3 Pitfalls of the HSA

Mar 15, 2019

The HSA was launched in 2004 with great excitement from the employee benefits community. It was crafted with the intention of empowering consumers to make better healthcare decisions. And it’s been marketed as the only savings vehicle with “double tax benefits.” Both employees and employers can deposit funds pre-tax, and then employees can use funds, including any capital gains, for qualified medical expenditures on a pre-tax basis.

Fourteen (14) years have passed since the HSA was launched, and the outcomes are clear: the HSA has some serious challenges:

Postponed Care for Chronic Conditions

The restrictions on the design of HSA eligible health plans were simply too tough. Although preventive care is covered at 100%, care for chronic conditions is subject to the deductible and results in high out-of-pocket costs to the employee. Proponents of the HSA tout that there’s been a 14% increase in employees “price shopping” for their healthcare; however, 33% of HDHP participants are postponing care altogether. The care being postponed is often routine care for chronic conditions like diabetes, asthma, and heart disease. Without proper attention to these conditions, their treatment costs increase exponentially, impacting both the employer and employee.

Insufficient Price Transparency

Additionally, without significant price transparency reform, an empowered consumer doesn’t have the tools necessary to make informed healthcare decisions. Sixty seven percent (67%) of consumers still feel that shopping for healthcare is more difficult than shopping for any other type of service. Shopping for healthcare should be as easy as shopping for groceries. Imagine if you didn’t know how much your basket cost until a few weeks after your trip to the market? That’s where we are with price transparency in healthcare.

Favors the Wealthy

Although well intentioned, the HSA has failed to benefit all but the very wealthy and very healthy. Until legislation is passed that permits an HSA to be paired with plans that offer first-dollar coverage for chronic diseases as well as prevention, we encourage employers to evaluate alternative strategies that attack cost-inflation from the supply-side. Successfully implementing these strategies can save employers 20 – 40% on their annual medical spend without compromising quality of care:

  • Unbundling your Health Plan with a flexible TPA
  • Contracting with a transparent PBM
  • Direct contracting bundled payments with providers
  • Value-based network steerage
  • Aggressive targeting of high-cost areas like Diabetes & Orthopedic Surgery

-Geoff Rowson


Consumer Engagement in Health Care: Findings From the 2018 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (Paul Fronstin & Edna Dreztka)

Trends in Health Savings Account Balances, Contributions, Distributions, and Investments, 2011‒2017: Estimates From the EBRI HSA Database (Paul Fronstin)

Keep Exploring