Amazon’s recent announcement that it will be accepting health savings account (HSA) cards for medical supplies sold on its e-commerce site marked a big step for the company’s evolving role in the healthcare space and may also push more consumers to take an interest in HSAs.
In addition, retail-meets-healthcare platforms such as this one represent the growing collaboration of private insurance plans and consumers in paying for out-of-pocket expenses, experts say.
Lisa Zamosky, senior director of communications at eHealth.com, said during the Affordable Care Act’s last open enrollment period, 23% of people who do not receive government ACA subsidies selected HSA-eligible plans at eHealth—that figure has been pretty stable at eHealth for several years. But on a broader scale, that number is even more dramatic, with enrollment growing fourfold between 2007 and 2017, Zamosky told FierceHealthcare.
“More than half of all employees in the U.S. have a high deductible health plan, meaning they are eligible for an HSA. The problem is that HSAs are still widely misunderstood and underutilized by consumers,” David Vivero, founder and CEO of digital health company Amino, told FierceHealthcare. “By accepting HSA dollars, Amazon is not only giving consumers across the country more options to save on medical expenses, but also hopefully exposing more consumers to the unparalleled benefits of this great healthcare savings tool.”
As consumers' cost-sharing in healthcare has gone up, financial concerns for medical expenses now outrank concerns for mortgages, taxes and unemployment.
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Steve Auerbach, CEO of Alegeus, says Amazon’s move into healthcare may prove to be a great example of industry consolidation with the goal of making shopping for healthcare as easy as other retail purchases.
And, if any brand can bring awareness and popularity to HSAs, it’s Amazon. The e-commerce giant already has a loyal consumer base and a convenient online platform, the experts said. Plus, with an increased emphasis on consumer data as a tool for personalization, Amazon will have a front seat to collecting valuable information.
One of the main challenges with HSAs, which Vivero says Amazon can help with, is the confusion for consumers around which purchases are HSA eligible. Amazon already lends itself to an easy space for defining which products are eligible for HSA purchase right there on the screen.
But HSAs can be used for a long list of qualifying medical expenses, including copays and deductibles, some first aid supplies and over the counter medicines, prescription glasses and contacts, dental services, maternity supplies and fertility treatments, and lots more.
There are other challenges to understanding the platform, too. For example, seven in 10 consumers mistakenly think their HSA is governed by a “use it or lose it” policy like an FSA.
And while some people are weary of calling participants healthcare “consumers,” Vivero believes there is no other way to look at it. Kaiser Family Foundation data show deductibles have risen eight times faster than wages, forcing people to make tough choices about healthcare.
“If you have a high deductible health plan, your HSA is your best tool for saving money on healthcare expenses because it is triple tax-advantaged,” Vivero said. “You can contribute pre-tax dollars, grow those dollars via tax-free investment, and pay for eligible items tax-free as well. The HSA is actually the most tax-advantaged savings account in the country.”
Vivero does warn that consumers generally don’t contribute enough to their HSA and that if they have the means, they should “max out” their HSA—or even better, invest it and grow the HSA dollars tax-free.
“Unfortunately, some people who buy HSA-eligible plans for themselves and their families underfund their health savings account. Some, in fact, never get around to opening an account, and so totally miss out on the benefits of an HSA,” Zamosky said.
According to the Aite Group, out-of-pocket healthcare spending in 2018 was predicted to be $371 billion. Yet, that same report indicates that only $86.3 billion of that spending would flow through tax-advantaged benefit accounts. Auerbach notes that assuming an average tax rate of 30%, consumers left nearly $85 billion in tax savings unclaimed last year.
So, what does the future hold for HSAs and healthcare consumerism?
Auerbach believes that Amazon’s emergence is just the latest example of how consumer-driven healthcare continues to grow in popularity. And as the healthcare market continues its focus on driving affordability and financial responsibility, other big retailers will make similar moves.
Plus, he says, industry consolidation and simplification will continue to merge business models between care delivery, insurance and funding.
“While many of the current acquisitions and partnerships will provide access to two-out-of-three of these pillars, the real winners will be those that can integrate all three, resulting in unchartered integration and simplification within the healthcare industry,” Auerbach said.
And while no one can predict the political future, Zamosky says that an all-public healthcare system seems unlikely.
“The U.S. has a long history of successful public private partnerships in healthcare, as in other fields, and it seems this is likely the way forward as well,” she said. “Experience shows us that public/private collaboration like what we see with the very successful and growing Medicare Advantage program is often appealing and of great benefit to American healthcare consumers.”
And Zamosky suspects HSAs will remain an important part of healthcare benefits. There have been proposals in recent years to broaden their use by eliminating certain restrictions on the accounts and raising the maximum tax-free contribution—but that will take bipartisan legislation.
Auerbach agrees that consumer-driven healthcare will continue to be a powerful tool to help address the crisis in the U.S. healthcare system. According to Mercer, 72% of large employers will offer a consumer-driven health plan in 2019, compared with 20% a decade ago.
“The success of CDH in reversing the cost trend—together with the recent rise in HSA adoption—confirms that CDH will continue to thrive into the future,” Auerbach said.
However, he warns that for the consumer-driven market to continue its growth in the coming years, there needs to be major improvements in the consumer experience. He notes account solutions need to be even more personalized with the help of technologies such as artificial intelligence and machine learning.
“CDH providers are now ready to arm employers and consumers with the smart tools they need to maximize value and utility. As consumers continue to take increased financial responsibility for their healthcare journeys, demand for an improved user experience will only grow,” he added.