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Section 8: High Deductible Health Plans with Savings Options
Recent changes in law have permitted the establishment of new types of savings arrangements for health care. The two most common are health reimbursement arrangements (HRAs) and health savings accounts (HSAs). HRAs and HSAs are both financial accounts that workers or other individuals can use to pay for health care services. Click here to go to HRA and HSA definitions.
This year we have added high deductible health plans with a savings option, or HDHP/SOs, as a distinct plan type in the survey. HDHP/SOs include (1) health plans with a deductible of at least $1,000 for single coverage and $2,000 for family coverage1 offered with an HRA (referred to as HDHP/HRAs); and (2) high deductible health plans that meet the federal legal requirements to permit an enrollee to establish and contribute to an HSA (referred to as HSA qualified HDHPs).2
Seven percent of firms offering health benefits offer an HDHP/HRA, an HSA qualified HDHP, or both in 2006. Among firms offering health benefits, 1% offer an HDHP/HRA and 6% offer an HSA qualified HDHP. We estimate that 2.7 million workers are enrolled in HDHP/SOs in 2006, with 1.4 million workers enrolled in HSA qualified HDHPs and 1.3 million workers enrolled in HDHP/HRAs.
Each section of the report now includes information, where sample size permits, about HDHP/SOs as a distinct plan type. In this section, information is presented separately for HDHP/HRAs and HSA qualified HDHPs, including premiums, worker contributions to the spending accounts, firm contributions to the HRAs and HSAs, and the distribution of covered workers with various deductibles for single and family coverage.
Percentage of Firms Offering HDHP/HRAs and HSA Qualified HDHPs, and Enrollment
Seven percent of firms offering health benefits offer an HDHP/HRA, an HSA qualified HDHP, or both in 2006 (Exhibit 8.1). This is a higher percentage than we reported for 2005 (4%), but the difference is not statistically significant.
Among firms offering health benefits, 1% offer an HDHP/HRA and 6% offer an HSA qualified HDHP (Exhibit 8.1). Firms with 1,000 or more workers are more likely (12%) than firms with 3 to 999 workers (6%) to offer an HSA qualified HDHP (Exhibit 8.2). The 12% of firms with 1,000 or more workers offering HSA qualified HDHPs is an increase from last year (4%). There are too few observations to look at firms offering HDHP/HRAs by firm size.
We estimate that 2.7 million workers are enrolled in HDHP/SOs in 2006, with 1.4 million workers enrolled in HSA qualified HDHPs and 1.3 million workers enrolled in HDHP/HRAs.
The estimate of workers enrolled in an HSA qualified HDHP is higher than the 0.8 million enrollees we reported for 2005.3
Forty percent of workers covered by a HDHP/SO are in firms where 100% of covered workers in the firm are enrolled in the HDHP/SO. When firms offer an HDHP/SO and at least one other plan type, an average of 19% of covered workers in those firms are enrolled in the HDHP/SO.
There is no legal requirement for the minimum deductible in a plan offered with an HRA. The survey defines a high deductible plan as a plan with a deductible of at least $1,000 for single coverage and $2,000 for family coverage.
2
The definitions of HDHP/SOs do not include other consumer-directed plan options, such as arrangements that combine an HRA with a lower-deductible health plan or arrangements in which an insurer (rather than the employer as in the case of HRAs or the enrollee as in the case of HSAs) establishes an account for each enrollee. Other arrangements may be included in the survey as the market evolves.
3
Because we did not distinguish HDHP/SOs as a separate plan type last year, we are unable to calculate a standard error for last year’s estimated enrollment to test for statistical significance. As an alternative to the two sample t-test, we used a one sample t-test on 2006 estimates and find that enrollment in HSA qualified HDHPs is higher in 2006 than in 2005 (p=.0127). The one sample t-test is slightly less reliable, however, than the two sample t-test we ordinarily use.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Section 8: High Deductible Health Plans with Savings Options (Continued)
Average general annual deductibles in these arrangements, as expected, are relatively high when compared to the average annual deductibles for health plans generally.
