Employees are eager for solutions that will help them save money and manage their healthcare expenses. Simply consider the fact that more than 35.5 million Americans are enrolled in health savings accounts (HSAs) to manage healthcare expenses in 2022—a 9% increase since 2021. Unfortunately, there are even more people who are enrolled in HSA-qualified health plans who aren’t aware they have this option.
However, simply enrolling in this company-sponsored benefit won’t deliver the financial edge they’re looking for. That’s where HR and benefits professionals come in: They can help employees get more from their health benefits and their pocketbook by engaging and educating them on how to use their HSA throughout the year.
If your organization offers a qualified high-deductible health plan (HDHP) and a company-sponsored HSA, your employees likely fall into one of three groups:
- Enrolled in the HSA and ready for action. This category of employees are enrolled in the HSA, are signed up for automatic payroll contributions, and have a plan of action for using their account. The broad eligibility rules for HSAs allow these employees to evolve their financial strategy over time as their lifestyles change. By educating them on how an HSA can support their health and save money at every age and stage of their life, you can drive long-term engagement and utilization.
- Enrolled in the HSA but not funding. Employees who elect into the HSA but don’t immediately fund the account often forget the option exists and are unaware they can begin funding the account at any time, either via automatic payroll deductions or onetime contributions as needed to pay for healthcare expenses. Likewise, if your organization automatically enrolls employees in the HSA during the onboarding process, they may not even be aware of this benefit and thus aren’t fully engaged. As a result, employees could be paying out of pocket for eligible expenses like sunscreen, thermometers, and first-aid items and missing out on savings. It’s estimated that 20% of open HSAs fall into this category, which represents a significant opportunity for your benefits team to spur utilization and satisfaction for this offering.
- Enrolled in the HDHP but NOT in the HSA. Approximately 50% of individuals who are enrolled in a qualified HDHP don’t open an HSA, which means they’re missing out on the tax benefits they can realize simply by opening their account. These employees are still spending money on HSA-eligible everyday health expenses and clinical services but without reducing their tax liability. For example, HSA Store estimates the average household spends more than $1,600 a year on items that could be purchased with HSA funds, resulting in approximately $480 in lost savings each year. Remind these employees that even without pre-funding their accounts, they can see immediate tax benefits by running such expenses through their HSA.
Understanding your employees aren’t all at the same place in terms of understanding their HSA is key for HR teams that want to boost utilization and engagement with company-sponsored benefits while instilling a culture of confidence that can differentiate your benefits program and influence outcomes. So, what can you do to educate and engage employees across your workforce? Consider these five tips to improve HSA knowledge and utilization, no matter which category your employees are in.
Instill the Basics
Navigating health benefits post-enrollment process can be daunting. That’s why it’s important to seize the moment after open enrollment to begin educating employees on the unique benefits an HSA can provide and what sets it apart from a flexible spending account (FSA) or other popular investment vehicles. The triple-tax advantage of the HSA is a great place to start. With no tax paid on contributions, interest earned, or qualified withdrawals, the HSA is unlike any other savings vehicle. The lack of deadlines is another powerful benefit because this allows employees to accumulate money tax-free over time. This also means employees can benefit by simply opening an account and funneling money through the HSA when they want to reimburse themselves for eligible expenses.
Encourage Adoption Across Your Population
HSAs are for everyone, no matter their age, income level, or lifestyle. By understanding the makeup and needs of your workforce, you can tailor your HR communications accordingly so the benefits of enrolling and using the HSA are clear to everyone. For example, families with young children tend to be higher users of healthcare services, so understanding what’s eligible is a top priority for this population. Meanwhile, employees who are nearing retirement are likely more focused on stockpiling funds for retirement and will need to understand the HSA rollover feature, available investment options, and how withdrawals in retirement work.
Increase Your Employees’ Eligibility IQ
The biggest roadblock to account enrollment and utilization continues to be a lack of understanding about how tax-free funds can be used. A big miss for most people is not using HSA funds to buy everyday health needs or routine healthcare services. Things like over-the-counter medications, cold and allergy products, menstrual care products, prenatal vitamins, pregnancy and fertility tests, contacts, and drug-free pain relief products are all items your employees buy on a repeat basis. Why not pay for those with tax-free funds? In addition, employees can use HSA funds to scratch that high-tech itch with devices to monitor conditions like high blood pressure or diabetes, to relieve joint and muscle pain, and even to help manage stress and anxiety. Remove utilization hurdles and improve the eligibility IQ of your workforce by sharing these tips throughout the year and giving them easy access to a searchable, online eligibility list.
Showcase the Savings Potential
An HSA’s savings potential can feel abstract to employees who have never used their account, so it’s important to include real-world examples. Regardless of an employee’s contribution intentions, HSAs can allow for real savings. In fact, the average individual can save 30% or more on eligible healthcare expenses, depending on their tax bracket. Point employees to a free tax savings calculator to help estimate their savings potential in real time and better plan for their future needs. By showing employees how much they can save and how their money can grow, your team can not only improve HSA adoption and satisfaction but also make a difference in your employees’ financial health. On a related note, make sure employees who are nearing retirement understand the catch-up contribution rule, which allows employees who are 55 or older to contribute an extra $1,000 per year to their HSA.
Emphasize the Importance of Recordkeeping
The recordkeeping required for HSAs is a critical but vastly ignored factor in account utilization and satisfaction. Because HSA administrators don’t track the purchases account holders make with their HSAs, encourage employees to save receipts for all healthcare expenses (including doctor visits and prescriptions) and all over-the-counter products they purchase so they can easily reimburse themselves from the HSA when they are ready or when they need the money. Direct employees to a free, online expense dashboard that makes tracking expenses by specific years or a specific time frame easy and that allows employees to manually enter transaction data or upload receipts. These practices provide HSA users a safeguard in the event of an Internal Revenue Service (IRS) audit.
Your benefits team has gone to great lengths to offer the right mix of benefits to keep current employees happy and attract new talent, but don’t stop there. By looking beyond the open enrollment period to educate employees on how to use their HSA throughout the year, HR teams can encourage appropriate utilization and improve corporate outcomes.
Itamar Romanini is vice president and general manager of HSA Store and a longtime leader and innovator in consumer-directed health care and HSAs. HSA Store is part of the Health-E Commerce family of brands, which also includes FSA Store, WellDeservedHealth, and Caring Mill.