Future Cadillac tax may be to blame for employers’ shrinking HSA contributions

Enrollment in health savings accounts (HSAs) is increasing, while employer contributions, on average, are stagnant or decreasing. That’s according to a survey of more than 10,000 employer-sponsored health plans conducted by United Benefit Advisors (UBA).

“Employees are highly interested in HSA plans even with decreasing employer contributions,” says Les McPhearson, CEO of UBA. “As we’ve seen, plan design and health care costs have a big impact on the popularity of HSA and HRA options offered by employers.”

According to the survey, the average single contribution to HSA plans decreased 14.5 percent from three years ago, going from $574 to $491. Since 2014, HSA enrollment has increased 10.7 percent; since 2013, that number jumps to 53 percent, indicating significant employer and employee interest in these plans over time.

“The looming Cadillac tax is having two effects: it is making high deductible health plans (HDHP) more attractive because of the low premiums, however, it’s also causing employers to contribute less to HSA accounts connected to HDHPs,” says Niko Washington, Vice President, Employee Benefits Practice, Johnson & Dugan, a California-based UBA Partner Firm. “If an employer and employee contribute too much to an HSA, it can tip the Cadillac tax threshold.”

Performance by industry. The UBA survey found the following in regard to HSA performance by industry:

  • Singles/families in the accommodation/food services industries received virtually no support from employers, with average HSA contributions at $149 and $172 respectively.
  • Government employers, on the other hand, offer the most generous contributions at $834 for singles and $1,636 for families, on average.
  • While most industries have seen steady growth in HSA enrollment, the utilities industry not only has the lowest enrollment (3.2 percent), it is the only industry to see a decline from three years ago.

“I expect we’ll continue to see employer contributions to HSAs decline as most employers are trying to steer employees to an HRA instead,” says Dan Cattaneo, CEO of Beneflex Insurance in California, a UBA Partner Firm. “An HRA costs the employer less because money is only used if an employee actually has a claim, whereas with an HSA, the contributed dollars immediately become the property of the employee.”

SOURCE: ubabenefits.com.

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