It is open enrollment time—the time of year when millions of American workers select their health insurance coverage for the coming year—either through their employer or, increasingly, through the health insurance exchanges. This year we expect to see even more workers choose a high-deductible health plan (HDHP) compatible with a health savings account (HSA). This provides a great opportunity for HSA program growth at credit unions offering HSAs.
Since first becoming available in 2004, HSAs have grown from less than 500,000 accounts at the end of 2004, to an estimated 13.8 million accounts at the end of 2014, according the Employee Benefits Research Institute. This trend is likely to continue and accelerate as a result of the implementation of the Patient Protection and Affordable Care Act of 2010 (PPACA).
Despite passage of the PPACA, health care costs continue to rise and businesses are concerned. They are increasingly turning to HSA-compatible HDHPs, both to rein in costs and avoid the threshold that triggers the “Cadillac tax,” the 40 percent nondeductible excise tax on employer-sponsored health coverage under PPACA that is scheduled to take effect in 2018.
A survey by the National Business Group on Health, a nonprofit association of 425 large U.S. employers, found that nearly one-half of respondents (48 percent) expect at least one of their health plans will hit the excise tax trigger in 2018, and almost three-quarters (72 percent) expect one of their plans to hit the trigger in 2020. To avoid the tax, 76 percent of survey respondents are expanding or adding consumer-directed health plans (CDHPs) with HSAs, with an increasing percentage offering only a CDHP option. In 2016, 83 percent of survey respondents will offer a CDHP, and one in three (33 percent) will only offer CDHPs to their employees. And more than 87 percent of employers responding to the survey that offer a CDHP option with an HSA will continue to make employer HSA contributions to their employees’ HSAs.
By making plan changes, such as switching to CDHPs with HSAs, adding consumer tools, and expanding wellness programs, survey respondents expect to keep health care benefit cost increases to five percent for the third year in a row.
Those who purchase health insurance through the health insurance exchanges may not be as fortunate as those covered by employer-provided health insurance.
According to a report in The New York Times, health insurance companies around the country are seeking rate increases of 20 to 40 percent for plans offered through the health insurance exchanges. And, while many expect that the rate increases will be scaled back, insurers in many states reported that claims expenses exceeded premiums collected for plans offered through the exchanges.
The Oregon Insurance Division earlier this year released final rate decisions that, in the individual market, ranged from an average rate increase of 8.3 percent to an average rate increase of 37.8 percent, depending on the plan. Insurance Commissioner Laura Cali said that the rate increases were necessary after division actuaries determined that the cost of providing coverage for individual plans in Oregon was $830 million, while premiums were only $703 million, meaning that for 2014, costs exceeded rates by $127 million. In announcing the rate increase decisions, Commissioner Cali, sensitive to the affordability of health insurance, cited the need to protect consumers, and noted that inadequate rates could result in insurance companies going out of business in the middle of the year or being unable to pay claims.
An analysis by the Henry J. Kaiser Family Foundation of 2016 premium changes for plans offered though the health insurance exchanges found premium changes varied significantly by city and area of the country. The analysis also found that plans offered through the exchanges that had the lowest premiums in 2015 generally were not the lowest cost plan in 2016. As a result, even though the participant may like the plan they have, they may not be able to keep it, and still be enrolled in the lowest cost plan offered through the exchange.
As workers choose their health care plans for 2016—whether through their employer or the health insurance exchange—more and more individuals will choose, or be forced to choose, HSA-compatible HDHPs because of the cost savings associated with them. This is good news for credit unions offering HSAs, as it will result in HSA program growth.
Credit unions offering HSAs reported double-digit growth in HSA deposits last year, according to call report data analyzed by the Economics and Statistics Department of the Credit Union National Association. This double-digit growth, in both the number of HSAs and deposits to them, is likely to continue as health care costs rise and workers switch to lower-cost HSA-compatible HDHPs.
If your credit union does not offer HSAs, consider offering them as a way to help your members manage their healthcare costs and benefit from the substantial tax benefits associated with them.