In this episode, we are joined by Dr. Jeff Kullgren, research scientist and faculty member at the University of Michigan, to discuss their study on the use of Health Savings Accounts to save for health care expenses.
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Highlights of this episode include:
- Background on the study which surveyed over 1,600 participants about their use of health savings accounts and how they saved for health care expenses.
- Details behind the growth of enrollments in high-deductible health plans in the private insurance market.
- Why only one in three individuals enrolled in a high deductible health plan did not have a health savings account.
- What top reasons were given for not contributing to a health savings account in the past year.
- What are some practical steps that employers, payers, and providers could do to better support high deductible plan enrollees to take advantage of using HSAs.
- And more…
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. Recent federal legislation has expanded health savings accounts and encouraged the use of them. However, little is known about how US residents who may be eligible for HSAs are using them to save for health care. Recently, a group of researchers set out to understand more about this. Today I’m joined by Dr. Jeff Kullgren, who led a study that looked at this issue which was published in the JAMA Network. Dr. Kullgren is a research scientist in the Center for Clinical Management Research at the VA Ann Arbor Health Care system and an associate professor in the Department of Internal Medicine at the University of Michigan Medical School and Institute for Health Care Policy and Innovation. Dr. Kullgren, welcome to the show.
Dr. Jeff Kullgren: Thanks very much for having me.
Mike: So why don’t we start out. Can you describe the objective of this particular study for our audience?
Dr. Kullgren: Yeah. So first of all, thank you for your interest in this research, and this work looked at a really important issue that I think has become more common and more important over the years, and that’s the growth of enrollment in high-deductible health plans in the United States. So I think one of the most notable trends that we’ve seen in health insurance benefit design over that time period has been the growth in enrollment in high-deductible health plans in the private insurance market. And in fact, what we see now is that out of all non-elderly Americans with private health insurance, nearly half of them have a high-deductible. Many of those plans then are also eligible to be linked to a health savings account, which is a tax preferred savings account that allows people to save for health care expenses, also allows them to carry those savings over year to year that they can then build over time. They can use to pay for eligible health care expenses and then could even use that too as a retirement savings vehicle and then take that money out tax free later in life.
So I think HSAs create an interesting opportunity to address some of the known problems at this point with high-deductible health plans. And namely, those are the high rates of individuals with high-deductible health plans forgoing necessary care due to cost and also facing very high out-of-pocket expenses that typically are for people with more limited means or more serious health care needs. They may experience those problems more frequently. So health savings accounts, I think, can create a real important opportunity to address some of the problems that high-deductible health plan enrollees may face. But we unfortunately don’t know a lot about how people who have a high-deductible health plan use health savings accounts. So we had several clear objectives in this particular study. The first was to quantify the percentage of high-deductible health plan enrollees in the United States who lack a health savings account attached to their plan to identify which high-deductible health plan enrollees may be more likely to lack a health savings account and also among those with an HSA to identify those individuals who might be more likely to not contribute to an HSA when they have one. And then finally, we also wanted to collect information on why high-deductible health plan enrollees who have an HSA don’t make contributions to their account.
Mike: And could you tell us about the data that you examined to meet these objectives?
Dr. Kullgren: So in this project, we used a nationally representative survey, and this was a survey we conducted in the fall of 2016. This was a nationally representative survey of 1,637 participants in GFKs knowledge panel. Now, GFKs knowledge panel is an Internet Panel Survey. So these are individuals who join the panel and then periodically complete surveys online. Individuals may ask themselves when they hear that, well, perhaps individuals who sign up for an online survey panel are different than other people in a number of ways who do not choose to sign up for such a panel and thus could that influence the results in some ways. That is an issue that affects many internet panel surveys. The reason why we chose GFKs knowledge panel is because they take many steps in order to ensure that their internet survey panel is as nationally representative as possible. They do address-based sampling. So instead of setting up a website and then asking individuals to sign up online for their panel, they send out invitations to join the panel to a sample of residential addresses in the United States. Then they do outreach to those individuals to see if they want to join the panel.
If people lack a computer or some other device to complete an online survey, they provide that technology to the individual. If people don’t have broadband internet access, they also similarly provide– or internet access in general, they provide internet access to those individuals as well. And with those and other approaches, knowledge panel is unable to construct a very nationally representative panel and then also ensure high response rate. So when using this methodology, we could be confident that our results are as nationally representative as possible. In our survey then, we asked high-deductible health plan enrollees. And so this survey was focused only on people who have high deductible health plans.
