns processed by IRS, and the average age is for the 

primary taxpayer filing the income tax return in 2004. Most HSA-eligible plans were sold in the 

individual market in 2004. 

b

The average age of tax filers reporting HSA contributions was about 9 years higher than that of all 

tax filers under age 65. The average ages listed in the table are rounded. 

c

Average age of tax filers reporting an HSA contribution. 

d

Enrollees under 65 years of age.

e

Traditional plans offered through eHealthInsurance include both PPO plans and other major medical 

plans that do not meet the federal criteria for HSA-eligible plans. 

f

Excludes retirees. 

g

Average age of all FEHBP enrollees, excluding retirees, in 2004. 

Page 21 GAO-06-798 Health Savings Accounts
Just over half of HSA-eligible plan enrollees, and most employers, 

contributed to HSAs, and account holders used their HSA funds to pay for 

current medical care and to accumulate savings. About 55 percent of HSAeligible plan enrollees reported HSA contributions in 2004. On average, tax

filers claimed a deduction of about $2,100 for their HSA contributions in 

2004, and the average amount increased with income. Most employers 

offering HSA-eligible plans contributed to their employees’ HSAs, and the 

average employer HSA contribution was about $1,064 in 2004. HSA 

account holders used their funds to pay for medical care and to 

accumulate savings. About 45 percent of those reporting 2004 HSA 

contributions also reported withdrawing funds in 2004, and 90 percent of 

these funds were withdrawn for qualified medical expenses. The 

remaining 55 percent of those reporting HSA contributions in 2004 

reported that they did not withdraw any funds from their HSA in 2004. 

Not all HSA-eligible plan enrollees opened and contributed to an HSA. 

According to our analysis of publicly available survey data and data 

obtained from IRS, about 55 percent of HSA-eligible plan enrollees 

reported HSA contributions in 2004. Industry experts we spoke with also 

estimated that the share of all HSA-eligible plan enrollees that had opened

and contributed to an HSA was about 50 percent to 60 percent. Similarly, 

one insurance carrier representative reported that about 60 percent of its 

HSA-eligible plan enrollees who obtained coverage through an employer 

opened and contributed to an HSA. 

Just over Half of 

Enrollees and Most 

Employers 

Contributed to HSAs, 

and Account Holders 

Used HSA Funds to 

Pay for Medical Care 

and to Accumulate 

Savings

Just over Half of Enrollees 

Opened and Contributed to 

HSAs 

HSA-eligible plan enrollees from the employers we reviewed were more 

likely to contribute to an HSA when their employer also offered account 

contributions. Specifically, two employers we reviewed contributed to 

employees’ HSAs and reported that 64 percent and 90 percent of 

employees enrolled in HSA-eligible plans contributed to an HSA in 2005. In

contrast, the third employer did not contribute to its employees’ HSAs and 

reported that 38 percent of its employees who were enrolled in HSAeligible plans contributed to an HSA in 2005.46

 46For the three employers we reviewed, these data represent only those individuals who 

contributed to their HSA through payroll deduction. 

Page 22 GAO-06-798 Health Savings Accounts
Tax filers claimed an average deduction of about $2,100 for HSA 

contributions in 2004, and the average amount increased with income.47

(See fig. 2.) The three employers we reviewed reported that employees 

enrolled in HSA-eligible plans contributed, on average, $826, $1,284, and 

$1,544 to their HSAs in 2005.48

 47Tax filers may claim an income tax deduction for contributions they, or someone other

than their employer, make to their HSA. The average deduction amount does not include 

HSA contributions individuals may have made through pretax payroll deductions and

therefore may understate the amount individuals contributed to their HSAs. 

48These data represent the contributions made by employees who contributed to their HSA

through payroll deduction. 

Page 23 GAO-06-798 Health Savings Accounts
Figure 2: Average Deduction Claimed for HSA Contribution, 2004 

0 

500 

1,000 

1,500 

2,000 

2,500 

3,000 

3,500 

Average deduction for HSA contributiona (in dollars) 

Source: GAO analysis of IRS data. 

