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Health savings accounts (HSAs) in the individual market
HSA plans and high-deductible health plans continue to see steady growth
The new administration and Republican Congressional leadership have been vocal supporters of enhancing HSA policies across all markets—with the goal of reducing costs and putting more responsibility for health care costs into consumers’ hands. We explored the current state of HSAs in the employer, Medicaid, and individual markets to find out key trends. As we look to the future of health care reform, you may want to pay attention to HSAs.
- Download the report
- What does this mean for the individual market?
- Consumers need education and tools to utilize HSAs properly
- HSAs in the Medicaid market
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Enhancing health savings accounts
Congress created health savings accounts in late 2003. Since then, many markets have seen steady growth in HSA-compatible plans.
We explored the current state of HSAs in the employer, Medicaid, and individual markets to find:
- The employer market’s experience with high-deductible health plans (HDHPs) and HSA-compatible plans can provide many lessons to the individual market. Research and evidence has shown that younger employees contribute less to their HSA than older employees, healthier individuals find them more attractive than unhealthy individuals, the arrangements are favored by high-income households over low-income households, and HDHPs can reduce health care utilization and spending.
- Experience with health accounts in Medicaid programs could also translate to the individual market. Experience with health accounts in Indiana’s and Michigan’s Medicaid programs suggests that low-income consumers may become more price sensitive and accountable for their own spending but also may face barriers that are less common in the group market (e.g., absence of checking accounts or internet access can make it difficult to make payments or check balances easily).
- HSAs aren’t prevalent on the individual market. Much of that may be due to several conflicting Internal Revenue Service (IRS) and Affordable Care Act (ACA) policies.
- Many policies, including ones in the American Health Care Act (AHCA), have been put forward to expand HSAs and plans that are eligible to be paired with them. Most have yet to gain widespread traction with lawmakers, however.
- Young adults would need to have considerable funds in an HSA in order to pay for the typical outpatient hospital visit, a service that is less common than an emergency visit but far more expensive. A review of plan designs in several markets and comparison to the average cost of an outpatient hospital visit revealed what costs consumers under the age of 30 would face under an HDHP.
HDHPs combined with HSAs hold the promise of encouraging people to shop for coverage, but employers have found they’ve needed to invest in tools and education to help people use them. Health plans may need to consider enhancing tools and support to consumers as HDHPs and HSAs become more prevalent in the individual market.
What does this mean for the individual market?
The new administration has made it a priority to enhance the use of HSAs across the different health insurance markets, including in the individual market. The AHCA’s policies are evidence of some of the ways they plan to do that. Moreover, the AHCA would remove one of the main reasons why individuals enroll in an on-exchange product over an off-exchange one: the ability to use premium tax subsidies on either product.
These factors combined could create more opportunity for expansion of HSAs in the individual market. However, discrepancies between how the IRS and ACA define and treat HDHPs may need to be resolved first.
More flexibility in the regulations and a merged individual market may lead to HSA growth.
Consumers need education and tools to utilize HSAs properly
Evidence from the group market and Medicaid experiments has shown that enrollees can become educated consumers of health care services if they are exposed to the cost of care and must spend their own money out of pocket first. However, these programs have also proven how valuable information and tools can be for consumers.
Both employers and Medicaid programs have seen that consumers need high-touch strategies to understand how the arrangements work and to understand how to use them once they’re enrolled. Health plans interested in expanding HSA enrollment may need to consider reviewing current or adding new strategies to educate and prepare their members to use these arrangements.
Evidence suggests that certain segments of the population (e.g., younger individuals and people with lower incomes) have more difficulty putting money into an HSA. Financial services organizations that help administer HSA accounts may be valuable partners to help consumers understand the value of putting this money aside.
Consumers are not the only population that may need support as HSAs increase in popularity. Evidence from Deloitte’s 2016 Survey of US Health Care Consumers shows that many consumers turn to their physician for advice first. While may health plans have built online tools and cost estimators, in the end, consumers may go directly to their physician for advice about treatment and services.
The more health plans can educate physicians in their network to have these conversations, the more consumers may start to understand how to utilize them properly.
Providers may also need tools to have conversations with consumers who have greater responsibility for the costs of their care.
HSAs in the Medicaid market
The evidence from Medicaid experiments with health accounts has shown that low-income individuals can effectively use these arrangements. However, many face barriers that are uncommon in the group market. For example, many individuals lack internet access, making it difficult for them to check account balances or use a portal-based cost estimator.
Health plans looking to grow the use of HSAs in the individual market may need to pay more attention to the impact that social determinants of health have—not only to understand the different health issues this population faces, but also what might deter them from becoming smarter, more cost-sensitive health care consumers.
Evidence from Medicaid health accounts suggests that HSAs may be effective in lower income populations, but these individuals face barriers that most employer-sponsored consumers do not face.
Implications for states
Deloitte’s 2016 Consumer Priorities in Health Care Survey