It may surprise you to learn that employer-sponsored, self-insured health plans live squarely at the intersection of business success and the goal of health equity. Health Savings Accounts (HSAs) play a critical role in the success of each.
What is Health Equity?
Let’s start by understanding the effects of a lack of health equity. Inequities in healthcare result in unacceptable differences in length and quality of life; rates of disease, disability, and death; the severity of disease; and access to the most appropriate treatment. Health equity, therefore, means ensuring patients can and will access the care they need when they need it, where they need it. Or as the National Academy of Medicine defines it, health equity means “providing care that does not vary in quality because of personal characteristics such as gender, ethnicity, geographic location, and socioeconomic status.”
Nearly half of the U.S. population goes without healthcare due to concerns over costs[i]. Health equity is achieved when every person can “attain his or her full health potential” and no one is “disadvantaged from achieving this potential because of social position or other socially determined circumstances.”
Half of Americans receive their healthcare coverage through an employer-sponsored plan – placing those plans at the front lines of the fight for health equity.
How Do Employer-Sponsored Health Plans Promote Health Equity?
Employer-sponsored health plans, “done right” can be part of a health equity solution.
Consider that tax-preferred employer-sponsored health plans must comply with eligibility and various other non-discrimination rules. Employers generally extend the same coverage options to all eligible workers, regardless of wage, age, race, ethnicity or gender.
Further, employers generally provide the same level of employer financial support to all workers, and many provide additional financial support where the employee elects dependent coverage. A few do more through income-based contributions or point of purchase cost sharing structures.[ii] So, an equal dollar amount of employer contributions results in a progressive structure (employer financial support for medical coverage is a higher percentage of income and a larger component of total rewards for lower wage workers).
- Single: The annual cost of single coverage averaged $7,739 in 2021, with workers paying $1,299 towards the cost of their coverage.
- Family: The annual cost of family coverage averaged $22,221 in 2021, up 4% from 2020, with workers on average paying $5,969 toward the cost of their coverage. Employers paid an average of $16,252.
- The median weekly wage for a full-time worker is ~$ 1,001 (3rd Quarter 2021), or $52,052/year.
- So, the average employer contribution for single coverage is 12% of median wages, and 31% of median wages for those electing family coverage. And, of course, it is a proportionately larger percentage of total rewards for workers whose wages are below the median.
How Does an HSA Strategy Promote Health Equity?
Many workers today are “financially fragile” and have not set aside savings specifically earmarked for out-of-pocket medical expenses. Most out of pocket medical expenses are regular cost sharing – deductibles, copayments, coinsurance.
The least burdensome option to prepare for out-of-pocket costs uses an HSA strategy. Done right, HSA-capable coverage has “equity-inducing” features, because typically:
- HSA-capable coverage has a lower premium than other coverage options.
- Employer contributions towards the cost of an HSA-capable coverage option are the same as contributions to other options, resulting in a lower dollar amount of employee contribution.
- Making the coverage more affordable for those living paycheck to paycheck.
Two other factors that contribute to health equity:
- Most employers who contribute to an HSA contribute the same dollar amount, regardless of wage, based on the worker’s election of single or family coverage.
- Many HSA-capable plans provide 100% coverage (with no employee cost sharing) for most of the health care services that the tax code permits as preventive.
HSA’s encourage individuals to leverage tax preferences to financially prepare for out-of-pocket medical expenses. Monies contributed to HSAs are always 100% “vested,” meaning there are no forfeitures. Thus, the account always goes with the worker and the funds are available anytime.
Monies that are portable, like HSA assets, also have greater potential value to minorities. This is because tenure is often lower, and turnover is often higher among Black and Hispanic workers compared to White and Asian workers.
Employer-Sponsored, Self-Insured Plans “Done Right”
aequum is fully engaged in ensuring that employer-sponsored, self-insured plans incorporate the most effective strategies available today. Based on all metrics and experience, this includes reference-based pricing, adequate participant protections against balance billing, participant advocacy and litigation support as needed, effectively designed HSA-capable coverage, and features and transition provisions that specifically address the needs of Americans with lower wages, as well as those living paycheck to paycheck.
Over time, this strategy has a favorable impact on the cost of coverage, meaning that it will favorably impact both employer and employee contributions, in turn, favorably impacting take home pay for lower wage workers. Making every day medical services financially feasible for lower wage workers will favorably impact health equity – minimizing the number of workers who go without care because of cost.
[i] S. Wooldridge, 13 million Americans skip prescription drugs due to cost, 7/7/21. Citing a report by the Robert Wood Johnson Foundation, “…more than 2.3 million elderly Medicare beneficiaries and 3.8 million privately insured working-age adults reported skipping needed treatments because of costs in both 2018 and 2019. …” Accessed 2/11/21 at: https://www.benefitspro.com/2021/12/07/13-million-americans-skip-prescription-drugs-due-to-cost/ See also: A. Goforth, 4 in 10 Workers Delayed Routine Health Care During the Pandemic, 2/9/22. Citing research by The Hartford: “… workers report declines in their mental health (42%), social well-being (41%), financial security (32%) and physical health (29%). Most respondents (63%) said their overall health and wellness affect their productivity at work.” Accessed 2/11/22 at: https://www.benefitspro.com/2022/02/09/4-in-10-workers-delayed-routine-health-care-during-pandemic/?kw=4%20in%2010%20workers%20delayed%20routine%20health%20care%20during%20pandemic&utm_source=email&utm_medium=enl&utm_campaign=bprodaily&utm_content=20220210&utm_term=bpro
[ii] J. Sammer, Is It Time to Tie Employee Health Care Costs to Pay? SHRM.org, 4/17/21. Author’s note: Where the employer contribution is the same dollar amount regardless of wage, an income-based structure isn’t needed – the plan already favors lower paid workers as health care coverage is a much larger component of their total rewards. Accessed 2/11/22 at: https://www.shrm.org/hr-today/news/all-things-work/pages/is-it-time-to-tie-employee-health-care-costs-to-pay.aspx