Are HSAs the Key to Making Obamacare Work? – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Top Stories
Topics
    • Life Insurance
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Content
    • Webinars
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
Sign in or register to be an INNsider.
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
  • Insider
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Health Insurance Newsletter
Top Stories RSS Get our newsletter
Order Prints
July 6, 2016 Top Stories 2 comments
Share
Share
Tweet
Email

Are HSAs the Key to Making Obamacare Work?

By Cyril Tuohy

Employees contribute far below the maximum amount allowed to an individual-coverage or family-coverage health savings account (HSA), a sign consumers aren’t taking full advantage of the account’s tax benefits, according to a new analysis of consumer records.

Managing health costs, particularly for consumers in or approaching retirement, is considered a growth area for insurance agents and advisors doing comprehensive financial planning. HSAs are primed to play a key role.

More than 20 million Americans have access to health plans with HSAs, according to the trade association America's Health Insurance Plans (AHIP). Congress recently passed bipartisan legislation expanding the use and contribution limits for HSAs.

The key is to get more Americans to utilize their HSAs, analysts say, which can offer relief for skyrocketing health insurance costs.

The 2015 HSA contribution limits set by the U.S. Treasury are $3,350 for individuals insuring only themselves through a high-deductible health plan and $6,650 for family coverage through a similar plan.

The average contribution for an individual-coverage HSA across the manufacturing, health care and education sectors was $1,398 from the employee and $551 from the employer, or $1,949. That is well short of the 2016 limit of $3,350, according to the analysis conducted by Benefitfocus, a cloud-based benefits management company.

Results are published in company’s State of Employee Benefits, Industry Edition 2016, which pulled data from 400,000 anonymous consumer records at employers with more than 1,000 employees last year.

Massive high-deductible health plan adoption coupled with low HSA contributions means the message of self-financed contributions isn’t resonating as loudly as it should, said Jeff Oldham, vice president of customer success at Benefitfocus.

Average contributions for a family-coverage HSA across the manufacturing, health care and education sectors was $2,768 from the employee and $1,161 from the employer, or $3,929, still short of the 2016 limit of $6,650.

As employers shift more of the cost of health care onto employees, HSA plans gave gained traction in the market.

At the end of last year, there were 16.7 million HSA accounts holding almost $30.2 billion in assets, according to Devenir Research’s 2015 year-end HSA Market Survey. HSA assets are expected to top $37 billion by the end of this year, the researchers said.

Maximum Limits and Underfunding

Employees in the education sector tend to self-fund their HSA to a greater degree than employees in the manufacturing and health care sectors, the Benefitfocus data show. Manufacturing workers lead adoption of high-deductible health plans.

“If manufacturing companies had any doubt about their efforts to introduce HDHPs (high-deductible health plans, they needn’t; for the most part, their employees are on board,” the report said.

But just because an HSA accountholder doesn’t save up to the limit allowed by the government doesn’t mean the account is “underfunded.”

A 25-year-old with one or two minor health claims over a 12-month period doesn’t need to put aside $3,350 annually, unless he or she wants to take full advantage of the tax benefits or invest the HSA contribution.

Health plans with the lowest premiums typically come with the highest deductibles, which sometimes run as high as $12,000 or more. Setting aside that much would take an employee three or four years to achieve.

If there’s not enough in the HSA to fund a catastrophic injury, accountholders often need to borrow from family, friends or credit card lenders to pay the balance.

Baby boomers tend to favor more traditional HMO and PPO plans while millennials, many of them weighed down by debt, gravitate to high-deductible health plans, Oldham said. The latter plans are cheap and young professionals starting out can’t afford anything else.

“You have to get folks out of debt and manage debt appropriately, otherwise the HSA contribution is last on the list,” he said.

Health care financing experts have called HSAs the 401(k) of the health care system because consumers fund their own health expenses similar to funding their own retirement through a defined contribution plan.

The accounts are portable and can be used to pay for health care expenses from one employer to the next, so long as the employer offers a high-deductible health plan.

Advantages of HSAs and high-deductible health plans include lower premiums, income tax reduction, tax deferral on assets in HSAs, rollover provisions, tax-free distributions, policyholder control and asset protection.

Disadvantages of HSAs mean the potential for higher out-of-pocket costs, penalties for nonqualified expenses and are not suitable for employees suffering from chronic conditions.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]

© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Older

AUM Pricing: A Dinosaur in Today’s Financial World?

Newer

Brexit Might Yield Some UK Bargains

Advisor News

  • Banks announce dividend plansTruist, Wells Fargo, Bank of America announce dividend hike plans
  • Jerry Shenk: Social Security demagoguery
  • Rick Kahler: My state flunked financial literacy. How about yours?
  • Inflation affects each family differently
  • With retirement balances down, a Roth conversion may make sense
More Advisor News

Annuity News

  • Sammons names Kevin Mechtley to newly created product innovation role
  • Athene completes pension group annuity deal with Lockheed Martin
  • Integrity expands annuity, life insurance distribution with Annuity Agents Alliance
  • Nationwide increases roll-up rate, payout percentage on L.inc+ suite
  • Midland Retirement Distributors launches Summit Focus 3
More Annuity News

Health/Employee Benefits News

  • How will Roe v. Wade reversal impact employee health plans?
  • Jury still out on new insurance plan for Idaho schools
  • Citadel reaches $7.85M settlement over switching patients to boost Medicare payments
  • Idaho gave schools millions to buy state health insurance, but many still can’t
  • Colorado one step closer to a state-designed health insurance plan
More Health/Employee Benefits News

Life Insurance

  • Wisconsin seeks policyholders of insolvent Time Insurance Co. products
  • 4 things to know about the return of premium life insurance
  • Murdaugh, Curtis Smith hit with new SC grand jury indictments
  • Foresters Financial boosts UL crediting rate to 4.75%
  • Protective Life releases 2021 sustainability report
More Life Insurance

- Presented By -

Product Alerts by INN
Brought to you by TSR

Protect Your Clients

Discover how you can find out which life insurance and annuity carriers actually have the financial strength to back their promises to your clients long into the future.

Financial engineering and reinsurance “sleight-of-hand” are prevalent in the insurance industry today. And this risky behavior could be reducing the reserves held to protect your clients.

The TSR Ratio exposes these troubling levels of risk on some stock and private equity owned insurers’ balance sheets. And right now, you can get access to an exclusive report…

Continue reading

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

FEATURED OFFERS

It’s time for John Hancock Insurance See how our cutting-edge solutions can help you grow your life insurance business. Get to know us.

Press ReleasesAll press releases

  • iPipeline® Provides Advisors Excel with Unified Path Toward Accessing Core Data Analytics in Financial Services
  • iPipeline® Adds Speed of Underwriting to Quote Engine with Ethos to Deliver Insurance to Agents in Minutes
  • National Life Will Host Annual Investor Call
  • RFP #T01622
  • OneAmerica Commits $1 Million Toward Financial Literacy
Add your Press Release >

Topics

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Content
  • Webinars
  • Monthly Focus

Top Sections

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2022 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your INNsider Account

Not registered? Become an INNsider.