Though participation in consumer-directed health plans is growing, only a small percentage of employees join these plans, and even fewer set up health savings accounts (HSAs). According to a survey from the Employee Benefit Research Institute, in 2008, 3% of the insured population, or 4.2 million individuals, were enrolled in a consumer-directed health plan, defined as an HSA paired with a high deductible health plan (HDHP). More—11%, or 13.4 million individuals—were enrolled in an HDHP, and of these, 42% were eligible to contribute to an HSA, but chose not to do so.
Misunderstanding the mechanics of HSAs and ignorance of their potential advantages keep many people who are eligible for an HSA from seriously considering opening an account. Similarly, employees who have a consumer-directed health plan option might see the high deductible feature as offsetting, and not consider other advantages of the plan. If your company offers employees the opportunity to participate in a consumer-directed health plan, or if you are considering making this opportunity available, it's important that employees understand how these plans work, so those for whom they are appropriate can benefit from this form of health care coverage.
Here's a quick rundown of a few common consumer-directed health plan and HSA fictions, along with the clarifying facts.
- Fiction: The only reason an employer implements a consumer-directed health plan is to shift health care costs to employees. Fact: An employer makes an investment in a consumer-directed plan, just as it does with a traditional plan. Though the premium cost might be less for the employer, it is less for the employees' share, too, and many employees would rather pay less for health care upfront (the premium) and the bulk of their costs at the time of service. Consumer-directed plans really represent an expansion of health plan choices for employees.
- Fiction: Since they're paired with a HDHP, HSAs only make sense for individuals who are young and healthy. Fact: An HDHP-HSA pairing provides comprehensive health care coverage at an affordable price for individuals with all sorts of medical needs. Though the HDHP deductible is higher than that found in more traditional plans, the premium is lower as a result. So, even if the account holder must dip into the HSA to pay for expenses that would be covered at an earlier point by a more traditional plan, this must be balanced against the premium savings. Also, as noted below, most preventive care is not subject to the deductible and can be covered at 100% by the HDHP.
- Fiction: Because of the HDHP high deductible, HSA funds are quickly depleted; even for individuals with only basic health care expenses, an HSA account holder is unlikely to have any funds left to roll over at the end of the year. Fact: For many individuals, the bulk of their medical expenses consists of preventive care, and HDHPs can cover preventive health care expenses at 100% before the deductible. Depending on plan design, such expenses can include well-baby and well-child doctors' visits and immunizations; adult physical exams and immunizations; and routine adult screenings, such as mammograms, Pap smears, prostate screenings and colonoscopies.
- Fiction: Unless you can predict your annual health care expenses accurately, you stand a chance of losing the money you contribute to an HSA. Fact: HSA funds that are unused in one year—whether they represent the contributions of the account holder or employer—carry over, and can be used to pay for health care expenses incurred in future years, even in retirement.
Resolving the confusion surrounding these and other consumer-directed health plan misconceptions can help employees better understand and appreciate the potential benefits of participating in these plans.