HDHPs with HSAs Gaining Favor

November 28, 2005 (PLANSPONSOR.com) - The concept of Health Savings Accounts (HSAs) coupled with High Deductible Health Plans (HDHPs) is beginning to gain traction in the marketplace, according to the latest Employee Benefits Market Survey released today by The Council of Insurance Agents & Brokers.

In its news release the Council said its fall survey showed a definite increase over the spring survey. In the spring, 40% of survey respondents said only a handful of their customers (1-10%) were inquiring about the HDHP/HSA approach. In the fall survey, those reporting minimal interest from their clients had dropped to 22%, while almost one-third of the respondents said more than half of their customers were interested in HDHPs and HSAs.

Seventy-one percent of the insurance brokers responding to the survey reported actually selling an HDHP-HSA plan for 2006 compared with 65% who reported selling a plan in the spring survey.

According to the fall survey, about two-thirds of employers who offer an HDHP-HSA plan do so as an option, rather than a replacement for an existing plan. Asked how much the typical employer is contributing to the employee’s HSA, 29% of the survey respondents said their clients were offering between $500 and $749 a year. Twenty-three percent of the respondents reported that their employer clients were not making any contribution whatsoever.

The most common reason cited for resistance to HSAs in the workplace, by 86% of brokers, was the complexity of the concept and the amount of education required for plan participants. Forty-seven percent cited the inability of those plans to carve out prescription drug coverage, and 34% said difficulty in coordinating HSAs with existing flex spending or health reimbursement accounts are the reasons employers were wary of the new approach.

The Council’s survey showed that group medical expenses increased for all sizes of accounts during the past six months, with three-fourths of the large accounts (502 or more employees) experiencing rate hikes of from 1-20% when they renewed their medical insurance. The rate increases were even sharper for small (50 or fewer employees) and medium (51 to 500) businesses, with nearly two-thirds of those accounts experiencing a 10-20% increase in premiums. An additional 12% of small accounts and 7% of medium accounts experienced premium increases of 20-30%.

The brokers reported that employers are dealing with the rising price of group medical coverage by increasing deductibles and co-pays for their employees, increasing the employee share of premium costs, assessing prescription drug co- pays and instituting up-front hospital and outpatient co-pays. Ninety-six percent of respondents said only 1-10% of their customers were discontinuing medical coverage as an answer to rising health benefit costs.

Full chart results can be seen here .