Effects of Health Savings Account Eligible Plans on Utilization and Expenditures

The health savings account-eligible design may decrease costs and utilization, but it also may decrease use of preventive services.

Published Online: January 29, 2011
Mary E. Charlton, PhD; Barcey T. Levy, PhD, MD; Robin R. High, MBA, MA; John E. Schneider, PhD; and John M. Brooks, PhD

Objective: To assess the impact of a health savings account (HSA)-eligible plan on utilization and expenditures
in an employer-sponsored Midwestern health plan which offered a traditional plan from 2003 through 2004 that was fully replaced by an HSA-eligible plan in 2005 and 2006.


Study Design: Retrospective pre–post design with a control group.


Methods: Medical and pharmacy claims of plan members younger than 65 years who were continuously enrolled throughout the 4-year study period were used to evaluate the impact of switching to the HSA-eligible plan. Expenditure and utilization measures were compared with those for a control group covered by employers in the  same industry and geographic location, while controlling for patient characteristics.


Results: The HSA-eligible plan was associated with significantly lower total expenditures (-17.4%), fewer and less costly office visits (-13.6% and -20.3%, respectively), fewer emergency department (ED) visits (-20.1%), lowerpharmacy expenditures (-29.2%), lower expenses per drug (-27.9%), a reduced likelihood of mammograms (odds ratio [OR] = 0.55, P <.05) and Papanicolaou tests (OR = 0.66, P <.05), and a borderline significant reduction in routine physical exams (OR = 0.76, P <.10). The HSA-eligible plan also was associated with increased outpatient facility expenditures (5.1%, P <.05).


Conclusion: Employer-sponsored HSA-eligible plans appear to be associated with lower healthcare expenditures and/or utilization, particularly for office visits, ED visits, and pharmacy. However, they also may discourage preventive care, leading to increased long-term medical costs. Employers offering HSA-eligible plans should ensure that there are no financial barriers for preventive services.


(Am J Manag Care. 2011;17(1):79-86)

This study evaluates the impact of a full-replacement health savings account (HSA)-eligible plan on cost and utilization.


  • Compared with traditional plans, the HSA-eligible plan was associated with lower total expenditures, fewer and less costly office visits, fewer emergency department visits, and less costly prescription fills.


  • The HSA-eligible plan was associated with reduced likelihood of mammograms and possibly Papanicolaou tests and routine physical exams.


  • The HSA-eligible design may be effective in decreasing cost and utilization, but employers and health plans may want to ensure that there are no financial barriers to preventive services to avoid unintended long-term consequences.
Since the Medicare Prescription Drug, Improvement, and Modernization Act was passed in December 2003, health savings accounts (HSAs) have gained increasing popularity among employers.1,2 However, little is known about the effects of HSA-eligible plans on expenditures and utilization, including use of preventive services. Health savings accounts are tax-exempt accounts that must occur in conjunction with qualifying high-deductible health plans (HDHPs) according to Internal Revenue Service guidelines. One of the overarching goals of HSAs is to align consumer habits with a more realistic understanding of healthcare costs. People with HSAs or similar coverage were 50% more likely than people with traditional plans to ask providers about costs, 33% more likely to seek out treatment alternatives, and 3 times more likely to choose a less expensive alternative.3

Because HSAs are relatively new, information from multiyear evaluations of these plans has just recently become available.4-10 Most studies have combined HSAs and health reimbursement accounts (HRAs) under the umbrella of consumer-directed health plans (CDHPs), making it difficult to interpret the impact of each distinct design. Perhaps most importantly, most extant studies of CDHPs have been subject to selection bias—those who anticipate low utilization and costs (ie, healthier people) will generally find HSA plans more attractive.

An important component that distinguishes HSAs from HRAs is the requirement that the HSA be opened in conjunction with a federally qualified HDHP (aka an HSA-eligible plan).  To determine whether HSA-eligible plans have affected utilization and expenditure, we compared the healthcare claims experience of 2 groups. One group consisted of individuals insured through a large Midwestern employer that fully replaced a traditional plan (HMO or preferred provider organization [PPO]) with an HSA-eligible plan so that all employees with  health coverage could open a corresponding HSA. The comparison group consisted of individuals insured through large Midwestern employers within the same industry that  offered traditional plans throughout the study period. This study design has the unique feature of reducing selection bias, which has been a major limitation of previous HSA studies. Furthermore, no other studies have evaluated a full-replacement HSA-eligible HDHP plan in which all preventive services were subject to the deductible.


