Health savings accounts are gaining in popularity with small to mid-size employers at the same time the appeal of health reimbursement accounts is waning.
A recent United Benefit Advisors survey finds HSAs are outpacing HRAs in both adoption and participation rates. The number of employers offering HSAs increased from 14.7% to 15.1% in 2013, and employee participation in these plans rose from 7.1% to 8.8% in the same period. By contrast, the percentage of U.S. employers offering plans with HRAs in 2013 was only 8.6% and employee participation in these plans dropped from 8.8% in 2012 to 8.6% in 2013.
Now that metal tier plans under the Affordable Care Act are allowed higher deductibles, employers are increasingly looking at HSA-qualified plans for their upcoming plan year, UBA says. Benefit advisers are already fielding questions from employers about what HSA funding levels will keep their plan competitive, whether to consider a consumer-driven health plan wrapped with a partially or fully funded HSA account, and whether an employer should consider partially self-funding a plan to lower premiums and deductibles, UBA says.
The ACA originally capped deductibles at $2,000 for individuals and $4,000 for families, forcing employers to buy plans with lower deductibles, explains Elizabeth Kay, compliance and retention analyst for the San Mateo-based benefit adviser group AEIS, a UBA partner firm.
As a result, we saw premiums go up dramatically in 2014 for some as much as 250% to 400%, she says.
In 2014, as part of the Protecting Access to Medicare Act, ACA legislation was amended to allow metal tier plans [e.g., platinum, gold, silver, etc.] to have higher deductibles.
"I think carriers will be more creative with their plan designs next year, and we may see a comeback of higher deductible and HSA qualified plans, Kay adds.
HSAs have proven themselves to be better at driving consumer behavior and cost containment while maintaining compliance with the maximum allowable out-of-pocket costs under the ACA of $6,350 for individual and $12,700 for family coverage, UBA says in its report.
Funding levels
The survey finds that on average, funding levels for plans with HSAs have remained constant for individuals at approximately $574 for both 2012 and 2013, while average funding for families increased from $928 in 2012 to $958 in 2013
By contrast, funding levels of plans with HRAs increased significantly for individuals from $1,605 in 2012 to $1,766 in 2013, and for families from $3,075 in 2012 to $3,506 in 2013.
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Under the ACA it seems unlikely that small employers will be able to use HRA contributions to get deductibles to the $2,000/$4,000 level, says Rob Calise, UBA board chairman. As a result, there will likely be a dramatic shift in funding strategies in the near future.
For example, he says, employers may opt to partially self-insure their medical plans to significantly lower their premiums, versus having to buy a plan with more coverage than they need.
Although CDHPs were designed to control costs by controlling consumption, Kay explains that employers began to wrap CDHPs with a partially or fully funded HRA account to make the overall plan more affordable for their employees.
Unfortunately, this strategy backfired because employees were still not spending their own money and not changing their consumption, so claims exceeded projected costs on these plans and premiums increased, she says.
CDHP/HSA/HRA plans can be used effectively, she adds, but it is a fine line between whats affordable for employers versus employees. Thats where a qualified adviser can help, says Kay.
