HSA Plans: Small Business Solution to Fighting Health-Care Costs?

Despite the amount of uncertainty small businesses have about health-care reform, many owners are leaning toward health savings accounts to help reduce provider costs.

Since becoming law in 2010, the Affordable Patient Protection & Affordable Care Act has generated concern from many small business owners because it changes the way they purchase and provide health insurance for themselves and their employees and could increase costs in an already tough economic environment.

A recent survey titled "2011 Employer and Account Holder Surveys," commissioned by ACS, a health-savings account product provider,  and conducted by Buck Consultants, showed more small business owners and employees turning to HSAs as a more affordable health-care option. These accounts are owned by the individual and are an alternate source of medical funds that can be used to pay for qualified medical expenses.

Marcia Wagner, principal and founder of the Wagner Law Group, said HSAs have gained popularity among small business owners for one simple reason: efficiency.

"For small business owners, changes in their marginal profitability matter a lot," Wagner said. "The most efficient way [to offer health care] is when people have some skin in the game and are forced to shop for themselves, which is why HSAs and HRAs are so popular."

Close to 80% of polled small business owners reported that a high deductible health plan (HDHP) with a HSA is key in controlling costs. In addition, 56% of account holders feel their HSA-qualified plan provides more affordability.

For employers, the average direct cost to provide a high-deductible health plan or HSA for individual coverage is $5,469 and $9,909 for family coverage. This is a major savings compared to the average PPO cost of $7,158 for individuals and $10,691 for family, the survey reported.

The survey was conducted among 300 employers and 1,400 employees in the fall of 2011. Many of the companies polled had less than 50 employees.

These programs can create real cost savings for small businesses in particular, when employees are incentivized to shop around for the best health-care offerings, rather than instantly enrolling in top-of-the-line coverage, she said.

For employers that implemented an HDHP and HSA program, 40% of eligible employees enrolled in it, according to the survey. In addition, 69% of employers contributed to their employee's HSA accounts.

Todd Berkley, HSA business leader at OptumHealth, said these plans not only keep cost down for employers, but also give workers an incentive to be healthier.

"[Employees] use the plans more because it changes awareness of cost," Berkeley said. "It's engaging employees and making them healthier."

Close to 30% of the survey’s respondents said they were shopping for lower priced prescription drugs, and 31% said they were planning health care better throughout the year.

Despite the rising costs associated with providing health-care plans for employers, only 7% of companies reported they were likely to move workers to health exchanges set to go into effect in 2014.

"HSAs are working in ways everyone can agree one,” Berkeley said. “They will be an active and vibrant part of health care and the Affordable Care Act—they are working and here to stay."

Although Wagner said she feels HSA and HRA plans are really the only way to provide efficient care for employees aside from privatizing the industry and covering catastrophic medical events, she doesn’t see these plans making it through the health-care reform overhaul.

"A lot of employers will opt out of health-care, and people will go into exchanges," she said. "There will be a shortage of doctors and nurses—it's not a really [well] thought-out plan. I am not sure HSAs can survive this, and that they meet the minimum requirement for health-care [coverage]."