Healthcare premiums are skyrocketing, and more employers are beginning to worry about their employees’ ability to afford healthcare during retirement. Which is why high-deductible health plans and HSAs have been growing in popularity over the past few years—with some companies even choosing to make them their only health insurance option.
Others are designing plans that include high deductibles along with other less appealing options, to persuade employees to choose the high-deductible option. However, a high-deductible plan with an HSA shouldn’t be a very hard sell—the funds in an HSA account are exempt from payroll taxes, the earnings will be tax-free, and withdrawals aren’t taxed either (when the money is used for qualified medical expenses). It’s similar to a 401(k) for medical expenses.
HSAs Don’t Work for Everyone
Employees tend to dip into their HSAs for medical expenses rather than let the savings grow. According to a recent Willis Towers Watson survey, only about 8% of employees are saving money entirely for retirement. HSAs tend to become an empty benefit for employees who don’t have the money to put into their accounts.
According to Devenir, be the end of 2017, the average balance of HSAs opened in 2005 was only about $8,600, and approximately 20% of the accounts were unfunded.
How Employers are Trying to Increase the Use of HSAs
Educating employees on the benefits of an HSA and how to use it properly is the most effective way to boost their usage. Decision support tools can help employees decide how much money to contribute to their HSA, and internal communication campaigns highlighting the long-term benefits of HSAs and how they differ from FSAs can positively impact how employees view their HSAs.
Compare HSAs to 401(k)s to help your employees understand how they work and how important they can be later in life. Along with communication and education, some employers are beginning to offer incentives to employees who choose an HSA but are not using it for medical expenses—like the opportunity to invest their HSA money in mutual funds once they hit a certain balance, or matching what employees put in their accounts.
Increasing HSA participation can help employees gain autonomy over their finances, and many employers consider the high-deductible plans they come with to be the best consumer choice—especially for a young workforce. Young employees have less need for healthcare and can choose to utilize their HSAs as long-term savings accounts.
Clarity Benefit Solutions Ready For Life HSA fills financial gaps for unexpected medical expenses, reducing any downsides for employees. This option takes the financial worry out of a high-deductible plan and shows employee appreciation by letting them know that you care about their well-being. Learn more about how Clarity can help you provide the best benefit solutions to your employees by visiting our website.
Sources:
1. https://www.employeebenefitadviser.com/news/raising-the-stakes-for-hsas
