Abstract
This report examines the emerging market for consumer credit facilities to
bridge the gap between a subscriber' s out-of-pocket medical expense
obligations under a high deductible health plan (HDHP) and any accumulated
assets held in a health savings account (HSA). High deductibles are what
HDHPs economically attractive in terms of lower premiums. The funding gap is
intended to be filled by assets from consumers' HSAs, which offer a
tax-advantaged savings vehicle for HDHP participants. Topics explored include:
- The structural gap between out of pocket expenses under a high deductible
health plan and any potential HSA-based savings creates an opportunity for
credit extension.
- HDHPs are growing quickly from a small base, although the future growth
trajectory is questionable. Credit facilities for employees could actually
enable more employers to adopt HDHPs.
- Early credit experience with HDHP participants has been positive, but may
be colored by early adopters who are healthier and wealthier.
- Credit providers so far have focused on two primary models: extending a
line of credit to individuals, or underwriting a broad employer based group
through payroll deductions.
- HDHP-related credit could reach $1.5 Billion in outstandings by 2010.
The study examines the emerging needs for credit under these plans, and the
approaches taken by early providers addressing the market need. Ken Paterson,
Director of the Credit Advisory Service at Mercator Advisory Group and the
author of this report comments that, "An analogy often made is that the
shift to HDHP' s is like the shift from defined benefit pensions to defined
contribution 401(k) plans. HDHP participants and sponsors work under
specified contributory limits and responsibilities, much like a 401(k). But a
key difference is that you can, in theory, plan for retirement in a specific
year, or you can move the date around a bit at your discretion if
circumstances permit. It is a lot harder to time a medical emergency for that
date when your HSA balance will cover your deductibles. So into the breach
rides credit, and a number of early market entrants are demonstrating the need
can be met using a variety of approaches. Credit may in fact come to play a
critical role in increasing the appeal of HDHPs for employers concerned about
employees' ability to meet their out-of-pocket obligations."
The report is 27 pages long and contains 8 exhibits
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