Health Savings Accounts are proving to be a worthwhile investment for employers.
A recent analysis by the consulting firm Mercer found that the average per-employee cost of HSA-eligible plans is 13% less than that of a traditional PPO. Yet, although 53% of large employers offer such a plan, just 6% position it as a full replacement for traditional medical coverage.
Higher costs are one reason. Employers that offer HSA plans as a full replacement spend $9,991 per employee vs. $9,453 when for plans that are offered as a choice
Poor employee engagement is another factor: At companies that offer HSAs, only 24% of covered employees enroll in one.
Employer contributions apparently aren’t much of a motivator. The Mercer analysis found that, when offered alongside other medical plans, just 40% of eligible employees choose an HSA to which their employer contributes versus 35% when there is no employer contribution.
“Many employees remain uncomfortable with the higher deductible” of HSA plans, Mercer says. But “whether you want to build enrollment over time or move to a full replacement, there are tools that make the transition easier for employees.”
What drives employee engagement
New research also suggests employees are drawn to a longer time horizon for HSAs.
More than 40% of the more than 14,000 HSA participants surveyed by ConnectYourCare, a provider of consumer-directed healthcare programs, enrolled in their accounts to make use them as savings vehicles for future health care needs. That compares with the 21% of respondents who cited tax savings and the 9.5% who identified lower premiums as the chief reasons for their HAS participation.
Nearly two-thirds (63%) of The ConnectYourCare survey respondents put healthcare affordability at the top of their retirement concerns. But a sizable majority (58%) continue to set their contribution level based on their current as opposed to their future healthcare needs.
“They recognize the long-term and the future value of an HSA, but they’re still thinking about how much they should contribute based on today’s expenses,” reports Barbara Boudreau, ConnectYourCare’s VP of strategy. “We need to show how even small extra savings, year-over-year, can accumulate to a nice nest egg going toward their future expenses.”
Employers can make use of tools such as calculators to help participants determine how much they should be contributing to their accounts, Boudreau says. They also can encourage enrollment by raising awareness of the tax benefits. As many as 47% of nearly 250 employers surveyed indicated that their employees weren’t aware of the tax advantages of HSAs, flexible spending accounts and similar savings vehicles.
Brokers and advisers can help their employer clients boost enrollments by “reaching employees who’ve never enrolled before and giving them a compelling reason to participate,” adds Boudreau. “Once we get them enrolled for the first time, they get it. They see the value and they’ll continue to enroll.”
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