As we’ve reported, consumer-directed health plans have mushroomed during the health reform era. In 2015, exactly half of all large employers (those with 500 or more employees) offered a CDHP eligible for a health savings account -- yet only 5% offered it as the sole plan available to employees at their largest worksite. Still, many employers are at least thinking about a full-replacement strategy.
In designing a full-replacement plan, how do employers take into account the fact that the plan must now work for all employees, rather than the minority who typically select it? And how is cost affected? To find out, we analyzed data from Mercer’s National Survey of Employer-Sponsored Health Plans to compare HSA-eligible CDHPs offered as a full-replacement strategy to those offered alongside PPOs or HMOs. Here’s what we learned:
Employee demographics: Employees enrolled in a full-replacement plan are older, on average, than those enrolled in HSA plans offered as an option (44 years versus 41 years), and they are also more likely to elect dependent coverage (58% versus 53%).
Plan design: Plan design is generally richer among the full-replacement plans. Employers are more likely to make a contribution to a health savings account (80%, compared to 71% of those offering the plan as an option), and the median contribution amount is higher ($700 compared to $500 for employee-only coverage, and $1,400 compared to $1,000 for family coverage). While the median in-network deductibles are actually higher in the full-replacement plans (by $200 for employee-only coverage and $400 for family coverage), out-of-pocket limits are significantly lower (by $800 for employee-only coverage and $1,600 for family coverage), to protect employees that incur significant medical expenses.
Employee contribution requirements: Employee contributions are somewhat lower as well. Among the full-replacement plans, employees contribute 18% of premium, on average, for employee-only coverage and 23% for family coverage, compared to 20% and 27% among plans offered as an option.
And what about cost savings? With younger (and presumably healthier) employees in the optional HSA plans and richer plan design in the full-replacement plans, it’s not surprising that the average per-employee cost of coverage in the full-replacement plans is higher than in the plans offered as a choice -- $9,835 compared to $9,032. Clearly, the opportunity for tax-advantaged savings can make an HSA-eligible plan more attractive to many employees than a traditional PPO with similar cost-sharing levels. And plans that incorporate effective transparency tools and other consumerism resources may deliver higher-than-average savings. However, this analysis suggests that most HSA sponsors are not willing to offer as lean a plan when it’s the only type of plan rather than a choice among traditional options -- and that will necessarily be a limiting factor when it comes to cost savings.
And as organizations go through the significant change management process of moving away from traditional medical plans to all HSA-based ones, they may well be finding that reinvesting some of the savings back into making the program more worker-friendly could be just the sweetener they need to support attraction, retention and a happier work-force.
An important caveat: Because so few large employers currently offer an HSA plan as a full replacement, these results should be considered suggestive rather than representative.