HSAs More Popular Than HRAs Among Small To Mid-Size Employers And Employees

The number of employers offering health savings accounts (HSAs) increased from 14.7 percent to 15.1 percent in 2013, and employee participation in these plans rose from 7.1 percent to 8.8 percent in the same period, according to new data released from the 2013 UBA Health Plan Survey. By contrast, the percentage of U.S. employers offering plans with health reimbursement arrangements (HRAs) in 2013 was only 8.6 percent and employee participation in these plans dropped from 8.8 percent in 2012 to 8.6 percent in 2013. UBA expects these trends to continue as HSAs prove themselves to be better at driving consumer behavior and cost containment while still in compliance with the maximum allowable out of pocket costs under the Patient Protection and Affordable Care Act (ACA) of $6,350 for individual and $12,700 for family coverage.

“The ACA originally capped deductibles at $2,000 for individuals and $4,000 for families, forcing employers to buy plans with lower deductibles,” explained Elizabeth Kay, compliance and retention analyst for AEIS, a UBA partner firm. “As a result, we saw premiums go up dramatically in 2014, for some as much as 250 percent to 400 percent. In 2014, ACA legislation was amended to allow metal tier plans [e.g., platinum, gold, silver, etc.] to have higher deductibles. I think carriers will be more creative with their plan designs next year, and we may see a comeback of higher deductible and HSA qualified plans.”

HSA funding levels. The survey found that on average, funding levels for plans with HSAs have remained constant for individuals at approximately $574 for both 2012 and 2013, while average funding for families increased from $928 in 2012 to $958 in 2013.

HRA funding levels. By contrast, funding levels of plans with HRAs increased significantly for individuals from $1,605 in 2012 to $1,766 in 2013, and for families from $3,075 in 2012 to $3,506 in 2013.

“Under ACA, it seems unlikely that small employers will be able to use HRA contributions to get deductibles to the $2,000/$4,000 level,” said Rob Calise, UBA board chairman. “As a result, there will likely be a dramatic shift in funding strategies in the near future. For example, many of these employers may opt to partially self-insure their medical plans to significantly lower their premiums, versus having to buy a plan with more coverage than they need.”

Kay added, “Consumer-driven health plans (CDHPs) were designed to control costs by controlling consumption. However, many employers began to ‘wrap’ CDHPs with a partially or fully funded HRA account to make the overall plan more affordable for their employees. Unfortunately, this strategy backfired because employees were still not spending their own money and not changing their consumption so claims exceeded projected costs on these plans and premiums increased.”

For more information, visit http://www.ubabenefits.com.

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