The national health care expenditure reached nearly $3 trillion in 2012 up from $2.6 trillion in 2010. The staggering figure, predicted to reach $4.6 trillion by 2020, has captured the awareness of the entire nation. The increase in health care expenses to-date has resulted in the first true health care reform policy seen in our countrys history and has caused significant employer benefit cost pressures, dramatically heightening consumer awareness around health care spending.
Because of these combined forces, consumers are now absorbing a greater share of their health care expenses. As a result, the shift in financial responsibility has led to the early stages of a more consumer-driven health care environment where consumers are encouraged to make smarter, more cost-conscious health care decisions using their own money.
Over the last decade, the increasingly consumer-driven shift in health care has helped propel the adoption of new savings and financial management tools, including the use of tax-advantaged benefit accounts, aimed at helping consumers offset their new-found health care expenses. The adoption of tax-sheltered benefits accounts including, Health Reimbursement Arrangements, Health Savings Accounts, and Flexible Spending Accounts are predicted to reach nearly 90 million accounts by 2017.
Tax-advantaged health benefit accounts are set to continue in their role as critical tools in helping both employers and employees manage their increasing health care costs. 2013 brought policy changes to the FSAs use-it-or-lose-it provision, signifying significant growth potential for FSAs in both account enrollment and funds contribution.
The entire health benefit account market is predicted to grow at a CAGR of 9 percent through 2017 driven in large part by the forecasted 21 percent CAGR in HSA account volume. Several significant market forces contribute to a shift in the mix of benefit account types; the two most notable are:
- Cost-conscious employers shifting from traditional PPO plans to HSA-eligible HDHPs
- Individual and small-business HSA enrollments increasing as exchanges increase in popularity
2014 will be a pivotal year for the future of benefit accounts as cost pressures continue evolving employee benefits. This year, well see the true significance of the 2013 FSA policy change and well monitor the volume of employees opting for high deductible health plans paired with HSAs as the primary means for managing their new-found financial health care responsibilities.
John Bull works with CDH product and strategy for Alegeus Technologies.
