A large Midwestern employer that adopted a high-deductible health plan with a health savings account (HSA) for all employees, replacing its traditional health plan, reduced its total health care spending by 25 percent in the first year or $527 per person in the aggregate. In the second year total spending was 8 percent lower than in the year before the organization substituted the HSA, according to a recent study by the nonprofit Employee Benefit Research Institute (EBRI).
The study analyzed claims data from the unnamed employer over a five-year period.
In particular, spending on prescription drugs (pharmacy) and laboratory services was lower by a significant percentage and remained lower for the four years after the organization adopted the HSA plan.
Among other findings noted in EBRI's July 2013 report, Health Care Spending after Adopting a Full-Replacement, High-Deductible Health Plan with a Health Savings Account: A Five-Year Study:
- Each category of health spending had significant reductions in the first year of the HSA plan with the exception of spending on inpatient hospital stays. Spending on lab services and prescription drugs had the largest declines (36 percent and 32 percent, respectively).
- The magnitude of the cost savings was greatest in the first year, but the savings continued over the succeeding three years.
Health insurance coverage with high deductibles (generally in excess of $1,000 for singles and twice that for families) is associated with tax-advantaged savings-account options that can be used to cover out-of-pocket costs for health care services, including HSAs and health-reimbursement arrangements (HRAs). These are often referred to as consumer-directed health plans (CDHPs), and they are intended to encourage employees to make cost-conscious decisions when selecting health care services. To learn more, see the SHRM Online article "Consumer-Driven Decision: Weighing HSAs vs. HRAs."
Although this study represents one of the longest observation periods reported with a full-replacement CDHP (meaning it was the only type of health plan the employer offered) and is one of the few studies with a matched control group, EBRI noted that the findings cannot necessarily be applied to broader populations, since they are based on the experience of a single employer and the study focused on workers with continuous plan eligibility during the study period. However, the data indicate that companies can achieve substantial cost savings by adopting a full-replacement CDHP.
Employers have been using CDHPs for more than a decade, according to the report. In 2012, fully 22 percent of smaller employers, 36 percent of larger employers and 59 percent of jumbo employers offered some type of CDHP, and nearly 1 in 5 workers were enrolled in one. Those numbers are expected to grow in coming years.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Midwest Employers Opting for High-Deductible Plans, SHRM Online Benefits, July 2013
Health Premium Growth Moderating as Employees Pay Larger Share, SHRM Online Benefits, June 2013
Study: 6.5% Growth in Medical Costs for 2014, SHRM Online Benefits, June 2013
Study Finds Fewer Office Visits, Prescriptions with CDHPs, SHRM Online Benefits, June 2013
Consumer-Driven Decision: Weighing HSAs vs. HRAs, SHRM Online Benefits, updated May 2013
For 2014, Higher Limits for HSA Contributions, Out-of-Pocket Expenses, SHRM Online Benefits, May 2013
Study: CDHP Customers Lowered Health Risks and Costs, SHRM Online Benefits, February 2013
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