Spending Account Safety Net

Lane Health started as an HSA administrator with a line of credit¹ feature. What led to the decision to offer short-term lending capabilities?

That’s correct. When we first started Lane Health, our mission was to help people who otherwise could not enroll in a Health Savings Account because they couldn’t afford to make a contribution. Upon activation of the Advance¹ line of credit, on-demand funds are provided to employees who previously had not enrolled in an HSA or who didn’t have enough cash in their account to pay for their healthcare expenses.

For example, 52% of all the Advances¹ provided are used by individuals who elected $0 in contributions during open enrollment. And 81% of Advances¹ typically are requested by individuals who make less than $75,000 per year.

Who has skin in the game?

Great question. First and foremost, the employer does not have to fund any of the loans¹, and the employer is not at risk for any outstanding loans¹ for employees after termination. In fact, the employer saves additional taxes through a reduction in payroll taxes on the Advance¹ payments that flow through the HSA. If employees pay back their loans¹ early, they’re also able to avoid any future periodic finance fees.

Does this model have the ability to work outside of the high deductible plan context?

Through conversations with our brokers and clients, it didn’t take long for us to recognize that people who are not enrolled in high deductible health plans also need credit to better afford healthcare. For example, employees who are in non-HSA eligible plans but still struggle with a high deductible, such as prescription copay plans, can have access to lending.

HDHPs are meant to encourage enrollees to be cost-conscious healthcare consumers, which can be difficult for even the most well-informed, highly motivated individuals. What else besides new credit and payment plans could impact utilization and enrollment in HDHPs?

For so long, employers have adjusted plan designs and premiums to encourage enrollment in HDHPs. For some it worked, for many it didn’t. And the primary reason it didn’t work was that most employees are risk averse, which means that, if available, they’ll select a more expensive, lower deductible health plan. They worry about the unexpected, large expense and how they would be able to pay for that.

Plan comparison tools are a great opportunity to demonstrate to employees the value of enrolling in a high deductible plan. What’s cool about ours is that we incorporate the value of our unique solution into the financial model. Of course, there’s always a need for enhanced communications, helping employees understand the value of the high deductible health plan, and helping them overcome the trepidation from being exposed to a larger deductible.

Finally, we’ve all seen surveys and statistics showing how people are regularly delaying or foregoing necessary healthcare because they can’t afford to pay for it. When employees don’t have to worry about their finances, we’re confident that they will feel more comfortable accessing needed care and thus potentially avoiding much larger expenses and care issues down the road.

The advent of HSAs highlighted the benefits of an employee-owned account with tax-free contributions, growth, and spending. Funds are typically used to pay for immediate healthcare needs, but is there an opportunity for advisers to help employees both use and invest these funds?

Without a doubt, most employees use their HSA funds to pay for current healthcare needs. And for good reason, as you mention. However, not enough people are using their HSA for longer term savings. In fact, only a small percentage of HSA accountholders are investors. More needs to be done from an education perspective to help employees better understand the value of saving and investing. Clients typically want to provide educational and communication materials to their entire population, so we’ve developed resources for two cohorts: Savers and Spenders. Savers are the 7%-10% of people who have an HSA and invest their contributions. Spenders are the individuals who either don’t open an HSA because they choose to not make a contribution, or they spend all of their HSA contributions on current healthcare expenses.

Recent regulatory changes require hospitals (and soon will require health plans) to report negotiated prices for services, bringing new transparency to patients when it comes to “shoppable services.” Are there additional policy reforms you think are necessary to decrease barriers to care with respect to HSA usage?

Encouraging policy discussions around HSA eligibility and the current regulatory environment would be a good place to start. There are many excluded groups who are unable to enroll in an HSA, such as people with Medicare and those enrolled in a qualified high deductible health plan but whose spouse is enrolled in a general healthcare Flexible Spending Account (FSA). And of course, the greatest opportunity to drive HSA participation is to decouple the requirement that HSAs can only be offered with an HSA-qualified high deductible health plan.

High deductible plans can be problematic for people with lower incomes or with chronic conditions who need regular care or medications. Are there pharmacy benefit plan design strategies that can be deployed in conjunction with your solution?

We believe that employees react well to incentives, so pharmacy designs that encourage filling prescriptions in more economical ways could prove to be valuable. From a lending perspective, the line of credit¹ is regularly provided to employees for prescription drugs. In fact, 44% of these Advance¹ transactions originate at the pharmacy, and 19% of HSA Advance¹ dollars run through the pharmacy.

As we think about future opportunities for lending, we believe that having a line of credit¹ specifically for prescription drugs could be a huge benefit as well. Think about a pharmacy expense charge card, for example, offered by a PBM. In the end, we want to help employees afford their prescriptions and not have to question whether they’re going to be able to fill them.

How do you think account-based solutions like HSAs will evolve in the next five years?

For cost reasons, there continues to be strong momentum for employers to migrate employees to high deductible health plans. Employers are adjusting premiums and plan designs, including removing any non-HDHP plan offerings. And for the single-digit percentage of employees who invest their HSA, we do see deposits increase year over year.

In their current form, HSAs are valuable to those who can save and invest. They disenfranchise those who can only afford to make a modest contribution or none at all, as well as those who are living paycheck to paycheck. In that regard, much more needs to be done to increase awareness and participation in HSAs.

Additionally, increased education efforts and permanent regulatory relief are going to be critical to ensure more people have access to and can take advantage of HSAs in the future.