TECH/CONSUMERS/HEALTH PLANS: Not much employer backing for HSAs

Those of us who feel that the CDHP movement is largely being used as cover by employers for reducing the benefits (i.e. compensation) that they’re paying employees will not be too surprised by this new analysis. The source, Vimo, though is somewhat surprising for two reasons. First, it’s a little technology start-up that’s providing comparison shopping for health, and second—as is clear when you listen to the interview I did with CEO Chini Krishnan—they are more than favorably disposed to the notion of individuals doing their own shopping for not just health insurance but all types of medical goods and services. So it’s hard to imagine them benefiting from bad news about HSAs. Yet what they’ve discovered, confirming research done by the more usual suspects such as HSC,  is that as employers convert their benefit offerings over to the HDHPs, they are not funding their employees’ HSAs.

Here’s the key part from their analysis:

First, the difference (in numbers) between HDHP (3,168,000) and HSA (820,000) means that there are a lot of individuals within the group and individual markets who aren’t opening HSAs, even though they’re entitled to them. Second, HSA asset levels are also lackluster. The same AHIP study lists the average HDHP deductibles as HDHPs $2,378 for single coverage and $4,760 for family coverage. The average HSA balance in the Inside Consumer Directed Care survey ($1,180) is less than fifty percent of the average deductible for single coverage.The simple fact is that HSA creation and asset levels are lagging HDHP enrollment by a significant margin.

And realistically given that some people are funding their full HSAs, given that the average is well below half the maximum, the median HSA account probably contains close to $0. What’s going on then? Well Vimo knows the answer.

Certainly there are immediate and significant savings available when companies or individuals migrate to HDHPs. This cost differential can be pocketed as a one time gain, or it can be used to fund most or all of the HDHP deductible by depositing the difference into an associated Health Savings Account. It would seem that many employers are opting for the one time gain.

If you’re in a business which depends on these accounts and CDHPs being adopted by a bunch of happy consumers, you can see that there is plenty of potential for angst amongst employees who discover that the move to the CDHP is basically telling them that they have to dip into their own pocket for something the company used to provide. In what is a very considered and well  put-together report—which I’d recommend you read all of—Vimo discusses the impact of this “transfer” on both consumers and employers. And true to their business model they are squarely on the side of looking out for consumers and employees.

I approve of them telling the truth, even if it’s a truth that opponents of the CDHP movement will highlight. After all, if this thing is done wrong, the longer term political consequences may be a future in which there is no such thing as a high-deductible plan or HSA—and that will leave Vimo with a whole different business problem.

4 replies »

  1. What’s tricky about having coverage by a spouse?
    The rules are pretty clear. The mistake that most employers make is allowing double coverage to happen.
    Business owners can and often do implement a company policy that if you have coverage available through your spouse, you must take it and are no longer eligible for our group insurance program.
    If both companies have this in force, then each of them is on their own employer’s plan, and the children are primary on the spouse who’s birthday falls first on the calendar year.
    What the people with double coverage on their dependents fail to realize is how much money is wasted by their employer for having two policies that cover them and don’t provide much of a benefit for the money.

  2. Coverage under a health insurance plan provided by your spouse can be tricky if you also have coverage provided under your company as well. Another alternative for folks looking for affordable health care is to look for a new job that might offer great health benefits. Many people choose to not worry about medical insurance, because they or their family are not sick today; that is a big mistake.
    Find out exactly what is covered in your plan to be sure it meets all of your family’s needs. A health insurance plan that is considered affordable by most people would have to have pretty low premiums for the average person to afford.
    Dave Stoll

  3. In all honesty, I don’t really think it’s that employees don’t have the money. They simply don’t understand what an HSA is and how it works for them.
    I can’t tell you the number of accounts where we’ve put HSA plans in place, and the employees just don’t get it. Recently, prior to enrollment, we do a educational sitting with the employees. They all have various banks that they use, and some banks are just NOW getting into the HSA market.
    It’s been tossd out there as a nice way to save money, but no one’s been showing the people who need them how to set it up or help them set it up.

  4. The difference between HDCP and HSA rates suggests that members of these plans do not expect to have significant out of pocket health care expenses, further suggesting a decline in preventive care. If preventive care is indeed cost effective (probably, but not definitely) then this is further evidence of CDHPs are just cost shifting from employers to society overall (and possibly will represent less savings to the employer than anticipated). Since both costs and benefits of good health accrue to society, isn’t it time for us to embrace a more economically efficient system like single payer? Preaching to the choir, I know…