The answer: yes. No matter where you stand on our new President, the Trump Administration’s concept of expanding and unbundling Health Savings Accounts (HSAs) from High Deductible Health Plans (HDHPs) is a good one.
As health care costs keep rising, employers keep shifting financial responsibility of health coverage to employees, largely via HDHPs (or Consumer-Driven Health Plans), but also in traditional plans.
This is something Benefitfocus benchmarks in our annual State of Employee Benefits Report, anonymized benefit election data from employees across over 500 large employers, released last week.
HDHPs Expose Consumers Financially If Not Backed with HSAs
Our 2017 data shows 56% of large employers offered an HDHP in addition to traditional copay-based plans, up from 52% in 2016. Combine that with the relatively uncommon instances of full replacement, where HDHPs are the only option, and six out of every 10 large group health insurance offerings now include an HDHP.
For the 2017 plan year, our data showed only moderate rises in HDHP deductibles and out-of-pocket maximums (under 5%), but large increases on monthly premiums, up over 12% for family coverage. That’s over seven times the annual rate of inflation.
For the average American, moving to an HDHP is a monumental shift. Lower premiums keep more money in employees’ paycheck, but unexpected out-of-pocket costs can be tremendous. The cost-benefit analysis of an HDHP is so unique to each individual or family, and not an easy one to navigate. Perhaps this financial uncertainly is the reason just 36% of employees opted for an HDHP.
PPOs Offering False Sense of Security
While much of the discussion around employers shifting health care costs to employees has focused on HDHPs, it appears it’s not just HDHPs requiring employees to pick up more of the tab for their health care. Practically everyone has seen their costs go up from a year ago.
In 2017, our State of Employee Benefits Report showed PPOs held steady as the most popular option (with 43% of employees selecting these plans), but the belief that PPOs offer a financial safety net may be a myth.
On the flip side of HDHPs, PPO subscribers saw negligible premium increases (roughly 1%), but had substantial hikes in deductibles and out-of-pocket maximums (up 8% for individual, 9% for family coverage). This puts PPOs only a couple hundred dollars below the IRS threshold for a plan to be considered an HDHP.
Granted, PPO premiums remain much higher than HDHP premiums and HDHP out-of-pocket costs much higher than PPOs. But the gaps have narrowed, leaving employees with more financial responsibility than they’ve ever had for their employer-sponsored health care.
This is why there’s so much upside to the unbundling of Health Savings Accounts.
Income Protection Measures Must Increase
Thankfully, our data showed HSAs gaining traction, with contributions up about 5% for individual and 2% for family coverage. Despite employer contributions dipping over 3%, the gap between what employees are actually putting into HSAs and what the IRS allows them to put in – while still significant – has narrowed.
The data also showed employers increasingly embracing voluntary benefits, with nearly 50% now offering at least one voluntary income protection benefit (accident, critical illness or hospital indemnity insurance), and the number of employers offering all three products nearly doubled compared to 2016.
As employees are required to take on a larger portion of their medical bills, it’s up to employers to make sure they’re equipped for the burden. This means guiding employees to enrollment decisions that make the most sense for their physical and financial health and expansion of the types of voluntary benefits they offer.
There’s still a long runway of opportunity for HSAs – only the beginning of what I expect to be a robust ecosystem of financial wellness measures. Products that aren’t core benefits today – including digital health services, student loan debt assistance and even microloans at a low APR – will be pushed forward by the shift to HDHPs, which is already well underway.
We’re moving closer to a world where every plan can – and should – have an HSA, along with other financial protection options. I look forward to helping shape and be a part of this world, where employers put more emphasis and effort into helping employees build the best plan, at an individual level, and employees are more informed health care consumers.
*Data referenced from the 2017 State of Employee Benefits Report was extracted and anonymized from employers and employees on the Benefitfocus platform