Some Employers Are Viewing Consumer-Directed Health Plans as Retiree Savings Vehicles

Reprinted from INSIDE CONSUMER-DIRECTED CARE, By Michael Carbine, Editor, (mcarbine@aispub.com)

The Kaiser/HRET 2008 employee benefits cost survey and a summary of the Towers Perrin 2009 Health Care Cost Survey, both released on Sept. 24, find that companies view CDH plans as a vehicle for managing their costs and continuing to provide their employees with health benefits.

But the Towers Perrin survey of 321 of the nation's largest employers, covering 6.6 million employees, also suggests that large employers view CDH plans as a way to help their employees prepare for medical expenses in retirement. The final version of the report will be released in early January 2009.

Towers Perrin says employers are viewing CDH plans as one solution to their continuing ability to offer affordable health benefits to their employees and, especially, retirees. The survey found that 58% of "high performing companies," defined by Towers Perrin as companies that focus on supporting and improving employee health and rigorously managing their health plans, say their CDH plans are helping them control employee costs. Over half of the companies surveyed say they are offering or will offer a CDH plan in 2009 (up from 46% in 2008), and that most will have an HSA rather than an HRA feature. This, Towers Perrin says, indicates employer interest in providing wealth-accumulation vehicles for retiree medical benefits.

But the Towers Perrin survey also finds that only half of employees participating in HSA-based plans, on average, contribute to the account. Ron Fontanetta, principal in the company's health and welfare practice, says this indicates that while CDH plans deliver lower costs, employers (and employees) "still have work to do to more effectively use these plans to support the wealth accumulation that active employees will need when approaching retirement." Overall, he says, "employers and employees may not yet have developed the mindset required to take full advantage of this new benefit approach."

Analysts caution that this new retiree benefits approach has its limitations, however. An August 2008 report from the Employee Benefits Research Institute concluded that statutory limitations on contributions and other factors make it unlikely that such accounts will play more than a minor part in retiree savings strategies. The report concludes, "The maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses."

The EBRI report was published in the August EBRI Notes and can be viewed at www.ebri.org.