That very human inclination to spend our own money more judiciously than what we are given underpins the growing interest in consumer-directed health plans, such as the now decade-old health savings account (HSA), or its slightly older cousin, the health reimbursement arrangement, or HRA[i]. Both are designed to provide workers the ability to pay for health care-related expenses with funds drawn from the account – and yet, EBRI’s 2013 Consumer Engagement in Health Care Survey (CEHCS)[ii] found evidence that adults with an HSA were more likely than those with an HRA to exhibit a number of cost-conscious behaviors related to use of health care services.
Specifically, the analysis found that those with an HSA were more likely than those with an HRA to:
- report that they asked for a generic drug instead of a brand name (52 percent HSA vs. 49 percent HRA);
- check the price of a service before getting care (41 percent HSA vs. 34 percent HRA);
- ask a doctor to recommend less-costly prescriptions (40 percent HSA vs. 38 percent HRA);
- develop a budget to manage health care expenses (32 percent HSA vs. 22 percent HRA); and
- use an online, cost-tracking tool provided by the health plan (27 percent HSA vs. 21 percent HRA).
HRAs and HSAs are very similar, so why might those differences in behavior occur between those covered by the two plan types? Consider that an HRA is an employer-funded health plan that reimburses employees for qualified medical expenses, in contrast to the HSA, which can have both employer and employee contributions. HRAs are generally “notional” accounts maintained by the employer, and while funds unspent at the end of each year can be carried over for future use, that option is at the employer’s discretion.
On the other hand, and as the EBRI report notes, an HSA is owned by the individual and is completely portable, with no annual “use-it-or-lose-it” rule. Additionally, those who do not use all the money in their HSA during their working years can use it to pay out-of-pocket expenses after they retire.
Said another way, for most people the HSA balance probably feels like it is “their” money[iii], and they spend it accordingly, while their HRA feels more like a gift card with an expiration date. It’s certainly not “free” money, but it may feel that way to them.
- Nevin E. Adams, JD
[ii] “Consumer Engagement Among HSA and HRA Enrollees: Findings from the 2013 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey,” is published in the June EBRI Notes here.
[iii] In many cases it is, of course, literally funded by their contributions.