Adjusted gross incomeb (in dollars) 

50,000 

50,000 to 

99,999 

100,000 to 

199,999

200,000 

or more 

1,370 

2,485 

3,010 

2,102 

Under 

Note: Data are based on a sample of 2004 tax returns processed by IRS. 

a

HSA deductions represent the amount individuals claimed they, or someone other than their 

employer, contributed to their HSA. Deductions do not include employer contributions, although 

employers may contribute to employees’ HSAs. Average deduction amounts do not include HSA 

contributions individuals may have made through pretax payroll deductions and therefore may 

understate the amount individuals contributed to their HSAs. In 2004, most HSA-eligible plan 

enrollees purchased coverage in the individual market rather than obtaining coverage through an

employer. These data are reported on a per-return basis and thus could include contributions to more

than one HSA in some instances. Moreover, the data do not distinguish between deductions claimed 

for HSA contributions made by enrollees with single and family coverage or between HSA-eligible 

coverage obtained in the group and individual market. The maximum allowable HSA contribution in 

2004 was $2,600 for single coverage and $5,150 for family coverage; account holders aged 55 or 

over and not enrolled in Medicare could contribute an additional $500. 

b

Adjusted gross income may include income earned by family members who are not covered under 

HSA-eligible plans.

Most Employers Offering 

HSA-Eligible Plans 

Contributed to HSAs 

About two-thirds of employers offering HSA-eligible plans contributed to 

their employees’ HSAs. According to a national employer health benefits 

survey, about two-thirds of employers offering HSA-eligible plans—

covering approximately 65 percent of workers in these plans—contributed 

Page 24 GAO-06-798 Health Savings Accounts
to HSAs for either single or family coverage in 2005.49 Similarly, another 

national employer health benefits survey reported that 62 percent of large

employers offering HSA-eligible plans contributed to their employees’ 

HSAs in 2005.50

The amounts contributed by employers to employees’ HSAs varied. In 

2004, the average employer HSA contribution reported to IRS was about 

$1,064. Two national employer health benefits surveys reported that 

employers contributed different amounts to their employees’ HSAs. 

Specifically, one national employer health benefits survey reported that 

the average annual employer contribution to HSAs in 2005 was $553 for 

single coverage and $1,185 for family coverage.51 Another survey reported 

that among large employers that contribute to employees’ HSAs, the 

median employer contribution was $100 for single coverage.52 Two of the 

three employers we reviewed contributed to their employees’ HSAs in 

2005. The employers’ contribution amounts varied from $100 to $1,400 for 

single coverage and from $200 to $2,300 for family coverage in 2005.53 One 

employer offered fixed HSA contribution amounts to employees, and the 

other employer offered varying contribution amounts, which were linked 

to employees’ participation in wellness programs. (See annual employer 

contribution to HSA in table 2.) 

 49Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey. 

50Mercer Human Resource Consulting, National Survey of Employer-Sponsored Health

Plans: 2005 Survey Report. 

51Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey. This average includes HSAs to which the employer did not

make a contribution. 

52Mercer Human Resource Consulting, National Survey of Employer-Sponsored Health

Plans: 2005 Survey Report. This median includes only HSAs to which the employer made a 

contribution. 

53One employer contributed an additional $50 if an employee completed a health risk 

assessment and an additional $200 if an employee completed a health coaching program.

These amounts are in addition to its base contribution amounts of $1,400 for single 

coverage and $2,300 for family coverage. 

Page 25 GAO-06-798 Health Savings Accounts
Our review of available data showed that HSA account holders used HSA 

funds to pay for current medical care and to accumulate savings. Data 

from IRS indicate that about 45 percent of those reporting 2004 HSA 

contributions—made by themselves, others on their behalf, or their 

employers—also reported withdrawing funds from their HSA, and the 

average annual amount withdrawn by these tax filers was about $1,910. 

Our analysis of data from IRS also indicates that about 90 percent of these 

withdrawn funds were used to pay for qualified medical expenses. 

Additionally, IRS data show that about 40 percent of all funds contributed

to HSAs in 2004 were withdrawn from the accounts by the end of the year. 