The average general annual deductible for single coverage is $1,442 in HDHP/HRAs and $2,011 in HSA qualified HDHPs (Exhibit 8.3). However, there is variation around these averages, particularly in the case of HSA qualified HDHPs, where 30% of covered workers are in a plan with a deductible amount between $1,050 and $1,499 and 63% of covered workers are in a plan with a deductible of $2,000 or more (Exhibit 8.5). Seventy-four percent of workers enrolled in HDHP/HRAs and 82% of workers enrolled in HSA qualified HDHPs are in a plan that does not require the deductible to be met before the plan pays for covered preventive services.
This year the survey was modified to collect additional information about family general annual deductible amounts. The survey asks employers whether the family deductible amount is (1) an aggregate amount (i.e., the out-of-pocket expenses of all family members are counted until the deductible is satisfied), or (2) a per person amount that applies to each family member (typically with a limit on the number of family members that would be required to meet the deductible amount). Due to this change, the amounts reported this year for family deductibles are not directly comparable to the amounts reported in 2005.
Average aggregate deductibles for family coverage are $2,985 for HDHP/HRAs and $4,008 for HSA qualified HDHPs (Exhibit 8.3). As with deductibles for single coverage, there is substantial variation among covered workers for their family coverage deductibles. Twenty-nine percent of covered workers in HSA qualified HDHPs have aggregate family deductibles between $2,100 and $2,999 and 38% have family aggregate deductibles of $5,000 or more (Exhibit 8.7).
HSA qualified HDHPs are legally required to have a maximum out-of-pocket liability of no more than $5,250 for single coverage and $10,500 for family coverage, while HDHP/HRAs have no such requirement.
The survey collected out-of-pocket maximum liability data differently than in previous years. As with deductibles, the survey asks employers whether the family out-of-pocket maximum liability is (1) an aggregate amount that applies to spending by any covered person in the family, or (2) a separate per person amount that applies to spending by each family member or a limited number of family members. The survey also asks whether the value reported for the out-of-pocket maximum includes the plan deductible. Because of these changes, the amounts reported this year for family out-of-pocket maximums are not directly comparable to the amounts reported in 2005.
The average out-of-pocket maximum for covered workers in HDHP/HRAs with single coverage is $2,693, which is not significantly different from the average of $3,172 for HSA qualified HDHPs. Among those with family coverage who reported their out-of-pocket maximum as an aggregate amount that applies to spending by any covered person in the family, the average amounts are $5,230 and $6,017 respectively (Exhibit 8.3).
Only four percent of covered workers in HSA qualified HDHPs are in firms who report that the general annual deductible is not included in the out-of-pocket maximum, while 38% of covered workers in HDHP/HRAs work in firms who report that the deductible is not included in the out-of-pocket maximum.
Average annual premiums for HDHP/HRAs are $3,666 for single coverage and $10,482 for family coverage (Exhibit 8.3). The HDHP/HRA premium amount for single coverage is lower than the single premium amounts for other health plan types. For family coverage, the HDHP/HRA premium amount is lower than the family premium for PPOs, but the differences between the HDHP/HRA family premium and the family premiums for HMOs and POS plans are not statistically significant.
Average annual premiums for HSA qualified HDHPs are $3,176 for single coverage and $8,515 for family coverage (Exhibit 8.3). These premium amounts are lower than the single and family premiums for other plan types.
Worker Contributions to Premiums
The average annual worker premium contribution for single coverage is $664 in HDHP/HRAs and $467 in HSA qualified HDHPs (Exhibit 8.3). Differences between these amounts and the average worker premium contributions for single coverage in other plan types are not statistically significant.
The average annual worker premium contribution for family coverage is $2,420 in HDHP/HRAs and $2,115 in HSA qualified HDHPs (Exhibit 8.3). Worker contributions for family coverage in HSA qualified HDHPs are lower than worker contributions for other plan types. For HDHP/HRAs, the average worker contribution is lower than the average worker contribution for family coverage in HMO and POS plans; the difference between the worker contribution for family coverage in HDHP/HRAs and the average worker contribution for PPO plans is not statistically significant.