We asked these individuals in the survey if they had a health savings account, if they had saved for health care expenses in the past 12 months, and if they had saved for health care in last 12 months, in what kind of savings vehicle they put that money, whether it was an HSA, an FSA, or flexible spending account or whether it was a bank account. And if they had not saved for health care in the past twelve months, we asked them why not. Now, for your listeners, one really important caveat about our study was the definition that we use of health savings accounts. So health savings accounts are a unique savings vehicle that was created under regulations over 15 years ago by the Internal Revenue Service. It’s difficult in a survey to precisely define and identify whether a savings account that someone is talking about that is giving you information on the survey is indeed an IRS-eligible health savings account or not. So what we did is we relied on an existing survey measure from the National Health Interview Survey, one of the most widely used, most longstanding federal sources of health information.
And just for your listeners, I’m going to read what the definition there was, is defined as a special account or fund that can be used to pay for medical expenses that are sometimes referred to as health savings accounts, health reimbursement accounts, personal care accounts, personal medical funds or choice funds and are different from flexible spending account. So it’s important then to keep our results in that context and realize that when we’re talking about health savings accounts and when we collected data on whether individuals have health savings accounts, those are the kinds of accounts that people were asked about. So when people then in the survey told us whether or not they had an HSA, if they had saved for health care in the last year, if they indicated that in the survey, we asked them how much they had saved and into what savings vehicle, and if they had not saved for health care in the last year, we asked them why not, and they could select from a wide variety of reasons and also could have a free text responses if their particular reason didn’t fit into some of our categories. In our analysis then, we used logistic regression to identify factors that were associated with lacking an HSA with not having contributed to an HSA among people that had one. And then we also, in all of our analysis, applied survey weights, which allow us to derive nationally representative estimates for all of our results.
Mike: And what were the results of your research?
Dr. Kullgren: The main results of our research were that approximately one in three high deductible health plan enrollees lacked a health savings account. Now, because of that definition that I mentioned just a moment ago, they may well be an underestimate of the percentage of high deductible health plan enrollees that lack an IRS-eligible health savings account. We found that individuals who acquired their health insurance plan through a health insurance exchange and also individuals who had lower levels of education were more likely to lack an HSA. We also found that more than half of people who indicated they had an HSA had not saved at all for health care in the past year. And we found that not having saved was more common among people with lower levels of education and people who had lower levels of health insurance literacy. Now, health insurance literacy is a construct that essentially represents people’s confidence in understanding how their health insurance works in being able to use their health insurance to get the care that they need. We found then that the most common reasons for not having saved for health care among people with HSA is included not anticipating a need for health care, already feeling like one had sufficient savings for health care, not having considered saving for health care, and also feeling like an individual is unable to afford saving for health care. And that particular reason was endorsed by about a third of people who had an HSA but had not saved for health care in the last year.
Mike: Are we surprised by these findings?
Dr. Kullgren: There were two main findings in our study that were the most surprising to our team. The first one was the very high percentage of people in our study who– that individuals who gained their insurance coverage through an exchange were substantially more likely to lack an HSA. So I mentioned a moment ago that about a third of people of high deductible health plan enrollees nationally lack an HSA as we had defined it, but that percentage was 70% among people who had gained their coverage through a health insurance exchange, so substantially more common. Now, this could be well be because there are certain features that a health insurance plan needs to have under current law and regulations in order to be eligible for linkage to an HSA, okay? Not only does a plan have to have a high deductible as defined by the Internal Revenue Service, but there’s certain other caveats about what the deductible does and does not apply to that can affect a plan’s eligibility for linkage to an HSA. And in fact, there were data that were released several months ago on federal marketplace coverage and the experience during the most recent 2020 enrollment period. And what the federal government had said about that is that just 7% of marketplace plans during the 2020 enrollment period were eligible for linkage to an HSA. Okay? Even though on the federal exchanges, the vast majority of plans that are selected by individuals who get their coverage that way have high deductibles. Okay. So there are other features maybe about those plans that preclude their linkage to an HSA. So that could explain some of the higher rates of not having an HSA among people who got their coverage through an exchange.
The second thing that was particularly surprising to us were that so many people, more than half of individuals who had an HSA had not saved for health care in the last year. Now, of course, some of that could be because– and this is why I mentioned in detail the definition of a health savings account that we use in this study. This could be some of the accounts that individuals indicated they had or were indeed not IRS-qualified HSAs. That may mean that those particular accounts don’t have the same tax incentives for savings as other kinds of accounts. And that certainly could well be one contributor, and we’re not able to quantify the extent to which that could have been an issue. But if we turn then to the reasons that people gave about why they had not saved for health care in the last year or when they had a health savings account, that does point to some other important reasons perhaps driving some of those decisions. Those include other things like not having considered saving for health care in the last year, not being able to afford doing so. So, again, we were really surprised that so many people with HSAs had not save for health care in the last year. And I think our results do point to some reasons for those decisions that potentially could be targeted by employer’s health plans and health systems.
