In the wake of the passage of the Affordable Care Act (ACA), there has been a marked migration of employee group plans from traditional health insurance policies to high-deductible health plans (HDHPs), according to data from America's Health Insurance Plans.
More than 13.5 million Americans receive health care coverage in the form of an HDHP, said AHIP - an increase of 18 percent in the space of a year.
The migration comes as employers are coming under increasing pressure to cut insurance costs.
High-Deductible Health Plans seek to keep health insurance premiums lower by having the insured retain more risk. These plans have minimum deductibles of $1,200 per year for individuals and $2,400 for family plans. In exchange for the higher deductibles, HDHP participants are eligible to contribute tax-deductible dollars to a health savings account, or HSA. Any distributions from HSAs to pay for qualified health care expenses is tax-free, though income taxes apply for any distributions for any other reason. A 10 percent penalty may also apply if the insured is under age 59½.
Traditionally, HDHP and HSA combos appealed mostly to self-employed individuals. To buy an HDHP and contribute to an HSA, you must not be eligible for a health insurance plan from any other source. But the rapid growth of HSAs in recent years is largely attributable to a rapidly rising interest among group plan sponsors: The employer share of HDHP policies in 2005 was just 19 percent; now group members represent fully 59 percent of all HDHP participants, according to AHIP.
Between January 2011 and January 2012, the fastest growing market for HSA plans was for large-group coverage, which rose by 26 percent, followed by small-group coverage, which grew by 9 percent.
In the individual market, 2.5 million people are enrolled in HSA plans, while approximately 3 million people were enrolled in HSA coverage in the small-group market and nearly 8 million were covered in the large-group market.
States with the highest levels of HSA enrollment were California (1,001,943 enrollees), Texas (755,432 enrollees), Illinois (717,384 enrollees), Ohio (662,999 enrollees) and Florida (539,778 enrollees).
The most popular type of HDHP plan sold today is the preferred provider organization, or PPO. About 89 percent of individual enrollees, 93 percent of large group enrollees, and 81 percent of enrollees in small-group HSA/HDHP plans were in PPO products. The data suggests that premium savings are paramount for consumers and employers - though consumers do not like having to go through a primary care physician to get a referral to a specialist.
According to the Kaiser Family Foundation's Employer Health Benefit Survey for 2011, the vast majority of HDHPs don't require participants to meet a deductible before the plan will pay for preventative health care and services.
In some cases, employers have passed premium savings back to their employees in the form of contributions to employee Health Savings Accounts. On average, employees contributed over $800 per year to individual HSAs and over $1500 per year to group HSAs, according to the Kaiser Family Foundation's report. Kaiser also found that, the average annual total employer contribution for covered workers in HSA-qualified HDHPs was $4,449 for single coverage and $10,649 for workers with family coverage.
According to the Kaiser Family Foundation, the average total premium costs for HDHP plans of all types were $4,793 for individual plans and $13,794 for family plans. Contrast this to the average premium for all plan types in 2012, which was $5,429 for individuals and $15,073 for families, according to the Kaiser Family Foundation
In the main, employers have been able to realize savings from adopting a group HDHP plan, though the general practice has been to share those savings with employees.
Young, healthy employees stand to benefit the most from HDHP/HSA combos, since they are the least likely to have to pay out much in deductibles. Sicker employees fare less well, because of the higher out of pocket costs - especially for those with ongoing chronic ailments that rack up out-of-pocket expenses year after year.