Growth rates in health savings account-eligible health plan enrollment have been trending down from as high as nearly 70% a decade ago to no more than 12% and as little as 0% last year. That’s the startling conclusion of a recent Employee Benefit Research Institute analysis of five separate HSA surveys.
In addition, EBRI found that many HSAs are unfunded and a growing number are not receiving employer or employee contributions. Researchers examined data from the EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey, America’s Health Insurance Plans, Kaiser Family Foundation, Mercer and the National Center for Health Statistics.
While these findings may alarm lawmakers and regulators, they also are bound to shape conversations that benefit brokers and advisers have with employers about leveraging pretax dollars to ease the sting of rising out-of-pocket costs.
But HSAs proponents say flat enrollment is only part of the story, and they’re bullish about the prospects for growth. “We grew 18% year-over-year in terms of the number of accounts, which was pretty solid growth,” reports Chad Wilkins, EVP of Webster Bank and head of HSA Bank, noting penetration rates of between 20% and 30% of commercially insured populations.
New people are still enrolling in HSA plans, explains Paul Fronstin, Ph.D., director of the EBRI’s Health Research and Education Program, but there’s nearly no growth in the total size of that marketplace. The issue is that many working Americans are leaving these types of plans after changing jobs or discovering that they’re just not the right fit, he says, citing those with chronic conditions or high uses of some healthcare services.
Most employees use HSAs for reimbursement of out-of-pocket healthcare expenses and not as an investment account, Fronstin adds. One reason is the longer someone is in an HSA, the more likely they are to invest. But most enrollees haven’t had their accounts that long, according to Fronstin, who estimates that 25% of employee populations are in an HSA-eligible plan.
Only about 1% of HSAs opened in 2016 were invested in securities, he says, whereas the number is 10% or 12% of accounts opened in 2005. In addition, Fronstin notes that just 13% of account holders max out their contributions.
Two possible explanations for the dearth of HSA investments are that people don’t necessarily know an investment option is available or they don’t meet the minimum-balance requirement to invest, Fronstin says. Another reason may be a reluctance to tie up money until the account holder has reached a certain balance over time, he adds.
A rising economic tide
There could be yet another driver of the results EBRI has uncovered, observes Keith McNeil, co-founder of Arrow Benefits Group. “An improving economy might actually cause a slowdown in the growth of high-deductible health plans,” he says. Employees who once could only afford an HSA-compatible plan without an HSA contribution might now afford a low deductible plan, which he says would be viewed as being more generous and not a take-away.
But there also are systemic problems that need to be resolved at the federal level, explains Mark Fendrick, M.D., co-founder and director of the University of Michigan Center for Value-Based Insurance Design Center, as well as a professor of internal medicine at the school.
“Every CFO of a large and small organization wants to move to an HSA-qualified HDHP,” he says, citing the savings to employers.
However, obstacles remain. They include shortcomings in benefit designs and IRS rules.
One positive development is that Health and Human Services Secretary Alex Azar wants to improve health plan choice and increase access to evidence-based services for chronic conditions by removing regulatory hurdles, Fendrick adds.
Marketplace innovation also is expected to play a role. HSA Bank’s online calculator, for example, allows individuals to model a total-cost scenario by entering their medical expenses, health plan costs and HSA contributions. Wilkins says the tool paves the way for a transparent price comparison relative to traditional PPO coverage or another plan option.
Adds Kevin Robertson, chief revenue officer at HSA Bank: EBRI’s analysis recognizes that the research it extrapolated involves sample studies, “and while they’re absolutely good from a directional standpoint, the reality isn’t that weak.” Even the trends reported in EBRI’s own data as well as others, show that despite flat enrollment, he says the industry has been growing at double digits all along.