In addition to using HSAs to pay for medical and other expenses, account

holders appeared to use their HSA as a savings vehicle. About 55 percent 

of those reporting HSA contributions to IRS in 2004 did not withdraw any 

funds from their account in 2004. We could not determine whether HSAeligible plan enrollees accumulated balances because they did not need to

use their account (that is, they paid for care from out-of-pocket sources or 

did not need health care during the year) or because they reduced their 

health care spending as a result of financial incentives associated with the 

HSA-eligible plan and HSA. However, many focus group participants 

reported using their HSA as a tax-advantaged savings vehicle, 

accumulating HSA funds for future use. For example, one focus group 

participant reported paying out of pocket for a costly surgery in order to 

save HSA funds for future use. 

Participants in our focus groups who were enrolled in HSA-eligible plans 

generally reported positive experiences, but most would not recommend 

these plans to all consumers. Participants generally understood the key 

attributes of their plan, such as low premiums, high deductibles, and the 

mechanics of using the HSA, but were confused about certain other 

features. Few participants researched the cost of hospital or physician 

services before obtaining care, although many participants researched the 

cost of prescription drugs. Most participants reported satisfaction with 

their HSA-eligible plan and account, but said they would not recommend 

these plans to everyone. Participants said they would recommend HSAeligible plans to healthy consumers, but not to people who use 

maintenance medication, have a chronic condition, have children, or may 

not have the funds to meet the high deductible. 

HSA Account Holders 

Used HSA Funds to Pay for 

Medical Care and to 

Accumulate Savings 

Focus Group 

Participants Generally 

Understood and Were 

Satisfied with HSAEligible Plans, but 

Would Not 

Recommend These 

Plans to All 

Consumers 

Page 26 GAO-06-798 Health Savings Accounts
Many participants in our focus groups were able to describe key attributes

of HSA-eligible plans, including low premiums, high deductibles, and how 

to pay for services using the HSA.54 Participants understood that 

employers and employees can contribute to an HSA and were aware of the 

maximum contribution limits. Participants also understood the ability to 

accumulate savings over time and that their HSA was portable if they left 

their company. 

Focus Group Participants 

Generally Understood Key 

Attributes of HSA-Eligible 

Plans and Accounts, but 

Expressed Confusion 

about Certain Features 

Participants expressed confusion about certain other features of HSAeligible plans and accounts. Regarding their HSA-eligible plan, many 

participants understood that certain preventive visits were covered free of

charge,55 but cited problems distinguishing between preventive services 

and other services provided during a preventive visit to a physician. In 

particular, participants noted that certain laboratory tests associated with

a preventive visit were not considered a preventive service and thus were 

not paid for by the plan. Participants of one focus group also reported that

they did not always know whether services were provided by an in- or outof-network provider, particularly in emergency situations. For example, 

one participant had to pay $1,800 for transporting his wife 10 miles in an 

ambulance because the ambulance that was dispatched was not an innetwork provider. Regarding their HSAs, many participants were unsure 

what medical expenses qualified for payment using their HSA.56 Some 

participants said that they were initially unaware of, or confused about, 

how having an HSA limited their use of flexible spending arrangement 

(FSA) funds to certain medical expenses.57,58 Participants from one 

 54Unless otherwise noted, the participant experiences we report reflect multiple focus 

groups. 

55One employer’s HSA-eligible plan required a copayment before paying 100 percent of the

cost of covered preventive services. 

56According to Mercer Human Resource Consulting’s briefing, “Mercer’s National Survey of 

Employer-Sponsored Health Plans” (Feb. 24, 2006), about 70 percent of large employers 

offering CDHPs reported that their employees had at least some difficulty understanding 

what services may be paid from their account. 

57Health FSAs are employer-established benefit plans that allow employees to be

reimbursed for medical expenses. According to IRS, employees with HSAs can have only a 

limited-purpose FSA, which is restricted to certain benefits, such as vision, dental, or

preventive care, or a postdeductible FSA, which can be used only after a minimum annual 

deductible is met. 

58About 60 percent of large employers offering CDHPs reported that their employees had at 

least some difficulty understanding how their account coordinated with an FSA, according 

to “Mercer’s National Survey of Employer-Sponsored Health Plans” briefing.

