Supplementing Health Expenses with Savings

Commonwealth is committed to building the financial security of financially vulnerable people, and one of the factors that is increasingly contributing to financial insecurity is health expenses – the average annual deductible grew 125% from 2006 to 2015, causing out-of-pocket health care costs to quickly grow. Part of those rising costs may be attributed to the increase in high deductible health plans (HDHPs). As health insurance markets continue to evolve, employers who offer health insurance are increasingly offering HDHPs.

HDHPs are attractive because they provide short-term cost savings on premiums to both the employer and employee. However, unless they are well designed, they increase the risk of out-of-pocket health expenses for employees, which can lead to medical debt, delayed medical care, missed work, and loss of productivity in the workplace. Lower-income employees, who do not have access to financial resources such as savings and affordable credit, are particularly at risk.

HDHPs can be offered alongside a range of savings product designed specifically for health care expenses – Health Reimbursement Accounts (HRA), Flexible Savings Accounts (FSA), and Health Savings Accounts (HSA) are the most common. HSAs are specifically designed to accompany HDHPs to offset the risk of the higher deductible.

However, more than half of employers offering coverage through HSA-qualified HDHPs do not contribute towards the HSAs that their workers open.  Many more employees with HDHPs do not even have an HSA. According to the Kaiser Family Foundation, only 29% of workers with employer policies now have HDHP coverage with a savings option.

With health, productivity, and financial security on the line, both employers and employees stand to benefit from HDHPs that are designed to mitigate the risk of the deductible by increasing savings. We’ve talked with people who have an HDHP, employers, HSA administrators, health insurance providers, and HR professionals to understand more, and are exploring innovative new approaches based on this research.

One approach to increasing saving is for employers to change the design of the HDHP benefit they offer. For example, auto-enrollment into a savings product would make the default option the advantaged option – employees are more likely to save when the mechanism is set as the default for them. The concept is already successful in the retirement space.  For employers who don’t currently offer a savings option, providing them with data in an engaging, and personalized, format about the impact of out-of-pocket health expenses on their employees’ lives could persuade them to offer such a product.

Another approach is to make saving more exciting by offering monetary incentives. Commonwealth’s work, such as SaveYourRefund and prize-linked savings, has shown how successful incentives can be to incentivize savings. In 2016 alone, prize-linked savings account holders at 153 credit unions in 12 states saved nearly $70 million dollars – bringing the total since 2009 to over $175 million.

A third approach is to both personalize the data about health expenses that is provided to employees – that is, tailoring it to the individual person – as well as visualization of the data for easier comprehension. This might increase knowledge and action taking to save money for unpredictable – but likely – health care expenses, as well as providing savers with benchmarks regarding how much to save.

These approaches are based on what we have heard from our surveys, interviews, and our 16 years of work to build solutions to make people financially secure. We are actively recruiting forward-thinking employers, or other interested organizations, to test new approaches to HDHP designs. Contact us today,

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