More employers offer health savings accounts as part of their benefit packages, aiming to lower costs for themselves and employees alike. Changes that make the accounts more consumer-friendly are likely to be part of any future healthcare reform.
Health savings accounts (HSAs) are gaining in popularity and could play a major role in any upcoming healthcare reform efforts, one analyst says, as some consumers demand more control over how they spend their own money on healthcare needs, and as employers urge the rest to get more involved.
Some employers offer HSAs as part of a health benefits package. They are similar to personal savings accounts, but the funds are deposited into the account on a pre-tax basis, so employees reduce their tax liability, and they can only be used for qualifying medical expenses.
The number of HSA accounts rose to 20 million in 2016, according to a year-end report, with almost $37 billion in assets. That is a year-over-year increase of 20% for the number of accounts and 22% for HSA assets for the period of December 31, 2015, to December 31, 2016.
The Affordable Care Act changed how consumers could use HSAs and the recent bills in the Senate tried to reverse some of those rules to give consumers more freedom with those funds, notes Brandon Wood, president of client experience with Maestro Health, a company providing support for employee health benefits to employers.
The most recent Senate bill expanded the amount of money people could set aside in HSAs and rolled back some restrictions imposed by the ACA.
Though that bill didn't pass the Senate, Wood says HSAs are increasingly popular with employers and any ongoing effort to reform the ACA is likely to include similar provisions.
"The Senate Republicans tried to restore some of the facets of HSAs that are most popular with Americans. The most significant was how the ACA disallowed the use of HSAs to pay for over-the-counter medications, stuff like allergy treatments," Wood explains.
"When the ACA took effect consumers could still use the accounts for that but they essentially had to get their physicians to write a prescription for it, which is not exactly consumer friendly."
Pharmacy and over-the-counter medications account for about 60% of the spending from HSAs and FSAs, Wood says.
Lawmakers also may revise efforts to expand the availability of HSAs, Wood says.
"If something passes, it is likely to include some changes to HSAs. Today you need to be in an HSA-qualified health plan, with a certain level of deductible, an certain out-of-pocket maximum attached to it, and some other requirements," he says.
"The latest proposal wanted to provide the ability for just about everybody to have an HSA whether they participated in an HSA-qualified health plan or not. It also increased significantly the amount of money you could put in those accounts, and those are changes that are popular with consumers."
Though HSAs are popular with savvy consumers, any increased availability will mean employers need to educate people and encourage them to participate. When employers offer HSA-compatible health plans, about 20% of people enroll in them, Wood says. So that's already a relatively small percentage of people familiar with how to use the tax advantage account, he says.
Even without HSA-related changes to the ACA, employers are increasing the availability of the accounts, sometimes with seed money to get them started, Wood notes.
"We believe the employer marketplace will continue to go in this direction, in part to drive down their own costs but also to encourage some level of consumer responsibility. The employer's chief challenge is how to get people to use the accounts right," he says.
"HSAs are getting more attention now, so employers can expect more employees walking in and asking when they're going to get one and how it works."
Gregory A. Freeman is a contributing writer for HealthLeaders.