For many of our Colorado clients who are purchasing individual health insurance policies, cost is a primary factor in selecting a policy. Sure, a $500 deductible and $25 office visit copays sound great, but for most people, the premium is out of reach (and often doesn’t make sense if you do the math). HSA qualified high deductible health plans have been very popular with our clients for several years now, mainly because of the lower premiums and the ability to set aside pre-tax dollars to use for medical expenses (and that money rolls over from one year to the next if it’s not used). We have an HSA qualified plan for our own family, and like many of our clients, we’ve increased our deductible over the years in order to mitigate our premium increases.
A new report from AHIP notes that the number of Americans covered by HDHP/HSA policies reached 10 million in 2010, up from 8 million last year. In Colorado, 9.2% of the under-65, privately insured population has HSA qualified coverage, which is the third-highest percentage in the nation. A recent study by the Mountain States Employers Council reports that 27% of Colorado employers surveyed are offering consumer-driven health plans this year, up from 21% last year.
I doubt that everyone who has a high deductible health insurance policy would choose that option if money were no object (although the tax benefits of having an HSA are very attractive to healthy people who are looking for an additional savings vehicle). For a lot of individuals and businesses, the annual premium increase notice tends to provide motivation to shop around for a lower priced policy. And often the fastest and easiest way to lower the premium is to increase the deductible. My guess is that this is what is driving the demand for HDHP/HSA coverage. The IRS currently limits the annual out of pocket expenses for an HSA qualified plan to $5950 for an individual and $11,900 for a family (this is adjusted annually by a small amount). HDHP/HSA coverage has only been available for about six years (established as part of the Medicare Prescription Drug, Improvement, and Modernization Act, signed into law in December 2003), so it makes sense that the number of people opting for this coverage has grown rapidly over the last few years. Whether the demand for HSA qualified plans will continue to increase at the current pace remains to be seen, but for now, they are quickly becoming a consumer favorite in the individual market.