HSAs: Moving from spending to saving to strategizing
Employers have made a big push in recent years to encourage employees to adopt high-deductible health plans (HDHP), incentivizing the switch with employer contributions to a health savings account (HSA). As of last year, according to data from the Employee Benefits Research Institute (EBRI), 46 percent of Americans with private health insurance were enrolled in a high-deductible health plan (though not all have a corresponding HSA).
As HSAs gain traction–and balances–new insights into consumer behavior can be gleaned.
In a recent webinar, EBRI explored the results of its recent study on HSA account balances. There are currently an estimated 25 million HSA accounts, 76 percent of which have been opened since 2015.
"They haven't had a lot of time to build up a very large balance, but they have enough time to build up a large enough balance to cover their deductible," says Paul Fronstin, director of EBRI's Health Research and Education Program. "We've done lots of work on the impact of the health plan on use of services, but we haven't looked at how account balances affect use of services.
"We know that deductibles have an impact on use of services," Fronstin continued. "When deductibles go up, people use less health care. Over time, as people build up account balances, does that counteract the effect of the deductible?"
For the majority of consumers, no. Healthy enrollees will have no need to spend down their HSA and will consequently accumulate higher balances, regardless of the deductible. Similarly, sick members will see higher utilization.
Looking at claims data pulled from a large employer from 2013 to 2016, some trends about HSA use began to emerge. Overall, account balances increased the longer the account had been opened. In addition, individual contributions increased a bit from year to year, and the percent of people who invested their HSA balance had gone up 13 to 14 percent.
One interesting finding: the more money employees have in their HSA account, the more likely they are to spend it. "It's not that people are hoarding their money and not spending it. They're increasing their average distribution," Fronstin said. "At the same time, we see that use of health care services is increasing over time."
For those employees who had more than $3,000 in their HSA, EBRI found that spending increased on services such as imaging, emergency visits, outpatient and primary care. However, there was no impact on hospital stays, prescription drug fills, blood tests or certain types of radiology.
It's possible that employees are delaying care until they can afford it–a negative consequence of many HDHP plans–but an alternative explanation could be that consumers are less discerning in their health care spending when they know they have enough saved up to cover the bills. Still another possibility: employees are simply experiencing more health issues as they age.
To combat the first possibility, Fronstin stressed the importance of employer contributions to HSAs, to ensure the employee is able to afford care when it's needed. But how can employers discourage spending on unnecessary health care services? "To get people engaged in their health benefits, increase deductibles," Fronstin suggested. "Create a gap between account balances and deductibles so that people aren't viewing the account as 'I've got the money there, I might as well spend it.'"
Another strategy is to get employees to stop thinking about the health care they need now and starting thinking more long-term–particularly about their health care costs in retirement.
"We often gloss over the long-term savings potential of the HSA," said webinar speaker Jennifer Benz, senior vice president of Segal Benz. "Possibly one of the greatest mistakes we made as benefits professionals is introducing HSAs as a version of an FSA instead of a version of 401(k)."
And, like a 401(k), employees should consider an investment strategy–once they've built up enough to cover their deductible. "As we talk about HSA investing in particular, it can seem like an overwhelming action," Benz cautioned. "Often, people will just forget to do it. You need to promote the benefits: Interest earnings are tax-free, returns, automation… focus on things being easy and simple is key."
HSA investing will depend in part on the HSA administrator, but employers should also be aware of the message they craft and to whom they promote. "There are folks that don't have a high enough balance to invest and they're going to be frustrated that you keep telling them to invest," Benz said.
"Let's recognize that there's always going to be a segment of the population that cannot afford to contribute to the HSA," Fronstin said. "The reality for these people is that they're stuck with the HDHP and if they do use medical services, they have to pay for that somehow. The advantage of the account for them is not the ability to invest but the ability to put money in and take the money out when they need it."
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