HSA, HRA contributions reach record high in 2013
Originally posted March 14, 2014 by Melissa A. Winn on https://ebn.benefitnews.com
The number of employers contributing to health savings accounts or health reimbursement arrangements continues to grow, with 71% of employees reporting contributions from their employers in 2013, according to a new report by the Employee Benefit Research Institute.
That number represents the highest level of employers contributing since the 2005 inception of the EBRI/ Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS).
While the study found that the number of employers contributing to HSAs and HRAs has grown, it also found the amount of their contributions for some has declined. The percentage of employees with employee-only coverage reporting employee contributions of $1,000 or more slipped from 28% to 23% in 2013.
For employees with family coverage, employer contribution levels were mostly unchanged, however.
That trend held true for employee contributions, as well. EBRI found, on average, workers with employee-only coverage dropped their HSA contribution levels last year, but those with family coverage kept contribution levels relatively steady.
These findings come from the 2008–2013 EBRI/Greenwald & Associates Consumer Engagement in Health Care Surveys (CEHCS), and earlier EBRI surveys, that have tracked the growth of so-called consumer-driven health plans since 2007. CDHPs consist of HSAs, health reimbursement arrangements (HRAs), and high-deductible health plans designed to bring aspects of consumerism to health insurance plans.
According to the study, 11.8 million adults ages 21-64, 9.7% of the U.S. population, were enrolled in a plan with an HRA or HAS in 2013. Another 9.3 million reported they were covered by an HSA-eligible plan but had not yet opened the account. Overall, therefore, the study found about 21 million adults ages 21-64 with private insurance, representing 17.3% of that market, were either already in a CDHP or covered by an HSA-eligible plan. When their children were included, 26.1 million individuals with private insurance, representing 15% percent of the market, were either in a CDHP or an HSA-eligible plan.
The full report, “Employer and Worker Contributions to Health Reimbursement Arrangements and Health Savings Accounts, 2006–2013,” can be found online at ebri.org.
Making HSAs and wellness work together
Originally posted January 13, 2014 by Rose Rosa on https://ebn.benefitnews.com
Maximizing the positive impact of a wellness program is a goal of many employers. Much of the discussion around wellness focuses on how to increase employee participation. Doing so remains a challenge for many employers, but there are some innovative approaches employers are exploring.
One concept we’re seeing is tying wellness to health savings accounts. With a HSA, employees can use tax-free dollars to pay for qualified out-of-pocket healthcare expenses, typically including items such as eyeglasses or prescription medications. Now, some employers are expanding use of HSAs to drive wellness participation.
Combining wellness and HSAs is a long-term strategy. However, there can be some immediate benefit for the employer, which typically begins by going from a traditional fully insured plan to a high-deductible plan with a HSA, thereby saving the employer some money right out of the gate.
Here’s how tying a HSA to wellness can work: The employer funds or partially funds a HSA, which is the “carrot” to get employees interested in the account. Over time, some employers introduce the so-called “stick” to maximize participation by requiring employees to meet certain health-related criteria.
Here’s one possible approach:
• In the first year, the employer contributes to the employees’ HSA account (typically, a 50% contribution).
• To receive the 50% contribution in year two, employees are required to complete a health risk assessment.
• In year three, the employer will increase the requirements, perhaps including completion of another HRA, plus biometric testing.
By increasing the conditions that must be met, it creates a natural progression that helps employees become more aware of their health and to do something about any issues identified by the screening. It also demonstrates to employees what they need to do to control their personal health care costs; those who make progress get discounts on their plan, so they become more responsible for their own health and ultimately their own savings. As employees control their costs, they help control the employer’s costs as well.
In the end, it’s a win-win scenario; the combination of HSAs and wellness programs can provide value to both employees and employers. It’s also an effective way to guide beneficial behavior since employees who follow the program are more likely to take steps to become (or stay) healthy. Using this type of program can also be a good opportunity to tie in other health initiatives, such as smoking cessation. One approach is to apply a smokers’ surcharge on the employee contributions (the stick) while also offering smoking cessation programs to help the employee quit smoking (the carrot to avoid the stick).
To make this combined strategy work, education is a vital. HSAs are most effective if employees understand how the program works, so it’s the employer’s duty to teach them. With this approach, employees have greater risk and higher deductibles, but they also have greater control and choice, coupled with an incentive to be healthy. Essentially, this spurs the employee to become a more educated consumer of health care services.
But it’s up to the employer to make the first move.
Medical savings accounts on the upswing
By David Albertson
As of 2012 there was $17.8 billion in health savings accounts (HSAs) and health reimbursement arrangements (HRAs), spread across 11.6 million accounts, according to data from the latest EBRI/MGA Consumer Engagement in Health Care Survey, sponsored by the Employee Benefit Research Institute and Matthew Greenwald & Associates.
That’s up from 2006, when there were 1.3 million accounts with $873.4 million in assets, and 2011, when 8.5 million accounts held $12.4 billion in assets.
The balances continue to grow as more employers adopt high-deductible, consumer-driven health plans combined with HSAs/HRAs. However, assumptions about these plans are not always proving true. For example, analysts predicted that individuals given more control over funds for health care services would become more cost conscious as they became more educated about the actual prices of those services. However, according to EBRI, no evidence was found to support this, nor was there evidence that healthy behaviors had any real correlation with account balance.