Employer Contributions to Premiums
Employers contribute to HDHP/SOs in two ways: through their contributions toward the premium for the health plan and through their contribution (if any in the case of HSAs) to the savings account option (i.e., the HRAs or HSAs themselves).
Looking just at annual employer contributions to the premiums for HDHP/SOs, covered workers in HDHP/HRAs on average have an employer that contributes $3,003 towards the premium for single coverage and $8,062 towards the premium for family coverage (Exhibit 8.4). The average amount contributed by employers for single coverage in HDHP/HRAs is significantly lower than average amount contributed by employers for single coverage in HMOs, PPOs and POS plans; differences in the amounts that employers contribute for family coverage in HDHP/HRAs and other plan types are not statistically significant.
In the case of employer contributions toward the premiums for HSA qualified HDHPs, covered workers in HSA qualified HDHPs on average have an employer that contributes $2,709 towards the premium for single coverage and $6,400 towards the premium for family coverage (Exhibit 8.4). These amounts are significantly lower than the amounts contributed by employers for single or family coverage for HMOs, PPOs and POS plans.
For single coverage, the difference in the average amounts contributed by employers towards HDHP/HRA and HSA qualified HDHP premiums is not statistically significant. For family coverage, the average amount contributed by employers for HSA qualified HDHPs is significantly lower than the average amount contributed for HDHP/HRAs (Exhibit 8.4).
On average, workers enrolled in an HDHP/HRA receive an annual employer contribution to their HRA of $797 for single coverage and $1,584 for family coverage. Workers enrolled an HSA qualified HDHPs on average receive an employer contribution to their HSA of $689 for single coverage and $1,139 for family coverage. When employer contributions to the savings account options (i.e., the HRAs and HSAs themselves) are added to their health plan premium contributions, the average amounts that employers contribute for covered workers in HDHP/HRAs are $3,800 for single coverage and $9,646 for family coverage, and the average amounts that employers contribute for covered workers in HSA qualified HDHPs are $3,398 for single coverage and $7,539 for family coverage (Exhibit 8.4). There are important caveats, however, for interpreting these averages (Exhibit 8.4).
In looking at total employer contributions to HDHP/HRAs, we note that HRAs are structured in such a way that employers may not actually spend the whole amount that they make available to their employees’ HRAs.4 Funds the employee does not use generally roll over and can be used in future years, but any balance may revert back to the employer if the employee leaves his or her job. Thus, the employer contribution amounts to HRAs that we capture in the survey may exceed the amount that employers will actually spend.
In looking at total employer contributions to HSA qualified HDHPs, we note that 37% of employers offering HSA qualified HDHPs (covering 30% of workers enrolled in these plans) do not make contributions towards the HSAs that their workers establish. The averages that we show include the large portion of covered workers whose employer contribution to the HSA is zero. When those firms that do not contribute to the HSA are excluded from the calculation, the average employer contribution for covered workers is $988 for single coverage and $1,632 for family coverage. The total employer contribution for HSA qualified HDHP family coverage is significantly lower than the employer contribution for POS family coverage.
In the survey, we ask firms, “Up to what dollar amount does your firm promise to contribute each year to an employee’s HRA?” We refer to the amount that the employer commits to make available to an HRA as a contribution for ease of discussion. As discussed, HRAs are notional accounts and employers are not required to actually transfer funds until an employee incurs expenses. Thus, employers may not expend the entire amount that they make available to their employees through an HRA.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Section 8: High Deductible Health Plans with Savings Options (Continued)
There is interest among firms in offering HDHP/HRAs and HSA qualified HDHPs in the next year.
Six percent of firms not currently offering an HDHP/HRA report that they are “very likely” to offer an HDHP/HRA in the next year, and another 18% of such firms report that they are “somewhat likely” to do so (Exhibit 8.12). Among firms not currently offering a HSA qualified HDHP, 4% say that they are “very likely” to do so next year and another 19% say that they are “somewhat likely” to offer such a plan. Firms with 5,000 or more workers are more likely than other firms to say that they are “very likely” to offer an HSA qualified HDHP next year (Exhibit 8.13).