Page 27 GAO-06-798 Health Savings Accounts
employer said that they were initially unaware of a monthly $3 

administrative bank fee for maintaining the HSA and felt that it diminished 

any potential savings from interest earned on their HSA balance. 

Few focus group participants enrolled in HSA-eligible plans researched the 

cost of services before obtaining care, although many researched the cost

of prescription drugs. A few participants reported asking physicians about 

the cost of services, but others expressed discomfort with asking 

physicians about cost.59 For example, one participant said, “Americans 

don’t negotiate. It’s not polite to question the value of [a provider’s] work.” 

Participants noted that physicians did not always know the cost of the 

services and that this information was generally handled through a billing 

office. Participants of one focus group also reported not initially 

understanding the extent to which they needed to manage and take 

responsibility for their health care as consumers, including by asking 

questions about the cost of services and medications. 

Participants reported that only limited information was available regarding

key quality measures for hospitals and physicians, such as the volume of 

procedures performed and the outcomes of those procedures.60 Many 

participants relied on referrals from family, friends, or health care 

providers for recommendations on providers. Some participants continued 

going to physicians with whom they already had an established 

relationship. Most participants did research general information on health

care issues, such as on health conditions or treatment options. 

Few Focus Group 

Participants Researched 

Cost before Obtaining 

Health Care Services 

Focus Group Participants 

Were Generally Satisfied 

with HSA-Eligible Plans 

but Would Not 

Recommend These Plans 

to All Consumers 

Most participants, who had voluntarily elected to enroll in the HSA-eligible 

plan as one of several choices offered by their employer, reported that 

they were generally satisfied with their health plan. Many participants 

cited the ability to accumulate savings, the tax advantages of having an 

HSA, and the ability to use an HSA debit card or online accounts as 

positive aspects of HSAs. Participants reported few problems obtaining 

care, and many used their health plan to obtain preventive services, visit 

 59“Mercer’s National Survey of Employer-Sponsored Health Plans” briefing noted that 

40 percent of all employers reported that they provided access to Web sites on provider 

quality and cost information. 

60In an earlier study, we reported on the challenges faced by carriers in providing cost and 

quality data. See GAO-06-514. 

Page 28 GAO-06-798 Health Savings Accounts
an emergency room or urgent care clinic, or fill prescriptions. When given 

a choice of health plan options, many focus group participants reported 

that they reenrolled in an HSA-eligible plan for the following year. 

Despite their general satisfaction with HSAs and HSA-eligible plans, some 

participants did not like certain aspects of their plan or account. Some 

participants said that they would prefer the ability to contribute more to 

the HSA to accumulate savings, while others noted that deductibles for 

HSA-eligible plans were too high and they would be willing to pay higher 

premiums for plans with lower deductibles. Participants also reported that

the cost of prescription drugs was high under HSA-eligible plans. Under 

two employers’ HSA-eligible plans, participants had to pay 

100 percent of the plan’s negotiated price for prescription drugs until 

meeting the deductible.61 In using the HSA, some participants said they 

encountered problems paying for services, such as billing errors for 

physician visits, and that the physician offices did not understand how to 

accept payment for services with an HSA debit card. 

Most participants said they would recommend HSA-eligible plans to 

healthy consumers. Some participants said they enrolled in the HSAeligible plan specifically because they did not anticipate getting sick, and

many said they considered themselves and their families as being fairly 

healthy. However, participants would not recommend these plans to 

people who use maintenance medication, have a chronic condition, have 

children, or may not have the funds to meet the high deductible. 

Focus Group Participants 

Enrolled in Traditional 

Plans Cited Several 

Reasons for Not Enrolling 

in HSA-Eligible Plans 

Participants enrolled in traditional plans from all three employers reported 

that they received and reviewed information about their health care 

options, including HSA-eligible plans. Most participants easily understood 

the features of their traditional plan, including copayments, deductibles, 

and the differences between in- and out-of-network providers, and one 

group of participants characterized the information on HSA-eligible plans 

as confusing and complicated. Participants reported that they did not elect 

to enroll in an HSA-eligible plan because their costs under a traditional 

plan would be lower and they were concerned about meeting the high 

deductible for potentially high medical expenses. Most participants said 

 61Under these two employers’ traditional plans, enrollees pay a portion of prescription drug 

costs through a copayment or coinsurance. A copayment is a fixed payment generally made

at the time of service, while coinsurance is a payment representing a percentage of 

expenses. 

