Data on Enrollment, Premiums, and Cost-Sharing in HAS-Qualified Health Plans

Data on Enrollment, Premiums, and Cost-Sharing in HAS-Qualified Health Plans

Order Code RS22417
May 13, 2006
CRS Report for Congress
Received through the CRS Web
Data on Enrollment, Premiums, and
Cost-Sharing in HSA-Qualified Health Plans
Chris L. Peterson
Specialist in Social Legislation
Domestic Social Policy Division
Summary
Health Savings Accounts (HSAs), which have been available since 2004, are the
newest addition to the array of tax-advantaged accounts people can use to pay for
unreimbursed medical expenses. To set up an HSA, one must enroll in a qualifying
high-deductible health plan (HDHP). This report analyzes findings about enrollment in
HSA-qualified HDHPs. It must be noted that enrollment in HSA-qualified HDHPs is
not the same as actually having an HSA account. Individuals may enroll in an HSA-
qualified HDHP without setting up an HSA. In addition, individuals may have an HSA
without contributing to it. The available estimates show the number of people enrolled
in HSA-qualified HDHPs, but provide little insight into whether individuals set up
HSAs and, if so, whether they contribute. According to the latest estimates from
America’s Health Insurance Plans (AHIP), nearly 3.2 million individuals were covered
by an HSA-qualified HDHP in January 2006. This report will be updated as new
findings emerge.
Health Savings Accounts (HSAs) provide a tax-advantaged way for people to pay
for out-of-pocket medical expenses. HSAs can be established and funded by eligible
individuals when they have a qualifying high-deductible health plan (HDHP) and no other
health plan, with some exceptions.1 First, this report analyzes data from America’s Health
Insurance Plans (AHIP), the national association representing health insurers, on the
number of enrollees in HSA-qualified HDHPs. The AHIP results are the only source of
data on enrollment in HSA-qualified HDHPs for both group (employer) and nongroup
health insurance. The report then looks at premiums and cost-sharing in HSA-qualified
HDHPs as reported by AHIP and two other sources, one focused on nongroup and the
other on group coverage. Finally, the report summarizes findings from the Government
Accountability Office (GAO) on HSA-qualified HDHPs available to federal employees.
1 An explanation of the rules governing HSAs can be found in CRS Report RL33257, Health
Savings Accounts: Overview of Rules for 2006, by Bob Lyke, at [http://www.congress.gov/
erp/rl/pdf/RL33257.pdf].
Congressional Research Service ˜ The Library of Congress

CRS-2
Data on Enrollment in HSA-Qualified HDHPs
Enrollment in HSA-qualified HDHPs has grown to nearly 3.2 million individuals,
according to the latest estimates from AHIP. These numbers include not only the primary
policyholders or covered workers but also their covered family members. In health
insurance lingo, these numbers are for all “covered lives.” These estimates of coverage
in January 2006 are triple the number estimated in March 2005, which was double the
number from September 2004. The results are based on “responses from AHIP member
companies, which represent nearly all the health insurance plans offering HSA-eligible
plans.” AHIP reported that insurers are offering HSA-qualified plans in more markets
“and to a wider array of large (employer) group, small group and individual customers.”2
For 28% of the 3.2 million enrollees in HSA-qualified HDHPs, it is unknown
whether that coverage was obtained through the group market or the nongroup market,
as shown in Figure 1. Additionally, among the 1.4 million for whom group coverage was
reported, 17% did not specify whether that HSA-qualified HDHP was obtained from a
small employer or a large one. AHIP members reported their membership in large- and
small-group markets according to their internal reporting standards. Thus, there may be
differences in plans’ definition of large- and small-group markets.
Because the characteristics of plans not reporting the detailed information may differ
markedly from plans reporting the information, it is difficult to draw strong conclusions
about the entire 3.2 million enrollees based on only the plans reporting details.
Nonetheless, although the precise share of enrollees in different categories is uncertain,
there has been substantial growth in HSA-qualified HDHPs in terms of total enrollees
across all of the categories, as shown in Table 1. Again, it is not known how many of
these individuals actually set up an HSA or, if so, contributed to it. Data on contributions
to HSAs in 2005 should be available from the Internal Revenue Service in 2007.
The AHIP results found that 31% of those who were newly enrolled in an HSA-
qualified HDHP through the nongroup market in January had been uninsured prior to
enrolling in that coverage. This percentage was calculated among insurers reporting the
information. These insurers covered less than half of the HSA-qualified HDHP enrollees
in the nongroup market. Thus, the results may be biased if the insurers who did not
provide the information had a significantly different percentage of enrollees previously
uninsured. The same caveat applies to the percentage of small employers offering an
HSA-qualified HDHP who did not previously offer coverage (33%). The AHIP study did
not provide results regarding the number of large employers previously not offering health
insurance. This is probably because the number was very low, since the percentage of
large employers not offering health insurance is usually estimated at 5% or less.
2 “January 2006 Census Shows 3.2 Million People Covered by HSA Plans,” America’s Health
Insurance Plans report, March 9, 2006. “HSA (Plans) Triple in 10 Months,” America’s Health
Insurance Plans press release, Jan. 26, 2006. AHIP reports its findings as virtually a census since
its members represent nearly all insurance companies and nearly all of the member companies
responded to the survey. According to AHIP, its reported number may be an undercount if, for
example, an insurer that offers HSA-qualified HDHPs is not an AHIP member, or if a large
employer offers a self-funded HSA-qualified HDHP without the help of an AHIP member serving
as a third-party administrator (TPA).