HRAs are medical care reimbursement plans established by employers that can be used by employees to pay for health care. HRAs are funded solely by employers. Employers typically commit to make up to a specified amount of money available in the HRA for premiums and medical expenses incurred by employees or their dependents. HRAs are accounting devices, and employers are not required to expend funds until an employee incurs expenses that would be covered by the HRA. Unspent funds in the HRA usually can be carried over to the next year (sometimes with a limit). Employees cannot take their HRA balances with them if they leave their job, although an employer can choose to make the remaining balance available to former employees to pay for health care.
HRAs often are offered along with a HDHP. In such cases, the employee pays for health care first out of his or her HRA and then out-of-pocket until the health plan deductible is met. Sometimes certain preventive services are paid for by the plan before the employee meets the deductible.
HSAs are savings accounts created by individuals to pay for health care. An individual may establish an HSA if he or she is covered by a “qualified health plan” which is a plan with a high deductible (i.e., a deductible of at least $1,050 for single coverage and $2,100 for family coverage in 2006) that also meets other requirements.5 Employers can encourage their employees to create HSAs by offering an HDHP that meets federal requirements. Employers in some cases also may assist their employees by identifying HSA options, facilitating applications, or negotiating favorable fees from HSA vendors.
Both employers and employees can contribute to an HSA, up to an annual limit equal to the lesser of the deductible in the HSA qualified health plan or a statutory cap. Employee contributions to the HSA are made on a pre-income tax basis, and some employers arrange for their employees to fund their HSAs through payroll deduction. Employers are not required to contribute to HSAs established by their employees, but if they elect to do so their contributions are not taxable to the employee. Interest and other earnings on amounts in an HSA are not taxable. Withdrawals from the HSA by the account owner to pay for qualified health care expenses are not taxed. The savings account is owned by the individual who creates the account, so employees retain their HSA balances if they leave their job.
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Exhibit 8.1: Among Firms Offering Health Benefits, Percentage That Offer an HDHP/HRA and/or an HSA Qualified HDHP, 2005-2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.2: Among Firms Offering Health Benefits, Percentage That Offer an HSA Qualified HDHP, by Firm Size, 2005-2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.3: HDHP/HRA and HSA Qualified HDHP Features, 2006
HDHP/HRA
HSA Qualified HDHP
Annual Plan Averages for:
Single
Family
Single
Family
Premium
$3,666
$10,482
$3,176
$8,515
Worker Contribution to Premium
$664
$2,420
$467
$2,115
Deductible‡
$1,442
$2,985
$2,011
$4,008
Out-of-Pocket Maximum Liability‡
$2,693
$5,230
$3,172
$6,017
‡
Three percent of workers enrolled in HDHP/HRAs have employers that reported no out-of-pocket maximum for both single and family coverage. These workers are excluded from the HDHP/HRA out-of-pocket maximum liability calculation. The deductible and out-of-pocket maximum averages shown for both the HDHP/HRA and the HSA qualified HDHP for family coverage are for covered workers whose firms report that they face an aggregate amount. Among covered workers in HDHP/HRAs, 14% are in plans whose family deductible is a separate per person amount and 18% report that the family amount for out-of-pocket maximum is a separate per person amount. Among covered workers in HSA qualified HDHPs, the percentages are 3% for deductibles and 3% for out-of-pocket maximum.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.4: Average Annual Premiums and Contributions to Spending Accounts For Covered Workers, HDHP/HRA and HSA Qualified HDHP, 2006
HDHP/HRA
HSA Qualified HDHP
Single
Family
Single
Family
Total Annual Premium
$3,666
$10,482
$3,176
$8,515
Worker Contribution to Premium
$664
$2,420
$467
$2,115
Firm Contribution to Premium
$3,003
$8,062
$2,709
$6,400
Annual Firm Contribution to the HRA or HSA‡
$797
$1,584
$689
$1,139
Total Annual Firm Contribution (Firm Share of Premium Plus Firm Contribution to HRA or HSA)
$3,800
$9,646
$3,398
$7,539
Total Annual Spending (Total Premium Plus Firm Contribution to HRA or HSA)
$4,464
$12,065
$3,865
$9,654
‡
When those firms that do not contribute to the HSA are excluded from the calculation, the average firm contribution to the HSA for covered workers is $988 for single coverage and $1,632 for family coverage.
