Press Release

Giving State Workers More Freedom

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RALEIGH – Two years ago President George W. Bush signed legislation that made tax-free “health savings accounts” possible. With many private businesses embracing HSAs as an alternative to traditional insurance arrangements, a new report from the John Locke Foundation urges the General Assembly to offer HSAs to North Carolina’s teachers and state employees.

The cost to North Carolina taxpayers of providing health insurance to state employees risen significantly over the past decade, with a dramatic doubling just since 2000, according to the new JLF report. It concluded that state lawmakers will need to reform the state employee health plan to avoid a budgetary train wreck in the coming years.

The author of the report is Michael E. DeBow, Samford University Law professor and Professor of Health Care Organization & Policy and Lister Hill Scholar in the University of Alabama at Birmingham School of Public Health.

DeBow argued that HSAs offer an attractive alternative to low-deductible, high-cost insurance benefits. The first academic study on HSAs found that employees with HSAs had lower total expenditures and lower out-of-pocket expenditures on health care than employees under Preferred Provider Organization (PPO) plans like North Carolina’s.

“HSAs are a form of medical savings account, similar to IRAs, that can be used for health care expenses” DeBow said. “But HSAs are the property of the individual employees. Unspent funds roll over to the next year, can accumulate interest and dividends, and be used for retirement and even willed to heirs.”

Eight percent of large private employers currently offer HSAs, and research shows that another 18 percent plan to offer them in 2006, with 47 percent studying the option for future implementation. “Private industry is poised for rapid, even radical, transformation over to HSAs,” DeBow said.

DeBow said that while initial reports find that companies offering HSAs are experiencing lower costs without cutting access to needed medical services, the real benefits of HSAs may come later. “By putting consumers in control of their own health care expenditures,” DeBow said, “they encourage employees to be better informed and thriftier in their consumption of health care services. HSAs bring efficient market solutions to health care.”

Dr. Michael E. DeBow’s Policy Report, “Health Savings Accounts: Consumer-Driven Health Care,” is available on the John Locke Foundation website. For more information, contact JLF Communications Director Mitch Kokai at 919-828-3876 or [email protected].

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About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.