Health Care Spending after Adopting a Full-Replacement, High-Deductible Health Plan With a Health Savings Account: A Five-Year Study

16 Pages Posted: 20 Jul 2013

See all articles by Paul Fronstin

Paul Fronstin

Employee Benefit Research Institute (EBRI)

M. Christopher Roebuck

RxEconomics LLC

Date Written: July 2013


This paper reports experience over five years from a single large employer in the Midwestern United States that adopted a high-deductible health plan with a health savings account (HSA) for all employees. This study represents one of the longest observation periods reported with a full-replacement consumer-directed health plan (CDHP), and it is one of the few studies with a matched control group.

In the first year of the HSA, the employer’s aggregate health care spending was reduced by $527 per person.

Results show that spending was reduced significantly in the inaugural year of the HSA plan in medical, pharmacy, and total-claims categories. Further, the magnitude of the cost savings was greatest in this first year but the cost savings continued over the succeeding three years albeit at a slower pace.

The introduction of the full-replacement HSA plan reduced total spending by 25 percent in the first year. Each category of health spending experienced statistically significant reductions in the first year of the HSA plan with the exception of spending on inpatient hospital stays. Spending on laboratory services and prescription drugs had the largest statistically significant declines (36 percent and 32 percent, respectively).

When examining the spending components separately, only pharmacy and laboratory spending were statistically significantly lower throughout the entire four years after the HSA plan was adopted.

Reductions in pharmacy spending were large and mostly sustained over the four years after the HSA was adopted. In the first year of the HSA, pharmacy-spending reductions were 40-47 percent for individuals in all but the highest quintile of spending.

When spending by pre-HSA quintile was examined, the largest spending effects in the first year of the HSA were seen in the third and fourth quintiles. The highest pre-HSA quintile group experienced spending reductions in the first year of the HSA that were not sustained. The second HSA-plan year showed total spending was reduced only in the second and fourth quintiles. By the fourth year, the HSA plan reduced pharmacy spending in the fourth quintile; only the third quintile continued to have reduced spending as compared with the year before the HSA plan was adopted.

This study adds to the consumer-directed-health-plan literature by reporting changes in spending during the four years after an HSA plan was adopted and showing that, in one employer, spending reductions eroded over time and that reductions varied by pre-replacement levels of health spending. The data suggest that the highest users were least affected and that moderate users were most vulnerable. The data did not allow for distinguishing discretionary from necessary services utilization. This is essential for understanding the value of account-based, high-deductible plans.

Keywords: Account-based health plans, Consumer-driven health plans (CDHPs), Employment-based benefits, Health care costs, Health care utilization, Health insurance coverage, Health savings accounts (HSAs), High-deductible health plans (HDHPs), Hospital costs, Prescription drug costs

JEL Classification: D12, I1, I11, J3, J32

Suggested Citation

Fronstin, Paul and Roebuck, M. Christopher, Health Care Spending after Adopting a Full-Replacement, High-Deductible Health Plan With a Health Savings Account: A Five-Year Study (July 2013). EBRI Issue Brief, Number 388 (July 2013). Available at SSRN:

Paul Fronstin (Contact Author)

Employee Benefit Research Institute (EBRI) ( email )

1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States
202-775-6352 (Phone)
202-775-6312 (Fax)

M. Christopher Roebuck

RxEconomics LLC ( email )

11350 McCormick Road
Executive Plaza II, Suite 705
Hunt Valley, MD 21031
United States
410-215-8380 (Phone)
410-696-5802 (Fax)

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