HSAs and the Struggle to Contain Out-of-Pocket Healthcare Costs

Beyond Coverage Uncategorized February 23, 2022

Employers have increasingly turned to high deductible health plans (HDHPs) to contain benefit costs. In fact, according to recent research,1 almost 53% of workers with employer-sponsored health insurance were enrolled in HDHPs in 2020. It’s a trend that has accelerated steadily over the last seven years: in 2015, under 40% were enrolled.2

For employers, shifting to an HDHP offers advantages, especially in benefit cost containment. But it’s a strategy that may be putting too much financial burden on employees by contributing to increases in out-of-pocket healthcare costs. The average HDHP deductible is $2,500.3 This can be a barrier, considering that a recent Kaiser Family Foundation poll found that 45% of employees with insurance would not immediately be able to afford a surprise medical bill of $500.4

High out-of-pocket healthcare costs have far-reaching consequences. Employees may opt to delay care, or avoid it entirely, which can affect health and well-being. Or, they may get care, which increases financial stress. Either of these paths can have business consequences, too, in lower productivity, decreased satisfaction and damage to employee loyalty.

Employers often do understand that an HDHP can create financial strain for employees. For this reason, many opt to pair an HDHP with a health savings account (HSA) to close gaps in coverage and address financial strain. But there are downsides. To improve employee benefits and address rising out-of-pocket healthcare costs, it’s important for employers and advisers to consider the common HSA shortfalls.

Common HSA shortfalls

Not enough. As noted above, the average HDHP deductible is $2,500. Yet the average employer HSA contribution is $870.5 This coverage gap increases employee financial strain.

Timing problems. HSA funds must accumulate before they can be used. This creates problems when funds aren’t available when expenses are incurred, or if funds are depleted before the end of the plan year.

Value and loyalty. Even when employer-funded, HSAs face an image problem: often, employees view them as “dollars in, dollars out.” In addition, they are portable, so employees can take the account with them if they leave for another job. These put HSAs—and employers—at a disadvantage because they aren’t perceived as a valuable benefit.

Improving employee benefits with valuable insured coverage

Given the fierce talent market, it’s an ideal time to look at the HDHP/HSA combination with the goals of reducing out-of-pocket healthcare costs and improving employee benefits. Employers and advisers can eliminate the downsides without changing strategy—and facing yet more consequences. It’s possible with innovative complementary benefits*—like BeneBoost by ArmadaCare, an add-on healthcare insurance solution designed to replace the employer’s HSA contribution.

This approach can address all the shortfalls of HSAs while complementing the existing benefit strategy. It reduces out-of-pocket healthcare costs for employees by providing more valuable insured coverage for routine and unexpected healthcare costs. The approach addresses the funds availability vs. timing problem. And, as valuable insured coverage, it can be a yearlong reminder of an employer’s appreciation. Best of all, these innovative benefits are a solution that can be layered over any plan, are HSA-compatible, and can even be targeted by employee population as defined by the employer.

Learn more about BeneBoost by ArmadaCare.

*The above referenced supplemental health insurance policies have exclusions, limitations and benefits that vary by plan and state. To obtain a quote or for more details on coverage, contact ArmadaCare.


[1] ValuePenguin, 2020

[2] ValuePenguin

[3] Kaiser Family Foundation, 2020

[4] KFF, 2020

[5] Devenir, 2021

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