High-deductible health plans have emerged in recent years as an increasingly popular means of controlling the growing costs of employer-sponsored health insurance in the US, particularly for healthy employees who don’t anticipate significant health care expenditures and would prefer to pay lower health insurance premiums, even if it means paying higher out-of-pocket costs when these expenditures do arise.
The State of Employee Benefits 2018 report from the benefits technology and services company Benefitfocus indicates that the shift to HDHPs accelerated last year among large US employers, though in most cases, these plans are offered to employees as a choice alongside traditional plans like preferred provider organizations. SHRM’s Stephen Miller outlines the key findings from the report, which analyzed data from 540 large employers with over 1.3 million insured employees:
For 2018, 70 percent of large employers offered at least one HDHP—either in addition to a traditional health plan (65 percent) or exclusively as a full replacement for traditional health coverage (5 percent). … When employees at large organizations were given options, 35 percent selected an HDHP while 48 percent chose a PPO for 2018. The remainder opted for other types of traditional plans, when available, such as health maintenance organizations.
Employees who elected an HDHP earn on average a salary roughly $4,700, or 7 percent, higher than that of employees enrolled in a PPO, the analysts reported. “Higher earners appear to increasingly favor HDHPs, while lower-wage workers identify PPOs—and their lower out-of-pocket exposure—as better suited to their needs,” [Benefitfocus’s senior vice president for global and institutional markets Jeff] Oldham said, and “that tendency is evident across age groups.”
The premiums paid by HDHP enrollees are on average 42 percent lower than PPO premiums for individual plans and 40 percent lower for family plans, the report adds.
Benefitfocus also found that health savings accounts are increasingly popular among employees with HDHPs: HSA participation rose dramatically from 50 percent to 81 percent of HDHP enrollees from last year to this year, with millennials especially driving the embrace of these savings vehicles. However, the average HSA received just over half the maximum allowable contribution for 2018, including both employee and employer contributions.
Other recent research from Bank of America Merrill Lynch also found that HSAs are increasingly popular, with more employers offering them and more employees taking advantage of the benefit. For the most part, however, employees are using these tax-advantaged accounts to cover current health care expenditures rather than using them as long-term investment vehicles, as financial experts believe they should be. Low-income employees are particularly unlikely to use their HSAs in this way, in part because they are less likely to understand how they work and how to maximize their benefit.