Health Savings Accounts — Benefits worth fighting for

A recent 2022 Midyear Survey¹ highlighted an increased utilization of HSAs around the country. In the first half of 2022, the number of HSA accounts grew from 32.5 million to 33.9 million, propelled by factors such as employer consolidation to a single medical plan, employees’ growing awareness of the financial benefits of HSAs, and workers’ increased focus in a post-pandemic world on their personal finances. 

Currently, the attitude towards HSAs is reminiscent of that towards 401(k)s 30 years ago; meaning, the potential of HSAs is enormous, once it gains momentum — and it’s starting to. As the trends above accelerate, more employers who offer high deductible health plans (HDHPs) are also turning to HSAs, but because HSAs are still relatively young, it can be difficult to implement them effectively to help make the most of what they have to offer.

Thinking about introducing HSAs as part of your employee benefits package? Here’s what you need to know.

Choose a provider that appeals to your diverse audience

The HSA provider you choose should appeal to all types of employees.

Spenders who use the funds in their HSA, for example, may not have enough discretionary income to use HSAs as an investment or retirement vehicle. For spenders, it’s important to consider the provider’s debit card technology and the ease with which one can link up medical claims. On the other hand, savers who are keeping funds in their HSA fully believe in the long-term aspect of HSAs or have enough income that their HSAs become an additional retirement resource. Flexibility regarding investments is key for savers. Consider whether people can choose their own funds and how fees are structured. And remember, as with any investment, there are risks; participants should make sure to fully explore those risks before choosing to invest.

Those in between may have enough discretionary income to use it as a longer-term savings account but also may need to dip in to pay for things.

In general, when selecting a provider for diverse employees, technology should be at the forefront of your decision, particularly the interface and support model. The limitations of their app, such as the ability to make changes or select your investment lineup within the app, can make or break its use amongst employees.

Educating employees is essential

Choosing the perfect plan based on your needs is fruitless if employees are unsure how to use it. The average HSA has a balance of about $3,000, but about half of all HSAs have a balance of $500 or less, including almost 20% of accounts with no balance. HSAs are usually driven by employers looking to reduce the costs of their medical plan or who are shifting to a higher deductible, but ineffective education negates all potential benefits: if an employee does not understand the benefit, under enrollment or lack of use will occur, and the employer loses the benefits of offering an HSA. Consider referring to a consultant or HSA provider who can prevent translational misunderstandings by educating employees before they enroll and be available during the process.

Implement strategies to combat under enrollment

Introducing the HSA benefit outside of your annual enrollment period can help boost enrollment. Make sure that lower income earners understand that they can save money in the long run even if they need to use the money regularly and aren’t saving it for retirement. The key is to make your information clear and digestible.

Alternatively, auto-enrollment boosts engagement without employees having to sign up themselves. Auto-enrollment is widely used in 401(k) plans but not as much with HSAs due to higher risk of financial consequence should a mistake be made.

Use the benefit to your advantage

In a post-pandemic world where employees are prioritizing health care more than ever, going the extra mile to offer employer-sponsored HSAs could help attract talent. 

Be prepared to pivot as new legislation is introduced

What's true this year may not be true next year. Be prepared to pivot as legislation regarding HSAs moves through Congress.

HSAs, unique and customizable, are an ideal vehicle for breaking down barriers to health and wealth as funds can be used now, later, or anytime in between. As HSAs become as respected and valued as a resource both now and into retirement, so too will your employees eventually recognize and appreciate the real value of this misunderstood yet highly attractive benefit.

This article was written by Greg Puig from Employee Benefit News and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.