Why HSA contributions are becoming as important as a 401(k) match
High-deductible health plans are increasingly become commonplace and more and more employees are investing in health savings accounts as a result.
As employees take on greater financial burden for their healthcare expenses, HSAs will become a critical component of an overall healthcare strategy, says John Park, chief strategy officer for Alegeus. “Because consumers do not fully understand the value of an HSA, employers must educate employees on the tax benefits,” Park says. “To entice participation, we see more employers contributing to these accounts, much like they do with a 401(k) match.”
Karen Frost, SVP of health strategy & solutions at Aon Hewitt, agrees that the substantial increase in HSA participation is due to employer incentives to employees. “Employers will put money into [an HSA], which is also called seeding,” Frost says. “We also see employers match employee contributions, similar to retirement plans.”
According to Aon’s March 2016 Consumer-Driven Health Plan Survey, 69% of employers offer seeding to their employees as a way to influence them to invest in a HSA, and 68% of employers will seed a flat amount for all covered employees.
Employers are offering other bonuses for HSA participation through wellness challenges or health and wellbeing activities that, when an employee meets a set goal or completes a challenge, have the employer depositing dollars earned directly into the employee’s HSA.
The Affordable Care Act’s Cadillac tax on high-value health coverage that exceeds set thresholds will impact the HSA market as well. “This penalty incentivizes employers to offer high-deductible health plans alongside HSAs,” Park says.
Frost added because of the Cadillac tax, many employers have begun to offer HDHPs as an option for employees or have limited employees’ choices to only HDHPs.
“In 2016, we have seen that 23% of employers will only offer high-deductible health plans, with the remainder (77%) offering HDHPs as a choice,” Frost says.
According to Devenir, by the end of 2016, it is estimated that there will be total of $31.8 billion in deposits into HSAs with $6.3 billion in investments.