09 Apr PPACA’s Impact on How CDHPs and HSAs Work Together

Originally posted by Bill Olson on March 31,2015 on www.ubabenefits.com.

Employer health savings account (HSA) funding strategies have changed in recent years in response to the Patient Protection and Affordable Care Act (PPACA) and its impact on employer-sponsored health insurance plans. Employers are contributing less, on average, to HSAs and the increase in popularity of cost-saving consumer-driven health plans (CDHPs) has also had a major impact on how employers use these accounts.

In 2014, employees saw a 10 percent decrease in their average single HSA employer contribution from the previous year, from $574 in 2013 to $515 in 2014, according to new data released from the 2014 UBA Health Plan Survey, the largest health benefits survey in the nation. Average family contributions also decreased 7 percent during the same period, from $958 to $890.

There are many additional factors that will impact an employer’s HSA contribution strategy, says Mark Sherman, Principal of LHD Benefit Advisors, a UBA Partner Firm. Sherman says such factors include the deductible amount, the employee premium contribution, the out-of-pocket maximum, and whether there are other types of plans offered.

“When HSA products were new, the employer could take the premium savings and fully fund the deductible. Now, however, premium reductions are not as great as they once were. As premiums increase, employers naturally opt to put their contributions toward premiums first and will slowly reduce their HSA funding to the point where, in some cases, it becomes entirely the employee’s responsibility,” says Brian M. Goff, President & CEO of Insurance Solutions, another UBA Partner Firm.

The CDHP Link

The survey results indicate a correlation between enrollment in HSAs and CDHPs, linking higher HSA contributions to increased enrollment in the cost-saving plans.

CDHPs have proven to generate cost savings, according to UBA surveys. The average annual health plan cost per employee for all plan types in 2014 was $9,504. In fact, CDHPs appear to have the lowest annual costs per employee, specifically 6.4 percent less expensive than average. In contrast, preferred provider organization (PPO) plans cost 9.7 percent more than CDHPs, yet they continue to dominate the market in terms of plan distribution and employee enrollment.

“While CDHP offerings are up 8 percent from 2012, they are largely unchanged from 2013,” says Les McPhearson, CEO of UBA. “From an enrollment standpoint, however, CDHPs have seen increases of more than 30 percent in the last two years (15.6 percent to 20.6 percent), despite overall decreases in employer contributions to HSAs. For large employers and some industries, even modest increases in HSA contributions can be a key part of the puzzle in migrating employees to lower cost CDHP plans.”

“HSA-based plans are still growing in popularity,” continues Sherman. “In fact, for many employers (especially those who have already offered HSA-based plans), the current movement is to offer a full replacement solution, often with two or more HSA-based plans to allow for employee choice,” says Sherman.

To read the full press release announcing the latest findings related to HSA funding, click here.

For the latest health plan cost trends, download the UBA Health Plan Survey Executive Summary. To benchmark your plan to others in your region, industry or size bracket, contact ClearPath Benefit Advisors, a UBA Partner, to run a custom benchmarking report or call us at (614) 857-6444.