Page 29 GAO-06-798 Health Savings Accounts
they were satisfied with their traditional plan, citing steady monthly 

premiums, no unexpected costs or coverage limitations, no need to 

manage one’s own health care, or an overall sense of comfort with 

traditional plans. If given a choice, most of the participants enrolled in 

traditional plans would reenroll in these plans. One group of participants,

whose employer was planning to offer only CDHP options in the future, 

suggested they would consider seeking employment elsewhere if forced 

into a CDHP. Some participants said they might have considered enrolling 

in an HSA-eligible plan if they had been younger and healthier. 

As more individuals face the choice of enrolling in HSA-eligible plans or 

other CDHPs, they will likely weigh the savings potential and financial 

risks associated with these plans in relation to their own health care needs 

and financial circumstances. We found that enrollees who use little health

care could incur lower costs under HSA-eligible plans than under 

traditional plans, while those who use more extensive health care services

could incur higher costs under HSA-eligible plans. Thus, when individuals 

are given a choice between HSA-eligible and traditional plans—as in the 

individual market and with employers offering multiple health plans—

HSA-eligible plans may attract healthier individuals who use less health 

care or, as we found, higher-income individuals with the means to pay 

higher deductibles and the desire to accrue tax-free savings. While 

patterns evident during the first few years of HSA-eligible plan enrollment 

may not predict future trends and enrollment will depend on the particular 

choices available, it will be important to monitor enrollment trends and 

assess their implications for the cost of health care coverage for all HSAeligible and traditional plan enrollees. 

Concluding 

Observations 

Contrary to the hopes of CDHP proponents, few of the HSA-eligible plan 

enrollees who participated in our focus groups researched cost before 

obtaining health care services. According to proponents, an increase in 

such health care consumerism is central to cost reductions that may occur 

under the plans. Any increase in consumerism that may be exhibited by 

CDHP enrollees will likely require time, education, and improved decisionsupport tools that provide enrollees with more information about the cost

and quality of health care providers and services. 

Finally, while HSA-eligible plan enrollees we spoke with were generally 

satisfied with their plan, it is notable that these enrollees each had a 

choice of health plans and voluntarily selected the HSA-eligible plan. Their 

caution that HSA-eligible plans may not be appropriate for everyone and 

the views of traditional plan enrollees who opted not to elect an HSAPage 30 GAO-06-798 Health Savings Accounts
eligible plan suggest that satisfaction may be lower when employees are 

not given a choice or when employer contributions to premiums or 

accounts do not sufficiently offset the potentially greater costs faced by 

CDHP enrollees. 

We provided to IRS and eHealthInsurance portions of a draft of this report 

pertaining to the data each had provided us. We received technical 

comments from IRS and eHealthInsurance by email and incorporated 

these comments as appropriate. 

Agency Comments 

As we agreed with your office, unless you publicly announce the contents

of this report earlier, we plan no further distribution of it until 30 days 

from the date of this letter. We will then send copies to others who are 

interested and make copies available to others who request them. The 

report will also be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-7119 or at dickenj@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs can be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix II. 

Sincerely yours, 

John E. Dicken 

Director, Health Care 

Page 31 GAO-06-798 Health Savings Accounts
Appendix I: Scope and Methodology 

Page 32 GAO-06-798 

Appendix I: Scope and Methodology 

To respond to our study objectives regarding health savings accounts 

(HSAs) and HSA-eligible plans, we examined (1) the financial features, 

covered services, and enrollees’ annual costs of HSA-eligible plans in 

comparison with those of traditional plans; (2) the characteristics of HSAeligible plan enrollees in comparison with those of other individuals and 

traditional plan enrollees; (3) the funding and use of HSAs; and (4) the 

experiences of enrollees with HSA-eligible plans. We reviewed all data for 

reasonableness and consistency and determined that the data were 

sufficiently reliable for our purposes. We performed our work from 

November 2004 through July 2006 in accordance with generally accepted 

government auditing standards. 

