The High Deductible Health Plan (HDHP) coupled with a Health Savings Account (HSA), initially touted as the potential savior to the employer-sponsored health insurance system, continues to stir passionate debate regarding its overall effectiveness.
On the surface, HDHPs typically perform better than traditional plans with rates of inflation at about half of traditional PPO-based plans. For a multitude of reasons, utilization of services in these plans is lower than traditional plans and premiums are around 40% lower on HDHPs according to a 2018 report. Looking good so far…
HSAs assets seem to be doing well too – studies showed a year-over-year increase of 22% for HSA assets and 11% for number of accounts at the end of 2017. HSA investment account assets totaled around $8.3 billion at the end of 2017 (up 53% year-over-year) and investment account holders hold an average $16,457 total balance between their deposit and investment accounts.
The flipside is not everyone can afford to sock away money into their HSA, let alone invest it. What’s worse is some plan members are foregoing care due to the increased deductible exposure and their lack of disposable income. Transparency tools should help people become more judicious consumers, but these tools are just not that precise and not that easy to use. Pricing non-preventive care still takes a tremendous amount of legwork even for cost-conscious members. Providers can’t give members a definitive answer on pricing since they can’t know what procedure codes will be used until after a visit. It could be several weeks or months before care is received, potentially having an undesired effect on plan utilization further down the road. Not so good.
Some employers combat the cost issue by instituting an employer HSA contribution. These employer subsidies and their timing are important in helping bridge a member’s out-of-pocket exposure and getting employee buy-in to the plan. Many employers fund HSAs quarterly, some front load it at the beginning of the year, and some groups have adopted wellness-related incentives for earning additional HSA funding.
It looks like the HDHP and HSA are here to stay but these plans require ongoing management. To keep them effective, employers should examine their population and adjust their HDHP/HSA game plan accordingly with the help of a knowledgeable benefits consultant.