CRS-3
Figure 1. Market Characteristics of HSA-Qualified HDHPs,
January 2006, by Number of Covered Lives
Unknown Market
878,000
28%
Small Group
Large Group
510,000
679,000
36%
Group Market
47%
1,436,000
45%
Unknown Group
247,000
17%
Nongroup Market
855,000
27%
Source: Congressional Research Service (CRS) analysis of report from America’s Health Insurance Plans
(AHIP) Center for Policy and Research, “January 2006 Census Shows 3.2 Million People Covered by HSA
Plans,” March 9, 2006, at [http://www.ahipresearch.org/pdfs/HSAHDHPReportJanuary2006.pdf].
Note: AHIP members reported their membership in large- and small-group markets according to their
internal reporting standards.
Table 1. Historical Market Characteristics of HSA-Qualified HDHPs,
by Number of Covered Lives
Growth between
Sept. 2004
March 2005
Jan. 2006
March 2005 and
Jan. 2006
Nongroup market
346,000
556,000
855,000
54%
Unknown market
77,000
878,000
1040%
Group market
92,000
397,000
1,436,000
262%
Large group
79,000
162,000
679,000
319%
Small group
13,000
147,000
510,000
247%
Unknown group
88,000
247,000
181%
Total
438,000
1,030,000
3,169,000
208%
Source: Congressional Research Service (CRS) analysis of report from America’s Health Insurance Plans
(AHIP) Center for Policy and Research, “January 2006 Census Shows 3.2 Million People Covered by HSA
Plans,” March 9, 2006, at [http://www.ahipresearch.org/pdfs/HSAHDHPReportJanuary2006.pdf].
Note: AHIP members reported their membership in large- and small-group markets according to their
internal reporting standards.

CRS-4
Premiums and Cost-Sharing in HSA-Qualified HDHPs
The January 2006 AHIP study also reported plan information such as average
deductibles, out-of-pocket maximums, and premiums on both nongroup coverage and
group coverage. The company eHealthInsurance produced a report on its nongroup
enrollees in HSA-qualified HDHPs in 2005.3 One of the leading surveys of employers’
health benefits reported similar plan information for group coverage.4 These results are
shown in Table 2.
There are a number of reasons why the results in Table 2 differ by source of data.
For example, the AHIP estimates of premiums and cost-sharing in HSA-qualified HDHPs
were based on what insurers reported for their “best-selling product.” The characteristics
of these products and the people who tend to enroll in them may be different from the
other products and those enrollees. The eHealthInsurance numbers are from people who
enrolled through their website. Enrollees who purchase health insurance online, for
example, may differ substantially from those who obtain health insurance though a local
insurance agent. The Kaiser/Health Research and Educational Trust (HRET) survey faces
limitations common to all surveys. For example, only 48% of the employers contacted
for the survey responded. Employers that did not respond may have systematically
different characteristics that could bias the results.
Among firms that offered health insurance in 2005, one in five (20%) offered a plan
with a deductible of at least $1,000 for single coverage and $2,000 for family coverage,
according to the Kaiser/HRET employer survey. However, most of these plans were not
HSA-qualified (perhaps because the plan’s out-of-pocket maximum was higher than the
statutory limit). Of firms offering an HDHP, only 12% had one that was HSA-qualified.
Moreover, among firms that offered an HSA-qualified HDHP, only 15% of eligible
employees enrolled in the plan.5
The employer survey by Mercer Human Resource Consulting provided 2005 results
for consumer-directed health plans (CDHPs), which include HSAs as well as Health
Reimbursement Arrangements (HRAs). HRAs are solely employer-funded accounts with
balances usually forfeited to the employer when the worker terminates employment.
Mercer considered it “a surprise” that so few small employers offered a CDHP.
“[P]roponents said HSAs would expand access to coverage by providing a less-expensive
option for small employers who might not otherwise offer coverage. This theory hasn’t
panned out: use of CDHPs by this group [employers with 10 to 499 workers] reached
only 2% in 2005, while the percentage offering any form of health plan dropped from
66% to 63%.” However, the survey indicated that 12% of employers with 10 to 499
workers were “very likely” to offer a CDHP in 2006, compared to 2% the previous year.6
3 “Health Savings Accounts: January 2005-December 2005,” eHealthInsurance, May 10, 2006.
4 “Employer Health Benefits: 2005 Annual Survey,” Kaiser Family Foundation and Health
Research and Educational Trust.
5 “Employer Health Benefits: 2005 Annual Survey,” chart pack.
6 “Health Benefit Cost Slows for a Third Year, Rising Just 6.1% in 2005,” Mercer Human
Resource Consulting press release, Nov. 21, 2005.