We relied on several sources to compare the financial features—that is, 

the premiums, deductibles, and out-of-pocket spending limits—of HSAeligible plans with those of traditional plans.1

 For the group market, we 

summarized data on financial features of HSA-eligible and traditional plans 

from two 2005 national employer health benefits surveys.2

 In addition, we 

hired a contractor, Hewitt Associates LLC, to contact employers, conduct

focus groups with their employees, and obtain information about the 

employers’ 2005 health plans. We judgmentally selected employers for 

review that (1) offered an HSA-eligible plan and a traditional plan in 2005,

(2) had at least 500 enrollees in their HSA-eligible plan in 2005, and 

(3) allowed us to conduct focus groups with their employees. We selected 

three large employers in the public, utility, and insurance sectors that met 

these criteria, and we agreed not to identify these employers by name in 

this report. The three employers we reviewed offered HSA-eligible plans 

that were administered by different insurance carriers. We requested that

each employer provide us with plan brochures and other documentation, 

including responses to a questionnaire describing its 2005 HSA-eligible and 

traditional plans.3

Financial Features 

and Covered Services 

 1

Unless otherwise noted, traditional plans refers to preferred provider organization (PPO) 

plans. 

2

Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey (Menlo Park, Calif., and Chicago, Ill.: 2005); and Mercer 

Human Resource Consulting, National Survey of Employer-Sponsored Health Plans: 2005

Survey Report (New York, N.Y.: 2006).

3

For the three employers, we reviewed the features of their PPO plan with the largest 

enrollment. 

Health Savings Accounts
Appendix I: Scope and Methodology 

To examine the financial features of HSA-eligible and traditional plans in 

the individual market, we reviewed data for plans sold for 2005 by 

eHealthInsurance, a large, national broker of individual and small business 

health insurance that offers more than 5,600 plans for more than 140 

health insurance carriers.4

 Data reported from eHealthInsurance represent 

only the policies of individuals who purchased insurance in the individual 

market through the brokerage for 2005 and cannot be generalized to all 

enrollees. These data were based on a random sample of policies sold by 

eHealthInsurance as of December 31, 2005. 

To examine the covered services and provider networks of HSA-eligible 

and traditional plans, we reviewed the three employers’ plan brochures 

and spoke with employer and insurance carrier officials and industry 

experts. 

To illustrate the potential health care costs faced by HSA-eligible and 

traditional plan enrollees, we estimated the total annual costs to enrollees

of the three employers’ HSA-eligible and preferred provider organization

(PPO) plans in 2005. We considered the following annual costs associated 

with coverage under the plans: 

• Premiums. HSA-eligible plans typically have lower premiums than PPO 

plans. We considered only enrollees’ share of the premiums. 

• Deductibles. HSA-eligible plans typically have higher deductibles than 

PPO plans. We considered all costs for covered services that enrollees 

incurred before meeting their deductible. 

• Out-of-pocket spending limits. HSA-eligible plans typically have higher

out-of-pocket spending limits than PPO plans. The out-of-pocket spending 

limit includes deductibles and other payments, but does not include 

premiums. We considered all copayments and coinsurance enrollees 

incurred before meeting their out-of-pocket spending limit. 

We also considered the contributions employers made to employees’ 

HSAs. Most employers contribute to their employees’ HSAs. We assumed 

that when paying for their health care expenses, enrollees only used funds 

their employer contributed to their HSA in 2005 and paid for the rest out of

pocket. 

 4

Traditional plans offered through eHealthInsurance include both PPO plans and other 

major medical plans that do not meet the federal criteria for HSA-eligible plans.

