The Impact of Offering Free Coverage on Enrollment Choice and Risk Selection in an HSA-eligible Health Plan

July 2017
EBRI Issue Brief #435
Paperback, 20 pp.
PDF, 998 kb
Employee Benefit Research Institute, 2017

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Executive Summary

This study examines whether offering a health savings account (HSA)-eligible health plan for free, alongside other health plan options with a premium, alters employee enrollment choices; and if responders differ by health status. The data for this study come from two large employers and cover the years 2011 to 2014, spanning the 2013 intervention when one of the two employers eliminated employee premiums for the HSA-eligible health plan.

Here are the key insights:

Health insurance premiums are a major driver of plan choice. After eliminating employee premiums for all coverage tiers, HSA-eligible health plan enrollment increased from 4 percent to 25 percent among individuals with employee-only coverage and from 3 percent to 28 percent among individuals with family coverage.

Healthier-than-average employees are enticed by $0 premiums for HSA-eligible health plans. Offering coverage with no payroll deduction attracted individual enrollees who were marginally healthier than those who would have enrolled without this financial incentive in place, therefore adverse selection was not mitigated as anticipated.