Mike: So let’s talk about that a little bit more. How do you think these findings affect those other constituents you just mentioned?
Dr. Kullgren: That’s a great question. And I do think that in spite of the particular definition that we used in this study and our inability to pinpoint exactly how many of the HSAs, the people indicated that they have or indeed IRS-eligible HSAs, that our findings do have very important– irrespective of that point, our findings have really important implications and points to some potential interventions that employers’ health plans and policymakers and also health care systems could implement to better support people who face high-cost sharing through high deductible health plans. So I think one important point for policymakers and other individuals and stakeholders who are involved with health insurance exchanges is that exchanges I think could better highlight the benefits of health savings accounts at the time of enrollment for individuals indicating the extent to which a plan that an individual may be selecting on the exchange indeed is eligible for linkage to an HSA, what an HSA is, why that could be beneficial to the individual. I think that’s something that at the point of choosing health insurance plans could be better highlighted. For some individuals, could lead them to make different decisions about plan selection than they otherwise would. Similarly, there have been a– I think as you highlighted at the outset, there’s been a lot of federal legislation recently that has sought to expand eligibility for health savings accounts to other types of health insurance plans, whether that be in different kinds of private health insurance plans. There also have been some policy initiatives that had been suggested to expand HSA eligibility, say to, the Medicare population or to other population subgroups. And certainly, those are approaches that could expand uptake of health savings accounts to the extent that more individuals are eligible for linking those accounts to their health insurance plan, whatever that may be.
I think in particular though, if there were no legislative or regulatory changes around the kinds of plans that could be linked to health savings accounts, there are some important practical things that employers, payers, and providers could do to better support high deductible plan enrollees to take advantage of using HSAs to help them blunt the impact of their deductibles and thus help them better afford necessary care. One thing that could be done in particular would be for employers, payers, and providers to deliver targeted messages periodically to high deductible plan enrollees to suggest HSA uptake and savings. I think a lot of the communications around health insurance benefits tend to be concentrated on the open enrollment period. And that’s understandable because that really is the point of choosing one’s plan that then has a lot of carry forward over the subsequent 12 months. But to the extent to which people could make conditional on already having chosen the plan could be making different decisions about going out and getting an HSA and linking that to their plan if they’re eligible to do so or perhaps changing their levels of contributions to an HSA to the extent that those are decisions that could be made over the course of the year. Those are things that targeted messaging to individuals who could benefit from doing so potentially that could have affect the decisions that they make and be beneficial to those individuals.
I think employers in particular have a lot of experience with encouraging retirement savings. So this is three different types of messaging interventions. This is also by, of course, matching contributions that individuals may be making to retirement savings. Similar things could be done to better encourage health care savings in health savings accounts in workplaces where high deductible health plans are offered and connected to an HSA. So certainly, some employer, there’s some examples of employers that have taken those kinds of approaches on their own, perhaps seeding HSAs with an employer’s contributions but I think more consistently implementing strategies to encourage savings for health care that can again importantly be rolled over year to year and also can potentially supplement retirement savings really should be pursued more consistently among employers. And a really important point in all of this work that we haven’t talked about yet is that in all of these efforts, stakeholders, whether they be employers, payers, health systems providers, should really prioritize outreach to people who could benefit most from each of these strategies. We know from other research including some of our own that people enrolled in a high deductible health plan with a lower income, with chronic conditions are more vulnerable to forgoing necessary care due to cost and to facing high out-of-pocket expenditures. And those can have important consequences for people’s ability to seek and ultimately afford necessary care.
And so those are individuals potentially who could benefit most from using an HSA to help them save for care that they know they’re going to need. We found in our study that individuals with lower incomes and individuals with chronic conditions were no more likely to have a health savings account than other people, and they were no more likely to have contributed to a health savings account where they had one. So that suggests because those are individuals who potentially could benefit most from having an HSA and from contributing to it, that employers, payers, and providers should prioritize those populations in their outreach to better support people who may be most vulnerable to some of the challenges in high deductible health plans that could benefit most from those approaches.
Mike: Dr. Kullgren, if someone wanted to find out more about you or your research, where can they go?
Dr. Kullgren: I would love to connect with anybody who would be more interested in learning more about this work. Probably the best way to connect with me would be via Twitter, where my handle is @JeffKullgren, and that’s J-E-F-F-K-U-L-L-G-R-E-N.
Mike: Dr. Jeff Kullgren, thanks for coming by the podcast today and sharing this research around the use of HSAs in the United States.
Dr. Kullgren: It was my pleasure. Thank you for having me.