Lower Premiums May Drive Employees into HSA-Eligible Plans

An analysis by the EBRI found that HSA-eligible plans may become more attractive as health insurance premiums are lowered or eliminated.

New research by the Employee Benefit Research Institute (EBRI) indicates that reducing or eliminating their health insurance premiums may be the biggest incentive toward driving funds into health savings account (HSA)-eligible plans.

The EBRI report, which analyzed the health plans of two large employers from 2011 to 2014, found that after eliminating employee premiums for all coverage tiers, HSA-eligible health plan enrollment increased from 4% to 25% among individuals with employee-only coverage and from 2% to 31% among individuals with family coverage.

“Clearly, workers and their families are highly sensitive to health insurance premiums,” said Paul Fronstin, director of EBRI’s Health Research and Education Program, and co-author of the report. “Understanding what drives enrollment in HSA-eligible health plans is important to plan sponsors, since enrollment in these plans is expected to grow.”

The firm notes that healthier-than-average employees are enticed by $0 premium for an HSA-eligible health plan. Offering coverage with no payroll deduction attracted individual enrollees who were marginally healthier than those who would have enrolled without this financial incentive in place, therefore not mitigating adverse selection as anticipated.

The report also dove into the demographics and characteristics of the typical HSA holder. The EBRI report points out that “older workers were less likely to enroll in the HSA-eligible health plan than younger employees. Moreover, less healthy workers and workers with less healthy families—as measured by the Charlson Comorbidity Index— were less likely than their healthier counterparts to enter the HSA-eligible health plan. Individuals with specific chronic conditions were also less likely to enroll, with one exception— individuals with family coverage with a person diagnosed with dyslipidemia where the effect was opposite in direction.”

However, the report points out that “Workers with chronic conditions and those who use health care services may find enhanced HSA contributions more attractive than a reduction in premiums, as HSA contributions can be used directly to reduce out-of-pocket costs. Plan sponsors may also consider accelerating their contributions to the HSA. Less healthy enrollees may be more likely to enroll in the HSA-eligible health plan if they are less concerned about not yet having enough money in their HSA to pay for health care before they have had a chance to build up an account balance.”

Moreover, the EBRI suggests that plan sponsors may benefit from exploring ways they can maximize the effectiveness of an HSA by covering as many preventable services as possible outside the deductible. EBRI notes that “individuals with chronic conditions that are well managed can confidently estimate their health care use at enrollment, and can be more easily convinced of the financial value provided by an HSA-eligible health plan.”

Educational efforts are also key as some research suggests Americans lack awareness of HSA benefits.

“The Impact of Offering Free Coverage on Enrollment Choice and Risk Selection in an HSA-Eligible Health Plan,” can be accessed at ebri.org.