Consumer-Driven Health Plans (CDHPs) have significant financial advantages, namely lower monthly premiums and the triple tax benefit of a health savings account (HSA). Employers can help lower wage earners overcome barriers to HSA adoption, so that employees across income level can benefit.

The advantages of an HSA-Eligible plan

Along with lower monthly premiums, CDHPs qualify for HSAs. With these savings accounts, individuals can make tax-deductible contributions, withdraw tax-free money to pay for qualifying healthcare expenses, and roll money over each year tax-free. Moreover, employers often match some portion of employee contributions. Savvy, well-resourced consumers can use HSAs to maximize their healthcare dollars and invest in their future.

Consumers with HSAs have also been able to reap even more benefits because of COVID-19. The CARES act broadened HSA reimbursements so that people could use HSAs for expenses like pain relievers, menstrual products, and thermometers.

Perceived barriers to adoption

Even when HSA-eligible plans are in their best interest, lower wage earners tend to avoid them because of a rational aversion to the high deductible. If you have a CDHP, you need to be able to pay for medical services out of pocket until you reach the high deductible when your health benefits kick in. Currently this means having money, up front and available, to cover at least $1,400 for an individual or $2,800 for a family. For consumers with less income, that’s a big risk.

A cycle of financial and health disparities

When consumers who should be in a CDHP choose a low deductible health plan instead, they get stuck with higher premiums, ultimately overpay on health insurance, and miss out on the benefits of an HSA. Moreover, because they’re overbuying, lower income employees end up subsidizing both higher wage earners’ contributions to the overall premium pool and their ability to save with advantaged tax vehicles.

Without mitigation strategies, lower wage earners will disproportionately miss out on best-value healthcare plans and tax savings, contributing to a widening wealth and health gap.

Income-based options can break the cycle

There is a more equitable solution: employers can adjust their HSA contributions to give those with less income a better deal.

Already, most employers contribute some amount to their employees’ HSA account (averaging $839 in 2019). Employers can contribute to HSAs up front, match employees’ contributions to a certain point, or do some combination of the two. Adjusting contributions so that lower income populations receive more money, especially if they receive that money up front, can make HSAs a viable option for those with less wealth. This option gives employees a safety net that offsets the risks of a high deductible plan.

HSA-eligible plans still won’t be the right option for everyone; there’s a lot of other variables to consider when choosing the right health plan. However, income-based HSA contributions will increase the likelihood that consumers across income brackets can benefit from HSAs.

How to make income-based contributions work

Income-based HSA contributions are an important opportunity to close the disparity gap. However, few employers offer them because they seem too complicated. After all, health insurance is already confusing enough without adding variable HSA contributions.

Complexity shouldn’t get in the way of equity though. That’s why MyHealthMath can work with clients to structure and provide income-based contributions. By using our advanced decision support to do the math, we’ve simplified the process. Specifically:

  • Enterprise Decision Support, a first of its kind optimization system, identifies the contribution structures that will most benefit all their employees
  • Employee decision support shows employees whether an HSA-eligible plan is right for them based on their expected medical usage

Advanced decision support empowers employees across income level to move into CDHPs when they are the right fit—and it removes the mathematical burden that makes companies wary of introducing income-based options.

“It’s exciting to be part of the solution to a long-standing equity issue around HSAs,” says MyHealthMath Chief Mission Officer, Elizabeth Coté, MD, MPH. “The way it works now, people with less income are precluded from HSA’s financial benefits, which ultimately compounds financial and health inequities. We can change this by working with our clients to develop a more equitable access to tax-sheltered insurance options.”