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. Since 2004, insurance carriers selling coverage in this market have added HSA-eligible plans to their portfolio of insurance products. Private health plans are offered in two primary markets—the group and the individual markets. The group market includes health plans offered by 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. 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. 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 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. 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. 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 spending of $5,250 for single coverage and $10,500 for family coverage in 2006. 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 HSA- eligible 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. After meeting the deductible, the HSA-eligible plan pays for most of the cost of covered services until the enrollee meets the out-of- pocket 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. 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. 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 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. 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. 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 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. 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 HSA- eligible 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. 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. 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. 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 plan deductibles were higher than traditional plan deductibles in 2005. For example, one national employer health benefits survey reported that annual deductibles for HSA-eligible plans averaged $1,901 for single coverage and $4,070 for family coverage in 2005—nearly six times greater than those of surveyed employers’ traditional plans. 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. Annual deductibles for the HSA- eligible 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.