CRS-5
Table 2. Average Premiums and Cost-Sharing in HSA-Qualified High-Deductible Health Plans (Single Coverage)
eHealth-Insurance
America’s Health Insurance Plansa
Kaiser/HRET survey of employers
All groups, PPO
All (large and
Nongroup
Nongroup
Small group
Large group
plans NOT HSA-
small) groups
qualified
Premium
$1,368
$1,121-$3,157b
$2,772
$2,745
$2,700
$4,150
$431
$603
Enrollee share
$1,368
$1,121-$3,157b
NA
NA
(16%)
(15%)
Firm share
NA
NA
NA
NA
$2,270 (84%)
$3,548 (85%)
Firms’ contribution
NA
NA
NA
NA
$553
NA
to HSA
Deductible
NA
$2,378
$2,143
$1,754
$1,901
$323
Out-of-pocket
$4,900-4,999c
$3,371
$3,381
$3,330
$2,551
$2,000-2,499c
maximum
Source: “Health Savings Accounts: January 2005-December 2005,” eHealthInsurance, May 10, 2006. “January 2006 Census Shows 3.2 Million People Covered by HSA Plans,”
America’s Health Insurance Plans report, March 9, 2006. “Employer Health Benefits: 2005 Annual Survey,” Kaiser Family Foundation and Health Research and Educational Trust.
Note: “NA” means not available or, with respect to firm information for nongroup coverage, not applicable. Information on individuals’ contributions to HSAs not available. “PPO”
is a preferred provider organization. According to AHIP, more than 90% of HSA-qualified HDHPs are PPOs.
a. These numbers are based on what insurers’ reported for their “best-selling product.” The average premium and benefits of these products may not be representative.
b. An average for all age groups was not provided. Average premiums were reported by age-groups.
c. Average not provided. This is the estimated median.

CRS-6
HSA-Qualified HDHPs for Federal Employees
In January 2005, HSA-qualified HDHPs first became available to federal employees
through the Federal Employees Health Benefits Program (FEHBP), which is administered
by the Office of Personnel Management (OPM). The U.S. Government Accountability
Office (GAO) analyzed the first-year experience of these 14 plans and, as of March 2005,
their 7,500 enrollees. (According to OPM’s preliminary estimates, there were 12,400
enrollees in FEHBP’s HSA-qualified HDHPs in March 2006.) This section summarizes
the GAO findings.7
The experience in FEHBP’s new HSA-qualified HDHPs was compared to another
new FEHBP plan that was not an HDHP. That plan was a traditional preferred provider
organization (PPO). Among the subscribers (that is, the federal employees or retirees
under whose name enrollment occurred), the average age in the HSA-qualified HDHPs
(46) and the new non-HDHP (47) was below that of FEHBP subscribers overall (59).
This was because a smaller share of retirees enrolled in new plans, regardless of whether
they were HDHPs. Excluding retirees, subscribers in the HDHPs and in the new
non-HDHP had an average age of 44, and for all FEHBP plans, an average age of 47.
The GAO report also compared the income of federal employees who signed up for
the various plans — specifically, the percentage of federal employees who had salaries
of $75,000 or more. In the HSA-qualified HDHPs, 43% of the federally employed
subscribers had a salary of at least $75,000. This percentage was much higher than in the
new non-HDHP (14%) and among all FEHBP plans (23%). In other words, federally
employed subscribers in the HDHPs were much more likely to be high-income compared
to subscribers in the other FEHBP plans.
Three of the 14 plans, referred to as the multistate HDHPs, comprised 96% of the
FEHBP HSA-qualified HDHP enrollment in 2005. The characteristics of these three
plans were compared to non-HDHPs offered by the same carriers. The deductibles in the
HDHPs were slightly more than double the carriers’ non-HDHP PPO deductibles.
HDHPs are permitted to cover preventive services without being subjected to the
deductible for qualifying for an HSA. All of the multistate HDHPs took advantage of this
exception, with enrollees paying the same or less for preventive services than the
traditional plan enrollees.
The average monthly portion of the premium paid by employees was $91 for the
HSA-qualified HDHPs (single coverage) and $99 for the traditional plans. In addition,
these HDHPs also made contributions to individuals’ HSAs. These contributions
averaged $82 per month, arguably offsetting much of the employees’ contribution to
premiums.
7 “Federal Employees Health Benefits Program: First-Year Experience with High-Deductible
Health Plans and Health Savings Accounts,” U.S. Government Accountability Office Report
GAO-06-271, Jan. 2006, at [http://www.gao.gov/new.items/d06271.pdf].