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Small employers most generous in funding accounts; so are employers in California
Enrollment in health savings account (HSA) plans increased 10.7 percent across the U.S. last year and 53.7 percent since 2013, indicating significant employee interest in consumer-driven plans over time, according to a survey of more than 10,000 worksite health plans.
March 2016 findings from United Benefit Advisors (UBA), a network of independent employee benefits brokerage and advisory firms, shows that enrollment in employer-sponsored HSA plans is rising while employer contributions, on average, are stagnant or decreasing. Meanwhile, enrollment in employer-funded health reimbursement arrangements (HRAs) remained flat at 8.7 percent for the last three years. (See
how HSAs and HRAs differ.)
“Employees are highly interested in HSA plans even with decreasing employer contributions,” commented Les McPhearson, CEO of UBA, in the survey report, which revealed that:
• The average employer contribution to an HSA was $491 for a single employee, down from $574 three years ago—a 14.5 percent drop. The average employer contribution for an HSA linked to family coverage was $882, down slightly less over the same period.
• Singles at companies with 1,000 or more employees received the lowest HSA contributions ($393 on average). Singles at companies with 10 to 24 employees received the most generous contributions ($541).
• Like their single counterparts, families received more-generous contributions from small employers. The average family HSA contribution at organizations with 25 to 49 employees was $1,005, and employers with 10 to 24 employees gave, on average, $921 to families.
• Companies with 10 to 24 employees also have the highest HSA enrollment rates (16.3 percent of covered employees). But companies with 200 or more employees saw the biggest increase in enrollment from three years ago.
With regard to HRAs:
• The average employer contribution to an HRA last year was $1,767 for a single employee and $3,472 for a family, up slightly from 2014.
• Singles at companies with 1,000 or more employees received the lowest average HRA contributions ($858), whereas singles at companies with 100 to 199 employees received the highest average contributions ($1,941).
“Large employers have not typically offered competitive HRA or HSA plans because they are able to offer other types of more generous plans,” McPhearson noted. “But this is the sector to watch: If they see the kind of double-digit cost increases other employer groups already have, they may have no choice but to offer more attractive HRA and HSA plans in an effort to control costs. Plus, employees at these companies are interested particularly in HSA plans, seeing a dramatic 53 percent enrollment increase over the last three years despite their lack of competitiveness.”
‘Cadillac Tax’ Concerns
The “Cadillac tax” on high-value health plans, which had been set to take effect in 2018 but is now delayed until 2020, also was a factor driving down employer contributions to HSAs. Although the bulk of plan costs that could trigger the tax come from premiums,
the threshold for the tax also includes pretax dollars that employers contribute directly, and that employees contribute through salary deferral, to consumer-driven accounts.
The tax was seen as having two effects: “making high-deductible health plans more attractive because of the low premiums [but] also causing employers to contribute less to HSA accounts connected to HDHPs,” said Niko Washington, vice president of employee benefits practice at Johnson & Dugan, a Daly City, Calif.-based UBA partner firm. “If an employer and employee contribute too much to an HSA, it can tip the Cadillac tax threshold.”
With the recent delay in the Cadillac tax and uncertainty over its ultimate fate—with either a partial or complete repeal possible, regardless of who wins the presidential election—employers may be less likely to see the tax as a catalyst for reducing future contributions.
California Employers Give Most
broke with the national pattern and saw increased employer HSA contributions over the last three years, making the state’s employers the most generous in the nation by contributing $981 to singles and $1,789 to families.
“In California, health insurance costs are so high that employees very often gravitate to the lowest cost options, typically the HSA-compatible high-deductible plans,” said Keith McNeil, benefits advisor with Arrow Benefits Group in Petaluma, Calif.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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