Large Employers Lead in HSA Adoption

Enrollment in health savings accounts linked to high-deductible health insurance plans grew last year among large U.S. employers at nearly three times the rate of small employers, a survey shows.

In fact, the fastest-growing market for HSA/HDHP products is large-group coverage, which has grown from 19 percent of the market in March 2005 to almost 50 percent of the market as of January, according to the survey conducted by the Washington-based trade association America’s Health Insurance Plans.

The survey, which was released Monday, April 2, found that more than 2 million employees of large companies were enrolled in HSAs in January of this year, up from 679,000 a year earlier and just 162,000 in March 2005, the first year that HSAs were widely available.

Although growth wasn’t as strong in the small-group and individual markets, enrollment still surged there. Enrollment in small-group HSA plans more than doubled to 1.1 million in January from 510,000 a year earlier. By comparison, individual market plans gained just 29 percent, with enrollment growing to 1.1 million from 855,000 a year earlier.

Altogether, about 4.5 million people were covered by HSA/HDHP products, according to the AHIP census, a 43 percent increase since last year.

“When you have in the large-group market a tripling in a year,” it shows that HSA plans “are quickly becoming a mainstream option,” said Michael Tuffin, a senior vice president at AHIP.

He also said the growth rate is phenomenal given the fact that the product is little more than two years old. While HSAs were authorized by Congress under a 2003 law and have been available since January 1, 2004, many employers waited to offer the plans until the Treasury Department issued guidance in August 2004 that resolved many of the operational concerns that had been raised about HSAs.

“The first real shot that employers had to offer this was 2005, and here we are January of ’07 with these numbers. That’s not insignificant,” Tuffin says.

He said the findings should assure other employers that are thinking about adding HSAs to their health plan options.

“Employers large and small are incorporating health savings account plans into their offerings for employees,” he says.

While the growth rates for large employers and small-group employers were exceptional, the tempering of enrollment gains experienced by the individual market slowed the overall growth rate for January to less than half that seen between March 2005 and January 2006.

Tuffin attributed the slowdown to “natural maturing of a marketplace.”

“I think 43 percent growth by any definition is robust and indicative of success,” he says. “Nothing’s going to grow at 200 percent forever.”

Moreover, “in a market that has a very low growth rate as a whole, to have one aspect of that market grow by 43 percent in a year shows that something’s happening,” Tuffin says.

Among other notable findings of AHIP’s 2007 HSA/HDHP census:

• Enrollment in HSA/HDHPs topped 100,000 lives for 11 large employers in January, up from seven employers in January 2006 and just two in March 2005.

• Large employers’ average annual premium for family coverage was $6,963 in January, while single coverage averaged $2,796.

• Annual deductibles in the large-group market averaged $3,996 for families and $1,952 for individuals.

• Eighty-six percent of HSA/HDHP enrollees had average annual balances of $2,500 or less at year-end 2006, while 4 percent had average annual balances exceeding $5,000.

• More than 90 percent of employers included in the survey offer HSA plan options with preventive benefits that are covered outside of the deductibles.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.