Page 33 GAO-06-798 Health Savings Accounts
Appendix I: Scope and Methodology 

When performing these calculations, we assumed that enrollees had single

coverage and used in-network services. For the analysis of enrollees’ total

health care costs related to extensive use of health care, we examined the

potential costs incurred by enrollees for an illness or injury resulting in a 

hospitalization costing $20,000. For the analysis of costs related to low to 

moderate use of health care, we examined the potential costs incurred by 

enrollees for six doctor’s office visits, classified as for low to moderate 

problems, and assumed the negotiated rate for each visit was $80. We

developed this assumption based on our analysis of one insurer’s 

negotiated rates for office visits for low to moderate problems in the 

regions the three employers’ plans were offered. We considered only the 

costs associated with medical care provided by a physician and did not 

consider any other costs that could be incurred by an enrollee, such as 

prescription drugs. We assumed that enrollees did not have HSA funds 

carried over from a prior year. If enrollees had used funds carried over 

from a prior year, their out-of-pocket costs could have been lower. We also 

did not consider the tax implications associated with enrollee spending for 

health care services; if HSA-eligible plan enrollees used tax-advantaged 

funds they or someone other than their employer contributed to their HSA, 

their costs could have been lower. 

To compare the characteristics of HSA-eligible and traditional plan 

enrollees, we compared demographic data provided by the Internal 

Revenue Service (IRS) on adjusted gross income and age for tax filers who 

reported HSA contributions on their 2004 tax returns with the 

corresponding data for all tax filers less than 65 years of age. IRS data 

were based on a random probability sample of 200,295 individual income 

tax returns for 2004 from the IRS Statistics of Income (SOI) individual tax 

return file, of which a small proportion reported an HSA contribution. The 

SOI file is a stratified probability sample of income tax returns filed with 

IRS, weighted to represent an estimated population of about 132 million 

tax returns. Of the 115 million tax filers less than 65 years of age in 2004, 

approximately 0.1 percent—an estimated 108,000 tax filers—reported an 

HSA contribution. To assess the relative precision of IRS’s data estimates, 

we reviewed the coefficients of variation for all estimates we used in our 

calculations.5

 The coefficient of variation measures the magnitude of 

Characteristics of 

HSA-Eligible 

Enrollees 

 5

GAO, Using Statistical Sampling, GAO/PEMD-10.1.6 (Washington, D.C.: Revised May 

1992). 

Page 34 GAO-06-798 Health Savings Accounts
Appendix I: Scope and Methodology 

dispersion around the mean. In each instance, the coefficient of variation 

was less than 33 percent, indicating small to moderate variation.6

IRS data for tax filers reporting an HSA contribution are not generalizable 

to all HSA-eligible plan enrollees because the sample is not designed to 

capture individuals enrolled in a high-deductible health plan who did not 

have an associated HSA. IRS data depend on tax filing status (e.g., single, 

married filing jointly, married filing separately) and are not linked to plan 

size; a tax return reporting an HSA contribution therefore may include 

contributions to multiple HSAs that may represent single and family 

policies obtained in the group or individual market. With regard to specific 

data elements, adjusted gross income data may represent the income 

earned by other family members who may or may not be covered under 

the HSA-eligible plan, whereas age data represent the age of the primary 

taxpayer, who may or may not be enrolled in the HSA-eligible plan. For 

comparison purposes, we analyzed data for a sample of all tax filers under 

age 65, because individuals 65 years and older are generally enrolled in 

Medicare and are ineligible to contribute to an HSA. 

To supplement IRS data, we analyzed 2005 income and age data reported 

for HSA-eligible and traditional plan enrollees who purchased coverage in

the group market, excluding retirees, through the three employers we 

reviewed as well as in the individual market through eHealthInsurance for 

enrollees under 65 years of age. 

To determine how HSAs are funded and how HSA account holders are 

using their funds, we gathered and analyzed SOI data from IRS, data from 

two national employer health benefits surveys, and data from the three 

employers we reviewed. To determine the share of enrollees that opened

HSAs, we analyzed survey data on the number of HSA-eligible plan 

enrollees7

 and IRS data on the number of tax returns reporting HSA 

contributions,8

 and examined data provided by the three employers we 

reviewed regarding the share of HSA-eligible plan enrollees who 

HSA Funding and Use 

 6

GAO/PEMD-10.1.6. 

7

America’s Health Insurance Plans, Number of HSA Plans Exceeded One Million in March

2005 (Washington, D.C.: 2005). 