Note: For definitions of HDHP/HRAs and HSA qualified HDHPs, see the introduction to Section 8. Values shown in the table may not equal the sum of their component parts. The averages presented in the table are aggregated at the firm level and then averaged, which is methodologically more appropriate than adding the averages. This is relevant for Total Annual Premium, Total Annual Firm Contribution, and Total Annual Spending.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.5: Distribution of Covered Workers with the Following General Annual Deductible Amounts for Single Coverage, HDHP/HRA and HSA Qualified HDHP, 2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.6: Among Covered Workers, Distribution of Type of General Annual Deductible for Family Coverage, HDHP/HRA and HSA Qualified HDHP, 2006
Aggregate Amount
Separate Amount per Person
HDHP/HRA
86%
14%
HSA Qualified HDHP
97
3
HDHP/SO
92%
8%
Note: For definitions of HDHP/HRAs and HSA qualified HDHPs, see the introduction to Section 8. For the first time this year, the survey distinguished between plans that have an aggregate deductible amount in which all family members’ out-of-pocket expenses count toward the deductible and plans that have a separate amount for each family member, typically with a limit on the number of family members required to reach that amount.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.7: Distribution of Covered Workers with the Following Aggregate Family Deductible Amounts, HDHP/HRA and HSA Qualified HDHP, 2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.8: Percentage of Covered Workers in Partially or Completely Self-Funded HRA/HDHPs and HSA Qualified HDHPs, 2006
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Exhibit 8.9: Distribution of Covered Workers with the Following Annual Employer Contributions to their HRA or HSA, for Single Coverage, 2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.10: Distribution of Covered Workers with the Following Annual Employer Contributions to their HRA or HSA, for Family Coverage, 2006
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.11: Distribution of Covered Workers in HDHP/HRAs and HSA Qualified HDHPs With the Following Types of Cost Sharing in Addition to Any General Annual Deductible, 2006
Deductible or Copay Only
Coinsurance Only
Both Copay and Coinsurance‡
Charge Per Day
None
Separate Cost Sharing for Each Hospital Admission
HDHP/HRA
1%
49%
3%
<1%
46%
HSA Qualified HDHP
<1
17
<1
<1
82
HDHP/SO
1
33
2
<1
64
Separate Cost Sharing for Each Outpatient Surgery Episode
HDHP/HRA
7%
41%
3%
^
48%
HSA Qualified HDHP
<1
17
<1
^
82
HDHP/SO
4
30
2
^
65
Separate Cost Sharing for Physician Office Visit
HDHP/HRA
15%
66%
0%
^
19%
HSA Qualified HDHP
11
18
0
^
71
HDHP/SO
13
42
0
^
44
‡
This includes enrollees who are required to pay the higher amount of either the copayment or coinsurance under the plan.
^
Respondents did not have a “Charge Per Day” (per diem) response option for questions regarding separate cost sharing for outpatient surgery and separate cost sharing for physician office visit.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.12: Among Firms Not Currently Offering an HDHP/HRA, Percentage That Say They Are “Very Likely” or “Somewhat Likely” to Offer an HDHP/HRA in the Next Year, 2005-2006*
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
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Exhibit 8.13: Among Firms Not Currently Offering an HSA Qualified HDHP, Percentage That Say They Are “Very Likely” or “Somewhat Likely” to Offer an HSA Qualified HDHP in the Next Year, 2005-2006*
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For more information regarding survey methodology, click here to view the Survey Design and Methods section.
