HSA: More Good News

I have a healthy skepticism when it comes to “breaking news” from insurance companies, even when that news tends to confirm that which I already know to be true. So, I was initially a bit dubious when I saw the title of this email which came across my monitor: “New HSA Data Reveals Positive Consumer Engagement.”

Among other entities, UHC (United HealthCare) owns a third party administrator (TPA) called Definity, and a financial institution (BANK) by the name of Exante [OT: how come there was so much gnashing of teeth when Barnett was handed down, allowing banks into the insurance biz, but when carriers seek inroads into banking, not so much?]. UHC uses the former to administer its Consumer Driven products (HRA, HSA, etc) and the latter to handle the actual funds.

In the event, UHC commissioned a study for the 2005 plan year, the purpose of which was to determine what effects, if any, Consumer Driven plans would have on insureds and their behaviors. The results, based on 25,000 covered lives, are striking:

As I had long suspected (based on the experiences of my own clients over the past 15 or so years), consumers are using their accounts as savings tools, including investment options as a means toward even greater accumulation. Some 86% of those in CDH plans (HSA-compliant) had opened an account, with an average balance of over $800 at year’s end.

Unlike their MSA forebears, HSA plans allow both employers and employees to make contributions (with MSA, it was either one or the other in any given year). And folks are taking advantage of that flexibility: over 2/3 of employers contributed at least some cash to their employees’ plans. What’s more, the average employer contribution was almost $900. And a similar percentage of employees contributed to their own accounts, to the tune of $1,200 (on average). Not too shabby.

Perhaps more interesting was the unexpected: nationally, some 60% of those who opt for High Deductible plans actually set up an account. But well over 80% of the folks in the Definity group set them up. UHC hypothesizes that this is due to employers using “an integrated health plan and bank account model.” I’m not sure that’s true: the key phrases here are “employer” and “employee.” That implies that most (if not all) of the 25,000 folks in the survey were covered under group plans. Most employers would want to keep things simple, and thus look towards setting up as seamless an arrangement as possible. Hence, the high percentage of health plans integrated with savings accounts.

Not surprisingly, the greatest single influence on the account opening rate seemed to be employer funding; that is, 91% percent of eligible employees opened an account if their employer made a contribution. Anyone that’s installed a qualified retirement plan (401k, SIMPLE, etc) knows that employee participation is heavily dependent on employer participation.

The other good news in this report is a decent fisking of one of the more pernicious criticisms of Consumer Driven Care: that such plans favor higher income individuals.

Not. True.

Some 80% of eligible low-income employees (those earning less than $25,000 annually) opened an HSA. And over 50% of these made their own contributions to the account, as well.

About the only thing that surprised me was that the size of the group mattered. That is, almost 90% of employees in large groups (5,000+) open an account; that drops to about 80% in small groups (1-99).

Go figure.