8

Department of the Treasury, “Fact Sheet: Dramatic Growth of Health Savings Accounts

(HSAs).” http://www.treasury.gov/offices/public-affairs/hsa/pdf/fact-sheet-dramaticgrowth.pdf (downloaded Mar. 28, 2006). 

Page 35 GAO-06-798 Health Savings Accounts
Appendix I: Scope and Methodology 

contributed to HSAs through pretax payroll deductions. We also 

conducted interviews with industry experts regarding the share of 

enrollees that opened HSAs. To examine individuals’ HSA contributions, 

we analyzed IRS data on the average 2004 HSA tax deduction claimed by 

tax filers and reviewed 2005 data provided by the three employers 

regarding the contributions of employees enrolled in HSA-eligible plans. 

To examine employer HSA contributions, we analyzed IRS data on the 

average employer contribution among those who reported any HSA 

contribution on their 2004 tax return and summarized 2005 data reported 

by two national employer health benefits surveys9

 and the three 

employers. To determine how HSAs are used, we analyzed IRS data on 

account withdrawals among those who reported HSA contributions made 

by themselves, others on their behalf, or their employers in 2004. We also 

obtained information regarding enrollee HSA funding and use through the

focus groups with employees of the three employers we reviewed.10

To determine enrollees’ experiences with HSA-eligible plans, we used 

focus groups of HSA-eligible plan enrollees to obtain qualitative 

information on enrollee education, plan comprehension, experience with 

obtaining care, use of decision-support tools, and plan satisfaction in 2005. 

We contracted with Hewitt Associates LLC, a human resources consulting 

firm, to screen and select participants and to moderate these focus groups. 

For each of the three employers selected, focus groups were conducted 

with employees enrolled in an HSA-eligible plan or, for comparison 

purposes, in a traditional plan in 2005. Across the three employers, eight 

focus groups were conducted, comprising 47 employees enrolled in HSAeligible plans and 28 employees enrolled in traditional plans.11 Each group 

consisted of 7 to 12 participants. In screening and selecting focus group 

participants, we requested that Hewitt Associates LLC attempt to balance 

the focus groups by demographic characteristics, including age, sex, and 

Enrollee Experiences 

 9

Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits: 2005 Annual Survey, and Mercer Human Resource Consulting, National Survey

of Employer-Sponsored Health Plans: 2005 Survey Report. 

10In addition to the focus groups, we also gathered information regarding enrollee HSA

funding and use on a questionnaire administered to focus group participants. 

11For two employers, two focus groups were conducted with employees enrolled in HSAeligible plans, and a third focus group was conducted with employees enrolled in a

traditional plan. For the third employer, one focus group was conducted with employees

enrolled in an HSA-eligible plan, and a second focus group was conducted with employees

enrolled in a traditional plan. 

Page 36 GAO-06-798 Health Savings Accounts
Appendix I: Scope and Methodology 

type of coverage (i.e., single or family), and with regard to employee job 

title or position. In order to ensure that the focus groups could describe 

the experiences of both users and nonusers of health care services, we 

requested that Hewitt Associates LLC include a mix of participants who 

used their health care plan to obtain medical care or prescription drugs 

and participants who did not. Finally, we requested that employees and

their supervisors not be included in the same focus group to encourage 

participants to speak freely. Unless otherwise noted, the participant 

experiences we report reflect multiple focus groups. The results of the 

focus groups and the data obtained from the three employers may not be 

generalized to all HSA-eligible plan enrollees or employers because they

represent only the experiences of the focus group participants and the 

benefit offerings of the three employers. 

Page 37 GAO-06-798 Health Savings Accounts
Appendix II: 

A

GAO Contact and Staff 

cknowledgments 

Page 38 GAO-06-798 

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact John E. Dicken, (202) 512-7119 or dickenj@gao.gov

In addition to the contact named above, Randy DiRosa, Assistant Director; 

N. Rotimi Adebonojo; Rashmi Agarwal; Martha R. W. Kelly; Roseanne 

Price; Pamela N. Roberto; and Patricia Roy made key contributions to this 

report. 

Acknowledgments 

Health Savings Accounts
Related GAO Products Related GAO Products 

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. 

(290424) Page 39 GAO-06-798 Health Savings Accounts
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER