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| Employer Health Benefits 2005 Annual Survey |  |
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High-Deductible Health Plans and Savings Account Options (Continued)
Click here to see definitions of Health Reimbursement Arrangements and Health Savings Accounts Premiums and Firm Contributions to the HSA or HRA - As expected, average premiums for HDHP/HRAs and HSA qualified HDHPs are lower than average premiums in the market.
- Annual premiums for HDHP/HRAs average $3,503 for single coverage and $8,530 for family coverage. When employer contributions to HRAs are added to the premiums for the HDHPs plans offered with HRAs, the annual “total cost” for HDHP/HRAs averages $4,295 for single coverage and $10,193 for family coverage. If these total costs for HDHP/HRAs are compared to the average single and family annual premiums for all health plans ($4,024 for single coverage and $10,880 for family coverage), the differences are not statistically significant (Exhibit 8.5).
- Annual premiums in HSA qualified HDHPs average $2,700 for single coverage and $7,909 for family coverage. When employer contributions to HSAs are added to the premiums for the HSA qualified HDHP, the annual “total cost” for HSA qualified HDHPs averages $3,280 for single coverage and $9,001 for family coverage. These amounts are significantly lower than the average annual single and family premiums in health plans overall ($4,024 and $10,880) (Exhibit 8.5).
Worker Contributions to Premiums - Average annual employee premium contributions to HSA qualified HDHPs for single coverage ($431) are not significantly lower than average annual employee contributions for single coverage in health plans overall ($610). Average annual employee premium contributions to HSA qualified HDHPs for family coverage, however, are significantly lower than average annual employee contributions to family coverage overall ($1,664 compared to $2,713). Employee contributions to HDHP/HRAs are nominally lower than employee contributions to health plans overall, but the differences are not statistically significant (Exhibit 8.5).
What Employers Contribute - Employers contribute to these new arrangements in two ways: through their contributions toward the premium for the HDHP and through their contribution (if any) to the savings account option. When these contributions are added together for each employer offering such an arrangement, the average total employer contribution provided for covered workers in these arrangements is generally similar to the average employer contribution provided for covered workers for health plans overall.
- Covered workers in HDHP/HRAs on average have an employer that contributes (premium and HRA contribution combined) $3,872 toward single coverage and $7,538 towards family coverage. The $3,872 average contribution for single coverage is significantly higher than the average contribution covered workers have from their employers for single coverage overall ($3,413). The average contribution for family coverage ($7,538) is not statistically different than the average contribution that covered workers have from their employers for family coverage overall ($8,167) (Exhibit 8.5).
- As noted above, HRAs are structured in such a way that employers may not actually spend the whole amount that they make available to their employees’ HRAs.9 Funds the employee does not use generally roll over and can be used in future years and the balance may revert back to the employer if the employee leaves his or her job (Click here for details). Thus, the employer contribution amounts to HRAs that we capture in the survey may exceed the amount that employers will actually spend (Exhibit 8.4).
- Covered workers in HSA qualified HDHPs on average have an employer that contributes (premium and HSA contribution combined) $2,850 toward single coverage and $7,337 towards family coverage annually. Neither the $2,850 average total annual contribution for single coverage nor the $7,337 average total annual contribution toward family coverage is statistically different than the average annual contribution covered workers have from their employers for single or family coverage overall. We note that approximately one in three firms offering an HSA qualified HDHP (covering about 35% of workers in such plans) make no contribution to their employees’ HSA for either single or family coverage (Exhibit 8.5).
- Covered workers in HDHP/HRAs on average have an annual employer contribution to their HRA of $792 for single coverage and $1,556 for family coverage. Covered workers in HSA qualified HDHPs on average have an annual employer contribution to their HSA of $553 for single coverage and $1,185 for family coverage (Exhibit 8.4). The average annual contribution to HSAs includes the cases where workers receive no employer contribution for their HSA. We note that the average HRA and HSA contribution shown in Exhibit 8.4 are different from the amounts that can be calculated by subtracting the average employer contribution toward single and family premiums for each arrangement from the average total employer contributions (premium plus account contribution) for single and family coverage for the same arrangements. This is due to missing data for some questions for several firms in the sample. In other words, different sample sizes are used to generate average values for total premium, worker contribution to premium, employer contribution to premium, and employer contribution to the spending account.
Future Plans - The number of employers offering HDHP/HRAs and HSA qualified HDHPs appears likely to grow over the next year.
- Four 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 22% of such firms report that they are “somewhat likely” to do so (Exhibit 8.6). Two percent of firms not currently offering a HSA qualified HDHPs report that they are very likely to offer an HSA qualified HDHPs within the next year, with another 25% reporting that they are “somewhat likely” to do so. Large firms (200 or more workers), which provide coverage to more than one-half of covered workers, have a greater interest in these plans than firms overall, with 7% of large firms not currently offering a HSA qualified HDHP reporting that they are very likely to offer such a plan in the next year (Exhibit 8.7).
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 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. Employees may use the HRA to pay for medical expenses and premiums. 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 $1,000 for single coverage and $2,000 for family coverage) that also meets other requirements.10 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 employee established HSAs, 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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| 9 | In the survey, we ask firms, "Up to what dollar amunt does your firm promise to contribute each year to an employee's HRA?" We reer to the amount that the employer commits to make available to an HRA as a contribution for ease of discussion. As discussed above, HRAs are notional accounts, and employers are not required to actually transfer funds until an employee incurs expenses. Employers may not expend the entire amount that they make available to their employees through an HRA. | | | | 10 | See IRS Publication 969 (2004) Health Savings Accounts and Other Tax-Favored Health Plans. | | | | | For more information regarding survey methodology, click here to view the Survey Design and Methods section. |
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