HSAs with High Deductibles May Save Cost

Posted on Monday, April 08, 2019

Researchers recently found health savings accounts (HSAs) with high deductibles had the effect of lower spending over the span of four years. Experts looked closely at data which was extracted from claims of a major company using HSAs and high-deductible plans over several years. The results of their analysis showed in the first-year, costs were reduced by 25% for each worker, compared to a traditional health plan. Researchers also found that while savings continued during the next three years, it was at a considerably slower pace.

Health Savings Accounts

2019 Annual Contribution Limits::

For an individual with self-only coverage is $3,500 (up from $3,450 in 2018).
For an individual with family coverage is $7,000 (up from $6,900 in 2018).

For 2019 a high deductible health plan is defined as a plan with an annual deductible not less than $1,350 for self-only coverage or $2,700 for family coverage (unchanged from 2018).

The out of pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,750 for self-only coverage or $13,00 for family coverage (up from $6,650 and $13,300 respectively in 2018). 

In addition to this, research data showed that reductions took place during the first year of the HSA plan. Although the changes occurred in every health spending category, with the exception of hospital inpatient stays. The biggest decline was in the area of laboratory services, which dropped more than 35%. The next highest decrease was in the cost of prescription drugs, coming in at a 30% decrease.

During the four-year period in which the plan was extended to workers, the pharmacy spending and laboratory categories showed much lower spending on average. For the pharmacy category during the first year of the HSA, spending reductions for individuals totaled more than 40% in the lower 80% spending tiers. Most of those lower tiers fall under an HSA plan deductible. Plan members demonstrated better financial management skills when in charge of their own spending, rather than when the insurance company picked up the tab.

Consumer-Directed Health Plans (CDHP)

Account options which are used for upfront medical costs are typically associated with high-deductible health insurance plans. (See sidebar.) These plans are known as consumer-directed plans or CDHP.

Health savings accounts are also included in the same category. With these types of plans, employees own the plan and the employer offers it. However, the government is tasked with controlling plans which are tax advantaged.

Consumer-directed health plans have been used by employers everywhere for over a decade. In the latest figures available, on report says:

About 60% of jumbo employers were using these plans.
In the category of larger employers, about 35% were also offering them.
Among smaller employers only about 20% were offering them during the same time period.

How many employees have enrolled in consumer-directed health plans? During the same period mentioned above approximately 20% of those surveyed said they were enrolled. Among those workers surveyed, approximately 20% said they were enrolled in plans.

As health insurance continues to change in the future, these figures are also likely to change. Employers considering switching from their current health insurance plans to consumer-directed health plans need to take their time and consider all important issues before taking the leap.  

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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