Consumer-Directed Health Plans Like HSAs/HRAs Continue to Grow

Does your computer’s spelling function auto-correct “HSA” to “HAS”? Mine used to, not recognizing that this abbreviation is no longer an error, but represents health savings accounts (HSAs), one type of consumer-directed health plan that is fast becoming mainstream in the health benefits industry.

Health savings accounts couple a tax-favored savings account that is used to pay medical expenses with a high-deductible health plan (HDHP) that meets certain requirements for deductibles and out-of-pocket expense limits. Most HDHPs cover preventive care services without requiring enrollees to first meet the deductible. The HSA funds are owned by the individual and may be rolled over from year to year.

Here’s some recent data from an annual census by America’s Health Insurance Plans (AHIP) of U.S. health insurers showing how these accounts are becoming more widely used.

• The number of people with HSA/HDHP coverage rose to more than 11.4 million in January 2011, up from 10.0 million in January 2010, 8.0 million in January 2009 and 6.1 million in January 2008.
• Overall, enrollment in HSA/HDHP coverage in the group market rose to 9.1 million in January 2011, up from 8.0 million in January 2010.
• Between January 2010 and January 2011, the fastest growing market for HSA/HDHP products was large group coverage. The large-group market represented approximately 55 percent all HSA/HDHP enrollment in January 2011, up from 50 percent of HSA/HDHP enrollment in January 2010.
• However, companies offering HSA/HDHP products in the small-group market (representing employers with 50 or fewer employees) reported enrollment of 2,779,208 as of January 2011, which is a decline from 2,970,000 in January 2010. The January 2010 enrollment figure was an increase from 2,429,000 in January 2009.
• HSA/HDHP plans accounted for 10 percent of all new health insurance purchases in January 2011.

The AHIP census did not track participation in another type of CDHP: health reimbursement arrangements (HRAs), which have features similar to HSAs and are offered by many large employers. However, a poll from the Society of Human Resource Management (SHRM) and Aetna shows that among organizations they surveyed that offered a CDHP, 47 percent provided HRAs, compared to 75 percent that offered HSAs. Overall, 42 percent of organizations surveyed offer a CDHP, and generally, offering such plans were considered one of three top cost-cutting measures related to health benefits. The top measure was asking employees to share more of the cost of health benefits (77 percent), followed by switching insurers to find the most competitive rates (47 percent) and offering CDHPs (41 percent).

More information how employers can implement HSAs and HRAs can be found in Employers Handbook: Complying with IRS Employee Benefits Rules.

I fixed my computer’s auto correct function long ago, by the way…