In our last few blog posts, we explored Picwell’s health plan recommendations. We reviewed how preferences and financial wellness affect benefits decisions, and how often employees actually choose Picwell recommended plans.
In this installment of our Insights series, we’re going to take a deeper look at Health Savings Accounts (HSAs), explore how Picwell rated HSAs in 2022, and how that affected enrollment.
How Picwell Rates HSA-Eligible Plans
When we look at Picwell recommendations, one of the key items that stand out is that HSA-eligible plans are often a great deal for a wide variety of employees. In fact, if you look at the value of enrolling in (and regularly contributing to) an HSA-eligible plan it becomes pretty clear that HSAs are important accounts to take advantage of to improve long-term financial wellness.
Before we begin, it is important to note that, in our Picwell Scores, we only look at the financial benefits of an HSA over a one-year period of time. So, if anything, we are underestimating how many employees should enroll in HSA-eligible plans, as the benefits from these types of plans can be much higher when you consider longer periods of time.
How often does Picwell recommend HSA-eligible plans?
To begin, let’s take a look at how often the highest scoring plans were HSA-eligible. If we just look at the employers who offered a mix of plans (including at least one HSA-eligible plan, and at least one plan that was not HSA-eligible) we find that:
- The top scoring plan was HSA-eligible 75% of the time. Interestingly, this is lower than what we have seen in previous years, where HSA-eligible plans take the top spot more than 85% of the time. This reflects changes in the variety of plans offered by employers.
- The top scoring HSA-eligible plan has a “green” score 83% of the time.
While HSA-eligible plans are often a great option for many employees, that doesn’t mean they are the best choice for everyone all the time. Just like with anything else, there are many factors that affect how often, and why, HSA-eligible plans are recommended to employees.
Factors that affect HSA-eligible plan recommendations
Picwell’s scores for HSA-eligible plans will reflect a mix of factors, including employees’ personal characteristics and preferences, as well as the different options available to them and the prices of those options. One of the things that makes Picwell unique is the extent to which we account for personal characteristics when we evaluate health plans, so let’s take a look at just how much some of these personal factors influence how we scored HSA-eligible plans.
Level of Risk Aversion
First, let’s take a look at how risk aversion influences recommendations. This graph shows how frequently the top scoring plan was HSA-eligible among employees with different levels of risk aversion.
Perhaps not surprisingly, HSA-eligible options were more likely to be the top scoring plan among people with lower risk aversion.
Capacity to Pay and Income
We see similar trends when we look at how employees respond to our survey question that asks how much they could afford if they needed unexpected medical care. Depending on how employees responded to this “capacity to pay” question, HSA-eligible plans received the top score between 71% of the time at the low end to 82% of the time at the high end.
Variation in HSA top-score frequency by income was very similar, ranging from 71% among employees with incomes below $40,000 per year to 79% among employees with incomes above $125,000 per year. It’s worth noting that HSA plans should look more appealing to higher income employees, holding everything else equal, because of the tax benefits associated with HSA contributions, which does factor into the Picwell Score.
Age, Family Status, and Predicted Health
When we look at HSA scores by coverage type, we find that HSA-eligible plans have the top score at pretty similar rates among employees who are covering just themselves compared to those who are covering additional family members.
We do see some relationship between age and HSA top-score rates, with HSAs scoring higher among younger employees. However most of this difference can be explained by differences in predicted health care spending, so let’s take a look at that metric instead.
As a refresher, Picwell predicts employees' likely cost and risk of future medical expenses, and from this, we can estimate plan-specific cost and risk. Based on these predictions, we can assign employees to different risk levels based on underlying expected medical cost predictions, and when we do this, we can see a strong relationship between predicted medical spending, or risk, and Picwell Scores of HSA-eligible plans.
The graph below shows that HSA-eligible plans had the highest score 87% of the time among employees who fell in the bottom 20% in terms of predicted health care spending. These are the lowest risk, or healthiest, employees. At the other end of the spectrum, HSA-eligible plans had the highest score 64% of the time among employees who were in the top 20% of predicted spending. These are the highest risk, or least healthy, employees. Note that we adjust for household size when assigning employees to the low and high risk groups.
