As a part of an overall cost-sharing strategy and in response to the rising cost of health care, employers are offering high-deductible health plans (HDHP) and health savings accounts (HSA) at higher rates. In fact, from 2008 to 2020, HDHP offer rates grew 53 percent and HSA offer rates grew 54 percent across the board according to a recent analysis of more than 200,000 employers using the Benefitplace platform. The analysis also found that the offering growth rate among employer groups with 1,000+ employees was more significant than employers with less than 1,000 employees.1
Consumer health plan election does bear out in following the offer trend where employee populations are willing to consider an HDHP based on the merits of the program. Since 2015, large employers remained steady with a two percent growth in HDHP election rates and small employers saw rapid growth in HDHP election rates with a 10 percent increase.2
So, what else is fueling the popularity of these plans?
Location! Location! Location!
The National Bureau of Economic Research indicates that employers who switched from non-HDHPs to an HDHP saw a 10-12 percent decrease in firm-wide health spending in just two years.3 So we can assume that higher HDHP and HSA election rates are likely due to strategic considerations for the employer, cost considerations for the employee, or a combination of the two. Upon taking a closer look, we found that that employer benefits strategy as well as employee enrollment and offer rates are affected by the specifics of location.
In 2020, the Midwest led all regions with a 40 percent offer rate, while the second-rated Northeast region only had a 5 percent offer rate. Since 2008, the Midwest has experienced an almost 35 percent offer growth rate! Considering the median household income rates in the Midwest, it makes sense why the region is leading by such a large margin for these cost-conscious plans as the region reports a household income rate lower than the national average.4 Employees in the Midwest potentially see HDHP and HSA options as more desirable and cost-conscious options. This indicates that employer HDHP offer and enrollment rates are directly influenced by income.
Similarly, HSA offer rates vary by region, but are not as contrasting. The West region leads in HSA offer rates at 60 percent in 2020, followed by the Southern region at almost 57 percent and the Midwest region around 54 percent.5
By implementing HDHP and HSA options, an employer will likely see changes to their bottom line (the intended result), but they should also keep in mind that employees may need education if they will be coaxed to enroll in an HDHP with an HSA. And if they do, they'll certainly need some guidance on how to effectively prepare for the difference in their financial responsibility, like new out-of-pocket costs that come with an HDHP.
In an effort to migrate employees to a lower-cost HDHP, employers should encourage employees to measure their current plan usage, evaluate their financial stability, and consider their future usage. Depending on the specific employee needs, an HDHP may be a more attractive, cost-conscious option than a traditional PPO plan. However, these changes may also put employees in a position that is unfamiliar.
For a significant percentage of employees, the out-of-pocket expenses associated with an HDHP eclipse their own average amount of savings - about $1,000. Even the standard deductible for a self-only PPO is greater than that $1,000.6 Employees are now faced with the kind of situation that they were afraid of: they have to make a health and wellness decision based on cost, not need. Even if HSAs are offered with HDHPs, it may not be enough to protect the most vulnerable employees. But, there is opportunity here.
This is where voluntary benefits like accident insurance, critical illness insurance and hospital indemnity insurance prove to be a valuable aspect of your employee benefits offering. These options can provide not only financial support and help cover cost concerns for your employees who elect to enroll in an HDHP, but they can also help reduce health risk and expense exposure. Employers could also consider investing any health care savings into wellness programs or additional benefits that can help support employees' financial and mental wellbeing.
The impact of health plan changes, especially cost-sharing measure introduced by the implementation of HDHPs and HSAs, have to be monitored closely. Examining and trending claims data throughout the year will provide opportunity to better understand plan usage and cost expectations, especially as it impacts their employees, their health, and their overall utilization. Tracking the plan usage and performance will also inform employers and give them insights for future health plan evolution.
Download the Exponential Rise in Consumer-Driven Health Plans infographic to take a closer look at how HDHPs and HSAs are trending.
1. Benefitfocus platform utilization statistics.
2. Large Employers defined as 1,000+ employees and Small Employers defined as 1-99 employees.
3. National Bureau of Economic Research. What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics. 2020.
4. Consumer Reporter. Midwest Region. 2020.
5. Benefitfocus platform utilization statistics.
6. Statista. Personal Savings in the U.S.: Most Americans Lack Savings. 2020.