Logic and the Madness of Crowds...

A couple of months ago, I made a presentation to the employees of a mid-sized client. The employer's renewal premiums were being increased by 15%+ and, in response, we were moving the plan down one notch in benefits...overall, it was still a pretty rich benefit schedule. Also, the company was adding another plan choice for the employees...an HSA with a $2400 deductible. As an incentive for employees to switch into the HSA, the employer was going to contribute a substantial portion of the premium savings into the employee HSA accounts. It worked out to a contribution of $1700 for employees and $3400 for employees with additional dependents.

From my perspective, this was a terrific deal. If somebody had no medical claims (admittedly an unlikely situation), he or she would end up with a slug of money in the bank. In a worst case scenario, with a large claim, the employee's out of pocket cost would be offset by the employer's contribution to the HSA account...the net savings to the employee would be thousands of dollars versus remaining in the PPO plan. As a practical matter, most people would end up somewhere in-between. On top of all that, the employee's share of the premium would be decreased to reflect the lower rates the employer would pay. It was a true win-win situation.

Out of 35 employees, guess how many switched to the HSA? Exactly one. The reason most people cited for not changing? They liked the fixed doctor's office copayments in the PPO. Sigh.