Among other findings from the EBRI/MGA survey:
After leveling off, average account balances increased. After average account balances leveled off in 2008 and 2009, and fell slightly in 2010, they increased in 2011 and 2012. In 2006, the average account balance was $696. It increased to $1,320 in 2007, a 90% increase. Account balances averaged $1,356 in 2008 and $1,419 in 2009, 3% and 5% increases, respectively. In 2010, average account balances fell to $1,355, down 4.5% from the previous year. In 2011, average account balances increased to $1,470, a 9% increase from 2010. It increased to $1,534, or 4%, in 2012.
Total and average rollovers increased. After declining to $1,029 in 2010, average rollover amounts increased to $1,206 in 2011 and remained there in 2012. Total assets being rolled over increased: $9.7 billion was rolled over into HSAs and HRAs in 2012, up from $6.8 billion in 2011. The percentage of individuals without a rollover was 11% in 2012.
Differences in account balances. Men have higher account balances than women, older individuals have higher account balances, account balances increase with household income, and education has a significant impact on account balances, independent of income and other variables.
Individual providers of HSAs likewise report significant growth in account balances over the past year, and bullish expectations for additional increases.
Among the HSA leaders, UMB Healthcare Services, a division of UMB Financial Corporation, announced that account balances for its HSAs grew 55% during the previous 12 months, surpassing $615 million dollars as of Jan. 31, 2013. The number of HSAs also grew to nearly 320,000 individual accounts, up dramatically from the 220,000 following open enrollment last year.
UMB Healthcare Services also saw a 29% increase in the number of debit cards it provides for Flexible Spending Accounts (FSAs), HRAs) and HSAs. Today, the number of cards in circulation has grown to more than 2.8 million.
According to the January 2012 annual census by America’s Health Insurance Plans’ Center for Policy and Research, the number of people with HSA/HDHP coverage rose to more than 13.5 million, up from 11.4 million in January 2011.
“Our HSA growth continues to reflect the trend we are seeing nationwide as more individuals and employers move toward consumer-directed health accounts,” said Dennis Triplett, CEO of UMB Healthcare Services. “We are now challenged with educating the growing number of employers and account holders on all that these accounts can offer toward future financial stability, beyond day-to-day health care expenses.”
Source: https://ebn.benefitnews.com/news/medical-savings-accounts-on-upswing-2731569-1.html
2013 Inflation Adjustments
Source: United Benefit Advisors
By: Chadron J. Patton
Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2013. Many of the new numbers are slightly higher than their 2012 counterparts. For instance, the annual 401(k), 403(b), or 457(b) deferral limit will increase from $17,000 to $17,500; the Section 415 limit on annual additions to a participant's account will go from $50,000 to $51,000; and the annual compensation limit will increase from $250,000 to $255,000. (The annual retirement plan catch-up contribution limit -- $5,500 -- will remain unchanged for 2013.)
The annual compensation threshold used in identifying highly compensated employees (HCEs) remains unchanged for 2013 (at $115,000). In identifying HCEs for 2013, employers should consider employees who earned at least $115,000 during 2012 (as well as 5% owners during either 2012 or 2013). This is due to the "look-back" nature of the HCE definition.
The annual limit on IRA contributions (whether traditional or Roth) will increase from $5,000 to $5,500, while the annual limit on IRA catch-up contributions will remain at $1,000.
The maximum contribution to an HSA will increase slightly -- from $3,100 to $3,250 for individual coverage, and from $6,250 to $6,450 for family coverage -- while the maximum HSA catch-up contribution will remain at $1,000. The minimum deductible for any high-deductible health plan (which must accompany any HSA) will also increase slightly -- from $1,200 to $1,250 for individual coverage, and from $2,400 to $2,500 for family coverage.
A new $2,500 limit on employee deferrals to health FSAs will apply for plan years beginning on or after January 1, 2013. This $2,500 limit applies only to salary reduction contributions under a health FSA and not to employer contributions. For this purpose, however, any employer FSA contributions that could have been received in cash are treated as salary reduction contributions.
The Social Security taxable wage base will increase for 2013 -- from $110,100 to $113,700. A question yet to be answered is whether employees will continue to enjoy a temporary reduction in the long-standing 6.2% "OASDI" tax rate. For 2011 and 2012, that rate has been temporarily reduced by two percentage points (to 4.2%), as a way of helping to stimulate the economy. Although there does not appear to be significant sentiment in either of the major political parties to extend this reduction, there is a slight chance that the 4.2% rate will remain in effect for 2013. (In any event, the employer OASDI tax rate will remain at 6.2%.)
The Medicare tax rate has long been set at 1.45% -- for both employees and employers. Beginning in 2013, however, the employee Medicare tax rate will increase by 0.9% (to a total of 2.35%) on wages in excess of $200,000 for single filers or $250,000 for joint filers ($125,000 for married individuals filing separately). Employers must start withholding this additional Medicare tax once an employee's Medicare wages have exceeded $200,000. This additional Medicare tax does not apply to the employer's share.
To obtain a quick reference card listing the 2013 annual benefit plan amounts, please contact Saxon Financial Consulting
Hot HSA's
A new study by Devenir found that the number of health savings accounts (HSAs) has increased to more than 7 million as of June 30, 2012, with assets totaling more than $14 billion. That's a 12 percent jump in accounts and a 21 percent rise in assets over the same time last year. HSA participants have kept 30 percent of their contributions this year, compared with 24 percent in 2011.