Employees not seeing many HSA bargainsby Lorna Benson, Minnesota Public Radio
By now you've probably heard about a Health Savings Account. The tax-deferred account, paired with high-deductible insurance, is the fastest growing new product in the health insurance market. Some five million people have set up HSAs since they were created in 2003. Many had no insurance previously.
But when employers offer an HSA to their workers along with other insurance options, studies have shown that employees tend to favor more traditional coverage. Some economists believe part of the problem is that employers aren't pricing their HSAs appropriately.
St. Paul, Minn. — It's the height of open-enrollment season in Minnesota. If your employer hasn't offered you an HSA in the past, chances are good that it will be among your health plan options this year.
During a recent open-enrollment meeting, Minnesota Public Radio benefits manager Francine Merrell introduced employees to the company's new HSA.
"We've added the second option, which is a totally new plan. It's the $3,000 high-deductible with the savings account option," said Merrell.
Here's how it works at MPR.
The Health Savings Account comes with a $500 contribution from MPR. Subtract that from the $3,000 deductible for single coverage, and employees are on the hook for the first $2,500 of their health costs. After that, insurance coverage kicks in.
Employees can also fund their medical savings account with pre-tax money. Anything in the account they don't spend during the year rolls over to the next year.
Compared to MPR's more traditional health plan option, the individual HSA premium is about $20 a month cheaper. But the traditional insurance plan has a much lower deductible. It's $500 compared to $3,000 for the HSA.
HSA-based plans can be structured in a variety of ways. But ultimately they are intended to save money for employers and employees by encouraging workers to spend their health care dollars judiciously.
But many employees don't see the savings potential. Stacia Marlett, who works for a large e-commerce company, has been offered an HSA for the past two years. But she says it's not a good deal.
"It was more for a single person," says Marlett. "It seems to only make sense for a family (without a lot of medical expenses) or somebody who is on a lot of prescriptions."
Marlett decided to stick with her traditional insurance plan. And she says many of her co-workers made the same decision.
Steve Parente, a health economist at the University of Minnesota, doesn't blame them.
"The employers have not, in my opinion, priced the HSAs as low as they should be pricing them, given what the size of the deductibles are," says Parente.
Parente says he's a little surprised that employers aren't making their HSAs a bigger bargain considering the financial risks associated with the plans. He owns an HSA plan that's offered through the university, and he says he's noticed the same issue with pricing.
"I look at the premiums and I just scratch my head. This should be a lot lower. It just doesn't make sense," says Parente. "And if I wasn't doing research in the area and sort of strangely interested in this, I'm not sure I'd go."
One reason employers might be reluctant to make HSAs more attractive has to do with the portability of the plans. If an employer contributes a significant amount of money to the employee's health savings account, the company could lose that investment if the employee leaves the company.
Additionally, some companies might not be convinced yet that HSAs work, according to Paul Fronstin with the Employee Benefits Research Institute.
"They're not pricing it to steer people towards it," says Fronstin. "They want to do some experimentation in the first year. They want to see how it works. They want to see who signs up. And they want to learn from that experience and basically ease people into it."
The problem with that strategy is that employers won't get good information about HSAs if they don't give employees the incentives to try the plans, Fronstin says. But for some employees, no incentive could convince them to switch to a high-deductible plan with a medical savings account.
Sharon Karas is a social worker with Dakota County. Her employer recently added a health reimbursement account to her health plan options. HRAs are similar to HSAs, but the accounts are not portable.
Karas, who's 55, says she would never opt for an either an HRA or an HSA.
"I don't have any major health problems but I'm not stupid. I have a father who died from heart disease and a mother and family members who have diabetes. I'm really not going to risk my health and my finances," says Karas.
It's still too early to tell how many employees will take this leap. Current HSA enrollment figures won't be available until early next year.
- Morning Edition, 11/26/2007, 7:20 a.m.