Employers Are Using Account-Based Health Plans To Control Healthcare Costs

With healthcare costs rising and self-insured employers exploring cost-containment strategies, those in the benefits industry are trying many tactics to keep spending under control. Whether it’s network steerage, formulary management, or wellness engagement, these tactics are the key to better, more efficient benefits for members. One common practice that’s gained momentum? Account-based health plans (ABHPs).

What are account-based health plans? These plans are like peanut butter and jelly, cheese and crackers, or steak and potatoes: they’re the perfect pairing a health insurance plan plus some form of medical spending account. The idea is that employers can save on overall healthcare costs, help members save for out-of-pocket costs, and do it all with pre-tax dollars.

One common form of ABHPs is the high-deductible health plan + HSA. We’ve written about this type of benefits strategy in the past, and while some employers see this as a way to push costs to employees, others are funding HSAs and contributing to out-of-pocket costs to avoid burdening members. If used thoughtfully, ABHPs can be a cost-saving measure for both employers and their members.

Willis Towers Watson’s annual Best Practices in Health Care survey showed some surprising data around account-based health plans. Employers reported the following:

• 22% of them expect to offer only ABHPs by 2019 (total replacement)
• Since 2012, over 50% of employers are offering ABHPs as an option for members
• The percentage of both strategies (total replacement, optional) had steadily risen until 2015, but now seems to have leveled off

There are a number of ways that employers can structure ABHPs to maximize their efficiency and minimize disruption to employees. Here are a few ways they’re doing it:

• Health Savings Accounts: These employee-owned accounts allow pre-tax saving for medical expenses. They’re usually paired with a high-deductible health plan, and can follow the employee if they switch jobs.
  
• Health Reimbursement Plans: Following the total replacement strategy, these plans are funded by the employer. Employees then use an “allowance” to seek reimbursement for premiums and out-of-pocket costs.
  
• Health Reimbursement Arrangements: These accounts can be paired with an HDHP or used as a total replacement plan. The employer funds the account (tax-advantaged) and the employee uses it for out-of-pocket medical expenses.
  
• Healthcare Flexible Spending Account: FSAs are a pre-tax account where contributions come from the employee. They allow savings for medical expenses and can be paired with a number of healthcare plans, but unlike HSAs, they are not portable to new jobs and the funds expire each year.
  
• Health Incentive Account: These accounts allow employees to earn healthcare dollars through incentive programs sponsored by the employer.

Willis Towers Watson suggests some helpful best practices when considering ABHPs, including offering plans that still emphasize affordable premiums, employer contributions to HSA or HRAs, and support/communication around financial wellness. We’d offer a few other thoughts to help employers make the most of an account-based health plan strategy.

Offer choice.

While HDHPs and HSAs are great for some employees, others will be more comfortable with lower deductibles and more traditional plans. By offering employees a number of choices, you’ll attract and retain talent while still impacting your bottom line.

Stay ahead of health policy.

Some of these types of plans are also subject to federal regulation, healthcare policy, and other restrictions (and contribution limits/tax rules change frequently). Employers who offer ABHPs need to carefully follow the changing winds in Washington.

Use benefits data.

It’s crucial with ABHPs to track, measure, and act on your health plan data. To ensure these plans are truly meeting the needs of members, employers will want to keep an eye on employer per member spend, member out-of-pocket spend, provider efficiency, financial wellness, and more.

A benefits analytics partner is the key to finding insights and making strategic changes that save both employers and employees money.