When an HSA-eligible plan is NOT the best option
As we’ve noted, HSA-eligible plans are often a great deal in a lot of different scenarios, and for a lot of different employees. The tax-advantages that come with HSAs make them valuable savings vehicles and they can be a key component to building long term wealth.
So you’re probably asking yourself, When would an HSA-eligible plan ever NOT be the best option?
As we’ve discussed above, personal characteristics do influence how Picwell scores HSA-eligible plans, but perhaps the biggest factor that determines when an HSA-eligible plan is not the best option is external to the employees.
Basically, it comes down to cost.
We can think about costs in two ways. The most obvious costs are the premiums that employees pay for their health plans, and the lowest premium option available to employees is usually HSA-eligible. Another way to think about cost is the total predicted cost after accounting for premiums, predicted out-of-pocket cost, tax benefits and employer HSA contributions. This is how Picwell thinks about costs, and the lowest cost option is usually HSA-eligible based on this metric as well.
However, based on both of these metrics, HSA-eligible plans are not always the cheapest options. The Picwell Score is a representation of value, so it makes sense that the scores for HSA-eligible plans would be lower when they don’t offer sufficient cost savings relative to other options.
If we think about cost in terms of premiums, we see that 22% of the time, the lowest premium option was not HSA-eligible. Among these cases, it was still possible for an HSA-eligible plan to receive the top score, but that happened at a much lower rate (32%). Similarly, the plan with the lowest predicted total cost was not HSA-eligible 22.5% of the time, and Picwell gave the top score to an HSA-eligible plan only 18% of the time in these cases.
Who selects HSA-eligible plans?
We’ve covered some of the factors that impact how Picwell scores HSA-eligible plans. Now let’s take a look at how often employees selected these types of plans along with some of the personal factors that were correlated with these selections.
As we mentioned, HSA-eligible plans can be a great deal for a variety of employees, and in 2022, 68% of Picwell users indicated that they were planning on enrolling in an HSA-eligible option. Among the employees for whom an HSA-eligible plan was the highest scoring option, 80% selected one. Interestingly, as you can see in this graph, not all of that 80% ended up picking the top scoring HSA-eligible option. In fact, a small handful of employees (3%) enrolled in different HSA-eligible plans that were not recommended.
Color Tier and HSA-status of Selected Plan
On the right side of the figure, we see the breakdown of selections when the top scoring plan was not HSA-eligible. In these cases, 22% of employees enrolled in an HSA-eligible plan anyway, but 15% of employees - or about two-thirds of this group - enrolled in plans received a “Green” rating, meaning that Picwell identified them as great values.
Now let’s take a look at some of the personal characteristics that Picwell accounts for and see which of these factors were correlated with selecting an HSA-eligible option. This graph shows how much more likely an employee was to select an HSA-eligible plan based on selected characteristics. There are a few things that stand out.
Employees who have low or medium levels of risk aversion were more than twice as likely to select an HSA-eligible plan than employees with high risk aversion.
Capacity to pay was only associated with HSA selections at the very high end. Those who could afford a surprise bill above $6,000 were about 1.4x more likely to select an HSA plan than everyone else.
Similarly, income was only associated with HSA selections at the high end, where we see that employees with income above $125,000 being 1.6x more likely to select an HSA.
We also see a significant relationship between health risk and HSA selections. Employees predicted to fall in the bottom 40% in terms of medical spending were 1.5 to 1.6x more likely to select an HSA plan compared to employees who had higher predicted spending levels.
Finally, we see that employees who were just covering themselves were about 1.5x more likely to select an HSA option than employees with family coverage.
We did not see a significant relationship between age and the likelihood of HSA selection after we controlled for the above factors.
HSA-Eligible Plans Are Great Options - But Not for Everyone
As you can see, while HSA-eligible plans are often a great choice (83% of the time!) that doesn’t mean they’re a great choice for everyone. Just like with any benefits decision, a variety of factors play a role in how employees view these types of plans and what they ultimately end up choosing.