Tuesday, July 5. 2011
By Roy Ramthun, President, HSA Consulting Services, LLC
The big news in the world of consumer-driven health was the long-awaited
release of the 2011 enrollment figures for health plans that make people
eligible to open health savings accounts (HSA) on June 14.
A heartfelt thank you to America's Health Insurance Plans (AHIP) for
continuing to conduct this research each year. It is the "gold standard"
for HSA enrollment data which those of us who follow the industry eagerly
await each year.
It is also possible that the AHIP survey does not count all Americans
covered by HSA-qualified plans. For example, many larger employers are
self-insured and use a third-party administrator (TPA) to manage their
benefit plan. Some of these TPAs may not be included in the AHIP survey. The
AHIP survey does include enrollment data from insurance carriers that are
members of AHIP who administer self-funded companies' benefits just like
For those looking for enrollment figures for all types of "consumer-driven
health plans" (CDHPs), HSA enrollment is only one part of the picture.
Surveys conducted by the American Association of Preferred Provider
Organizations (AAPPO) and the U.S. Centers for Disease Control & Prevention
(CDCP) indicate that more than 20 million people are enrolled in
"consumer-driven health plans." But there are many other health plans with
high deductible that do not qualify people for HSAs. For example, some
people are enrolled in older higher deductible plans that do not meet all
the specific requirements to qualify people for HSAs. Other people are
enrolled in high deductible plans through their jobs that offer similar
plans to HSAs known as "health reimbursement arrangements" (HRA).
Strong Growth but Small Employer Enrollment Declines
Let's take a closer look at the enrollment figures. My first reaction was,
11.4 million - is that all? To be sure, enrollment grew only 14 percent
from 2010 to 2011. Putting things in broader perspective, enrollment in HSA
plans has grown 87 percent since 2008. Growth in the individual market grew
15 percent from 2010 to 2011. The group market (large and small employers)
grew 14 percent year over year. Ten percent of all new insurance purchases
were HSA-qualified plans.
So why did enrollment grow slower this year? Taking a closer look at the
group market, we see that growth in the large employer group market actually
grew by 26 percent over 2010. Enrollment in large companies now represents
55 percent of the total HSA enrollment. However, coverage in the small
employer group market actually dropped 6.5 percent from 2010 to 2011 - from
just under 3 million to slightly less than 2.8 million. The small group
market's share of enrollment also dropped from 30 percent to 24 percent.
Had the small group market grown by 26 percent like the large group market
did, an additional 1 million people would have been covered by HSAs (12.4
million total) in 2011.
There is no doubt that the economic challenges facing the country recently
had some impact, particularly for small businesses. That HSA enrollment grew
at all is probably quite an accomplishment during the recent recession. For
those small businesses that did not drop coverage or go out of business, HSA
plans represented 13.5 percent of all new enrollment in the small group
market. Without this growth, the decline would have been much greater.
One also has to wonder what impact the health reform law had on the small
group market for HSAs. Concerns about the new minimum medical loss ratio
requirements and the impact on agent/broker commissions are well documented.
Agents and brokers frequently tell me that consumer-driven plans have lost
some of the price advantage in the small group market as well. Hopefully,
that is not an indication of what will happen as the marketplace evolves
into insurance exchanges. If it is, enrollment in commercial plans that will
be the future "Silver" and "Bronze" plans will not be as affordable as
projected, thus raising the cost of income-based subsidies provided by the
federal government and increasing the likelihood of people choosing to pay
the penalty instead of complying with the individual mandate. Neither are
what the law's supporters intended.
Some States Get It, Some States Don't
Looking at the enrollment figures state by state, one can see that a lot of
"blue" states are well represented by high enrollment and/or high
penetration in the private market by HSA-qualified plans. California,
Illinois, and Vermont particularly come to mind. With 11.4 percent adoption,
one has to wonder why Vermont just voted to become implement a state-run
"single payer" system. Vermonters with HSAs, do you want to keep your HSA?
Three states - Alabama, California, and New Jersey - still haven't conformed
their state income tax code to provide the same tax benefits as federal law.
With almost 1.1 million enrollees, the time is now for California to make
this change, but I suspect budget problems will prevent that from happening
this year. I look forward to Gov. [Chris] Christie to lead efforts to change
the law in New Jersey. Alabama doesn't strike me as a "blue" state so I'm
not sure what the reasons are there. But if Wisconsin can change its law, so
Other Items of Interest
The AHIP census included some other items worth mentioning. First, the
number of insurance carriers with enrollment of more than 100,000 lives
increased from 21 to 24. Second, the demographics of enrollees indicate
strongly support the appeal of these plans to families with children, as
well as older couples approaching retirement. Other data from the Employee
Benefit Research Institute (EBRI) shows that the income gap has narrowed
significantly and has a strong correlation with education levels. Third, 85
percent of HSA plans offered tools to support their enrollees. How useful
the tools are is probably the subject for another study, but it is good to
see that tools are being offered.
What Is Needed for Sustainable Growth?
It is clear that HSAs are part of the mainstream in health insurance options
today. More than half of large employers are offering these plans, according
to most surveys, and the percentage of larger employers which these types of
plans are the only option offered appears to be around 20 percent and
However, that does not mean they will continue to grow unless provisions in
the health reform law that could harm HSA users are eliminated, such as:
Individuals now cannot use HSA funds for over-the-counter medications
without first obtaining a doctor's prescription.
The Wall Street Journal
previously noted how this provision is causing paperwork headaches for
patients and physicians alike.
HSA users with chronic conditions and/or high medical expenses who withdraw
funds for non-health purposes are subject to higher penalties (20 percent)
compared to IRAs and 401(k) programs.
Minimum medical loss ratio requirements do not count medical claims below
the deductible because the claims are not paid by the insurance carrier.
This may make it harder for high deductible plans to meet the minimum
Other provisions of the new law have yet to be defined. For example, the
law's essential health benefits package could contain new restrictions on
deductibles and cost-sharing that will prevent at least some current HSA
plans from being offered. Worst of all, many more individuals could lose
their HSA plan, depending on how "insurance" is defined.
Fortunately, Senator Orrin Hatch (R-Utah) and Rep. Eric Paulsen have
introduced legislation (S.1098 / H.R.2010) that would expand HSAs and
eliminate many of these barriers to growth. Contact your elected
representatives today and ask them to support these bills and HSAs.
Source: WSJ Source
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