Academic journal article The Journal of Consumer Affairs

Motivating Personal Contributions to Health Savings Accounts

Academic journal article The Journal of Consumer Affairs

Motivating Personal Contributions to Health Savings Accounts

Article excerpt

Each individual enrolled in a health savings account (HSA) faces myriad conflicting forces when deciding whether to defer the immediate benefit of take-home pay for the potential future benefit of making HSA contributions. Personal contributions allow enrollees to accumulate funds to cover out-of-pocket medical expenses. If an enrollee does not make HSA contributions, he or she might not be able to receive needed medical attention and take full advantage of the various financial and tax planning benefits of HSAs. In this study, the first of its kind, hypothetical experimental surveys were conducted using a nationally representative sample of 505 respondents to determine factors that motivate personal contributions to HSAs. One statistically significant treatment required respondents to view digital recordings of three current HSA enrollees speaking about their personal motivations to make contributions. A second treatment demonstrated no significant influence of an employer match on the hypothetical level of HSA funding selected.

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A health savings account (ITSA) is an investment/savings account that enrollees can use to accumulate tax-deferred funds to pay for medical expenses. Since their creation by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, HSAs have grown in popularity. According to the annual census by America's Health Insurance Plans (AHIP), 17.4 million Americans were enrolled in an HSA-eligible insurance plan as of January 2014, a 29% increase over 13.5 million reported in 2012 and a 118% increase over 8 million reported in 2009 (America's Health Insurance Plans Center for Policy and Research 2014). Contributions to an HSA are allowed only if a consumer is covered by a statutorily defined high-deductible health plan (HDHP). HSA contributions may be made by the account holder, his or her employer, or both. (1) However, contributions are not required by statute. In fact, many consumers who are eligible to contribute to an HSA never do (Fronstin and EBRI 2011: Reed et al. 2012).

Recent health insurance reform could increase or decrease the popularity of HSA-eligible plans. Tanner (2011) anticipated that the Patient Protection and Affordable Care Act would seriously impede the growth of consumer-directed health insurance plans, which include HDHPs. In contrast, Sperling and Shapira (2011, 43) suggested that the high cost of US health care and changes in the health insurance market might cause a "sea of change" in the direction of HSA-eligible health insurance plans. They compared this change to the move away from defined-benefit retirement plans to the currently more popular defined-contribution plans.

Enrollees in HSA-eligible plans must use HSA or other personal funds to pay out-of-pocket medical expenses until they satisfy the deductible of their health insurance plan. The minimum annual deductible for a HDHP is $1,300 for an individual and $2,600 for a family in 2016 (Miller 2015). If an enrollee does not have HSA or other personal funds to pay the deductible, he or she might not be able to receive needed medical attention other than preventive care not subject to the deductible. Although technically "covered" by health insurance, an enrollee without HSA or personal funds to pay the deductible could be rendered virtually uninsured. Within a family, a high level of out-of pocket medical expenses can compete even with the basic need for food (Kim, Yoon, and Zurlo 2012; Nielsen, Garasky, and Chatterjee 2010). In addition, significant tax benefits accrue to enrollees who pay for medical expenses with HSA funds rather than personal funds. (2) Because of the health-related and financial benefits of making HSA contributions, the recent rapid increase in HSA-eligible HDHPs, recent economic instability experienced by US families, and changes to the US health care system, this study was designed to discover factors that motivate enrollees to make personal HSA contributions. …

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