Study Population

The study population included individuals covered through large Midwestern transport companies headquartered in the same state, with claims administered by the same  Midwestern health plan. Study population members were continuously enrolled in a health plan all 4 years of the study period (January 1, 2003, through December 31, 2006) and were younger than 65 years on January 31, 2006. The study population included 2 groups: (1) employees of a single employer covered by PPOs or HMOs in 2003 and 2004 and by an HSA-eligible plan in 2005 and 2006 (HSA group), and (2) employees of different employers in the same industry covered by PPOs or HMOs from 2003 through 2006 (traditional group). The traditional group was distribution matched (4:1) to the HSA group on the basis of prospective risk score (illness burden) category as of December 31, 2003, defined in increments of 0.1 for risk scores of 0 to 3, 0.5 for scores of 3 to 10, and 1.0 or scores of 10 to 14. The prospective risk score is described in further detail in the following section.

Data Elements

Age and sex were captured from the health plan’s membership data. Illness burden was measured using Symmetry Episode Risk Groups (ERGs), which use episode-of-care methodology to create measures of health risk for individuals and groups using medical and pharmacy claims information. The ERG prospective risk score is a relative risk measure that predicts an individual’s need for healthcare services and associated costs for the next 12 months.11 Episode Risk Groups are considered a leading health risk assessment tool for commercial populations, and outperformed 6 other predictive models.12

Utilization and expenditure measures were derived from medical and pharmacy claims data for each calendar year of the study period. Utilization counts were calculated for office visits, outpatient facility visits, emergency department (ED) visits, inpatient admissions, and prescription fills. Total expenditures were summed for each calendar year of the study period and categorized by place of service (office, outpatient facility, inpatient facility, and pharmacy). Expenses included out-of-pocket payments by the individual and the amount paid by the health plan, and were typically defined by the health plan’s fee schedule for office/outpatient services and by diagnosis-related groups (DRGs) for inpatient hospital services. Fee schedules and DRGs are based on the complexity and resource intensity associated with each service or admission. Annual expenses were adjusted for inflation using the Consumer Price Index and expressed in 2006 dollars.

Plan characteristics such as deductibles, out-of-pocket maximum (OPM), coinsurance, and copayment amounts were collected from the benefit database maintained by the health plan. The HSA-eligible group and the traditional group had similar benefits in 2003, each having in-network single/family deductibles of approximately $500/$1000. As of January 1, 2005, the HSA group’s single/family deductibles and OPM amounts substantially increased to $2000/$6000 and $4000/$10,000, respectively, and an HSA option was added to the plan. In contrast, the traditional group experienced only modest increases to deductibles and OPM amounts during this same period. Both groups had 20% coinsurance levels throughout the study period (coinsurance was required once the deductible was met in the HSA plan), and most members of the traditional group had office copayment amounts of $15 or $20. The HSA-eligible plan did not waive the deductible for any preventive services, meaning that members paid out-of-pocket until the deductible was met.

Statistical Analysis

SAS/STAT software version 9.2 (SAS Institute Inc, Cary, NC) was used to perform all analyses.13 Age and prospective risk score were compared between the traditional and HSA groups using t tests and X2 tests. Multivariate models were used to investigate the effect of the independent variables (age and prospective risk as of the beginning of that calendar year, sex, and plan design, which was coded as HSA = No in years 2003 and 2004 and HSA = Yes in years 2005 and 2006 for those with an HSA-eligible plan; all others were coded No across all 4 years) on the dependent variables (utilization and expenditure measures) over time.

For the expenditure data, separate models were estimated for the zero values (due to the excessively large number of zeros across the 4-year study period) and the positive values. The skewed distributions of the positive expenditures were addressed through application of the log normal models with random effects (for which zero is not a legitimate value, in contrast to normal theory models). Logistic regression with random effects modeled the presence of positive expenditures versus the zeros.

Fixed-effects negative binomial models with random coefficients were used to analyze the utilization variables.14 In observational studies with longitudinal data, fixed-effects models are appropriate because they focus on the withinsubject differences, which allow the unobserved variables to have any correlation structure with the observed variables, thus providing an element of control of external variation typically available in designed experiments with random effects. Fixed-effects models work only with balanced data (no missing data); therefore, they could not be used for expenditure data due to the large number of zeros that were dealt with by applying separate models, leaving the positive expenditure data unbalanced. Zeros are legitimate values with count data, but zero values in all 4 years were problematic because fixed-effects models for counts require positive counts at least 1 point in time within person. Consequently, people with zero values in all 4 years of the study were excluded from the utilization models.

For both expenditure and utilization models, analyses were conducted with and without outliers. Two-way scatter plots of utilization by prospective risk were used to develop outlier exclusion thresholds for utilization models, and outliers were excluded on the basis of a prospective risk score greater than 9, as visual data plots illustrated these to be extreme values. Two-way scatter plots of expenditures by prospective risk score were used to identify outlier thresholds by expenditure category. A prospective risk score greater than 10.5 and/or the following dollar thresholds were used to exclude subjects: $100,000 for total expenditures, $40,000 for office, $100,000 for inpatient, $75,000 for outpatient, $15,000 for pharmacy, and $700 per drug, as visual data plots illustrated these to be extreme values.

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