ACA & The New Normal

Growing Health Savings Account Balances Impact Health Care Access, Increase Spending

When consumers have more in their HSA’s, they tend to use it more

by Paul Fronstin M. Christopher Roebuckfor The Employee Benefit Research Institute (EBRI). Reprinted with permission. Visit ebri.org

Employers have adopted HSA-eligible health plans as a way to manage the cost of providing health benefits to workers and their families. HSA-eligible health plans are expected to make health plan members more cost conscious because they are paying more out of pocket than in traditional health plans. In theory, health plan members will use less unnecessary care and will be more cost conscious about the health care services that they use.

However, a new study from the EBRI Center for Research on Health Benefits Innovation finds a relationship between large health savings account (HSA) balances and increased use of health care services. Consumers with larger HSA balances at the beginning of the year visited the emergency room, primary care physicians, and specialists with greater frequency than those with lower HSA balances. The Issue Brief, “Do Accumulating HSA Balances Affect Use of Health Care Services and Spending?,” also found that those with higher HSA balances at the beginning of the year were more likely to use chiropractic services, physical therapy, psychotherapy, blood tests, X-rays, CT scans, MRIs, and musculoskeletal surgery than individuals with lower balances.

“Larger HSA balances may be viewed as ‘free money’ to pay for current health care,” said Paul Fronstin, Director of the Health Research and Education Program at EBRI and co-author of the study. “Employees may not realize they can save their HSA balances for expenses in retirement and that this can provide an important way to meet retirement spending needs.”

Most People Are Healthy…

This study examines whether and how HSA balances impact use of and spending on health care services. Most account holders will build up an HSA balance (to the degree that contributions are made) because most people are healthy and do not use a lot of health care services in any given year. Over time, growing HSA balances may mitigate the impact of the deductible. We find that as individuals build up balances in HSAs, they use more health care services than they otherwise would. In essence, HSA balances may blunt the cost-reducing effect of high-deductible health plans over time. The implication is that employers may want to consider the impact of the size of the plan’s deductible. Another approach is to explore education around the long-term benefits of saving the HSA balance for health care expenses in retirement.

Larger HSA balances may be viewed as ‘free money’ to pay for current health care; Employees may not realize they can save their HSA balances for expenses in retirement and that this can provide an important way to meet retirement spending needs...

The health insurance eligibility and claims data for this study, which come from an employer with approximately 120,000 employees, were matched to HSA balance, contribution, distribution, and investment data from the EBRI HSA Database. A subset of about 6,500 policyholders was used in the study. Data from 2014–2016 were analyzed.

Key findings:

In general, we find that larger beginning-of-year HSA balances result in increased use of health care services. Use of the following services increased: emergency department visits, primary care physicians (PCP) and specialist visits, chiropractic services, physical therapy, psychotherapy, blood tests, X-ray, CT scan, MRI, and musculoskeletal surgery.
Individuals with $3,000 or more in their HSA at the beginning of the year visited PCPs and specialists on average one-half visit more per year than individuals with HSA balances under $3,000.

Spending was $19.52 higher for primary care office visits and $28.06 higher for specialist visits. Overall spending was $496.40 higher for every $1,000 in HSA balances, though the finding was not statistically significant. Spending associated with other outpatient services was $550.96 higher among individuals with an HSA balance of at least $3,000 and was statistically significant.

Balances in HSAs more than doubled between 2014 and 2016. Among enrollees with employee-only coverage, balances increased from $1,131 at the beginning of 2014 to $2,861 at the beginning of 2016. Similarly, balances more than doubled among enrollees with family coverage. The average balance was $3,312 at the beginning of 2016.

The percentage of accounts with a zero balance at the beginning of the year fell to nearly nothing after two years of contributions. Only 2 percent of HSAs started 2016 with a zero balance. At the beginning of 2014, 20 percent of those with employee-only coverage and 17 percent of those with family coverage had a zero balance. The percentage of accounts with balances between $1,500 and $2,999, and $3,000 or more nearly tripled between the beginning of 2014 and 2016 among those with employee-only coverage. Among those with family coverage, the percentage of accounts with balances between $1,500 and $2,999 more than doubled, while the percentage of accounts with balances of $3,000 or more quadrupled between the beginning of 2014 and 2016.

Read the full EBRI Issue Brief here.