There’s no doubt about it. Health savings accounts (HSAs) are gaining in popularity, and their growth—both in assets and enrollment—is not likely to slow down any time soon. Typically paired with a high deductible health plan (HDHP), HSAs offer several benefits for employers and employees. Here, we take a look at the continued growth of HSAs and breakdown why they are so attractive.
Enrollment in HSAs Increases
Popular employee benefits for 2018 include commuter benefits, workplace wellness programs, and financial fitness courses—among which Clarity Benefit Solutions commuter benefits and commuter benefits administration prove extremely useful. However, it’s the HSA that proves most popular and useful.
A Steadily Growing Trend
Over 20 million consumers invested in HSAs in 2016, according to a survey conducted by American’s Health Insurance Plans (AHIP).1 This was a net increase of 648,000 enrollees or roughly 3.4% from 2015. Rising from about 3 million in 2004 to just under 20 million in 2015, the number of enrollees has increased steadily and will likely continue to do so, perhaps even picking up some speed.
What’s Popular in the HSA Market?
Most HSA enrollees are part of the large group market, where large group is defined as policies offered by employers with 50+ employees. Preferred Provider Organizations (PPOs) are the most popular type of HSA/HDHP product with over 60% of those enrolling in an HSA/HDP enrolling in a PPO. And, the majority of companies offering HSAs provide workers with a way to manage their account online.
So, what’s attracting workers to HSAs?
What’s Attracting Workers to HSAs?
Workers elect to participate in HSAs for several reasons. These reasons all relate to the advantages offered by the product:
• Triple tax advantage: Pre-tax contributions means more take home pay; interest earned is tax-free; and withdrawals (for qualifying medical expenses) are tax-free.
• Flexible contributions: Workers can change the amount they contribute as needed to accommodate their lifestyle and financial needs.
• Individually-owned: HSAs are owned by the worker. This means that when the worker leaves a company, they can take their HSA with them.
• Cost management: HSAs provide a way to cover out-of-pocket healthcare expenses until (and even after) an insurance deductible has been reached.
• Roll-over: Funds roll-over from year to year—nothing is forfeited because it’s not used.
• Help: HSA accounts, offered by the right benefits administrator, come with online tools and assistance to help workers manage and understand their account. Workers can receive all the hand holding they need, including a payroll advance to cover emergency medical expenses.
What’s Attracting Employers to HSAs?
It’s not just employees that HSAs attract. In an age of rising healthcare costs, HSAs may be a life boat for employers, carrying them safely to distant shores. Several factors explain the rising popularity of HSAs amongst employers. These include:
• Cost management: Typically paired with an HDHP, HSAs offer employers a way to reduce premium rates and thus buffer the rising costs of healthcare, even if they make contributions to HSAs on behalf of their employees.
• Reduced taxes: Employer contributions to HSAs are deductible. In addition, these contributions are not subject to social security tax. This means employers save on every dollar they contribute to an HSA on behalf of an employee.
• Bigger Budgets: The money saved by offering an HSA-HDHP plan can be used to tackle other business projects and grow.
• Talent recruitment: HSAs are attractive to workers for several reasons. Fortunately, companies of any size can afford to offer HSAs and attract talent in a competitive labor market. Moreover, a cash contribution to worker HSAs is a tangible benefit likely to be extremely popular among employees.
• Better Relationships: Not only will employers improve their relationship with employees by offering HSAs as an attractive benefit, by having workers open their HSA with the company’s bank, the company can strengthen their relationship with their bank.
Now’s The Time to Get on Board
With steadily growing enrollment, HSAs may just become the next 401k. Their benefits are attractive to workers and employers. So, now’s the time to connect with a benefits administrator who can set you up with an HSA solution. Start the New Year off right with a proper HDHP-HSA offering.
1. The AHIP survey is an annual survey of U.S. health insurance companies offering health savings accounts and high deductible health plans.
