With the cost of health care skyrocketing, an increase in baby boomer entrepreneurs covering their own health care, rising unemployment, and a reduction in employer-covered health care, health care can be a significant financial burden for boomers until they’re eligible for Medicare. Many self-insured boomers, however, may consider a high-deductible/low-premium health plan coupled with a health savings account – but first, they’ll need some education on all the benefits of such an arrangement.
Baby boomers and health savings accounts
Sales of high-deductible/low-premium health plans coupled with a health savings account increased from 438,000 in 2004 to 6.1 million in 2008, and are becoming even more popular among baby boomers — as of January 2009, 53 percent of individual HSA enrollees were older than 40.
These plans not only offer lower premiums than traditional health plans, but they also allow consumers to save and invest their health care dollars on a tax-free basis. In fact, many insurance professionals have started recommending HSAs as a way to cover long term care insurance premiums for clients who generally have a high income, are in their 50s, and are looking for a way to realize tax benefits.
While there has been significant growth in the number of boomers holding HSAs over the years, many of them are either still unfamiliar with the benefits of a HSA or don’t fully understand how to manage the funds within their health savings accounts. As a result, then, many boomers who have an HSA associated with their health plan simply do not utilize the accounts effectively.
For those boomers who don’t have the funds to contribute to an HSA, a high-deductible health plan is often the most affordable health insurance option, and is certainly better than not having any insurance at all.
According to a 2006 report by the Commonwealth Fund (“Health Coverage for Aging Baby Boomers”), more than half (55 percent) of older workers with individual coverage spent more than $3,600 annually on health insurance premiums, compared with 16 percent of older workers with employer coverage. Survey respondents also expressed an interest in new Medicare savings accounts.
So while it sounds like boomers may already be primed to own a high-deductible plan with an HAS, there are still many obstacles keeping them from signing up — one of which is that many boomers do not fully understand HSA benefits.
Boomers’ reactions to high-deductible HSA plans
ECI Healthcare conducted a study in 2006 among baby boomers to assess their interest in HSAs. The study revealed that of those boomers who understand how an HSA works, the product can be ranked as follows:
- Tax-advantaged savings with pre-tax dollars (31 percent)
- Coverage of medical (or medical-related) expenses (27 percent)
- Savings for future medical expenses when older (24 percent)
- Savings should health insurance coverage be lost (18 percent)
And those boomers who didn’t find high-deductible plans with HSAs to be a viable option listed the following as reasons why they held this opinion:
- Too much money to pay up front (deductibles)
- Do not want a high-deductible plan at all
- Cannot afford the cash outlay for the health plan and do not have the cash to put into an HSA account
- Does not seem to work with high annual medical expenses
- Too confusing
Marketing HSAs to boomers
Overall, there is a need to better explain to boomers the benefits of a high-deductible plan coupled with an HSA. For starters, perhaps changing the name to “low-premium/high-deductible health plans” would get boomers more interested in this type of coverage. Most successful products outside of the health industry are not marketed with a negative feature (“high-deductible”) at the front of the product description. Next, providing a very clear education on how HSAs work could help increase adoption and utilization of the accounts.
Here are some specific tips for selling these plans to boomers:
- Highlight “low-premium” rather than “high-deductible” when presenting the health plan component.
- Emphasize affordable and predictable costs, explaining that there are no surprises.
- Explain the tax savings advantages of the HSAs up front.
- Provide educational support using clear language rather than “insurance speak.”
- Provide self-empowering online tools that allow boomers to easily and clearly compare plan costs, features, and benefits so that they can see for themselves how they could save money if they are careful and informed health care consumers.
- Illustrate an understanding of the boomer segment’s desire to remain independent, healthy, and in control of their health, their health care, and their lives as they age.
- Don’t sell to boomers; let them arrive at their own decisions with your guidance and support.
- Reinforce boomers’ new values as they age (spending less and making smart choices).
- Build online communities that offer peer support and sharing opportunities.
- Understand the importance of females in the health care decision-making process of male/female households.
It appears that while the likelihood of a boomer voluntarily enrolling in a high-deductible plan and contributing to an HSA will be affected somewhat by income, as well as by available cash and an their or their family members’ health conditions, boomers’ understanding of the products and their perceptions of the benefits and risks are also very important factors. When you properly present this information, you can ensure greater success when selling high-deductible plans with HSAs to baby boomers.
Robin Raff is the director of strategy for ECI Healthcare. She can be reached at firstname.lastname@example.org.