Even though health savings accounts have been around for nearly 16 years, employers are still having a tough time getting employees to understand the vehicle’s triple tax benefit in saving dollars today for health care costs tomorrow.
Employee education was the top concern for nearly 62 percent of employers in a newly released survey on HSAs by the Plan Sponsor Council of America. There was a significant difference between education and administration concerns, which ranked second at just under 16 percent.
People often confuse HSAs with flexible savings accounts, said Kenneth Forsythe, head of product strategy for Empower Retirement. Forsythe was part of a panel of experts speaking at the PSCA national conference in May. Part of the reason for the confusion is the number of acronym-rich savings accounts that can accompany high-deductible health care accounts, and that employers typically only talk about HSAs during open enrollment, he added.
The survey backed that up by showing that 76 percent of plan sponsors only offer HSA education during open enrollment. Only 21 percent offer education at different times during the year. Group presentations were the most popular education resource (59.9 percent), followed by HSA “how-to” guides (56.6 percent), and flyers (45.1 percent).
Surprisingly, educating employees via mobile technology ranked nearly last at 15.4 percent. Glen Kvadus, vice president of Optum Financial Services, said education needs to be accessible and easy to understand.
“We need to take the confusion out of [HSAs] for consumers,” Kvadus said at the PSCA conference, adding that providers need to “make it as easy as shopping on Amazon.”
Defining an HSA
Created through the Medicare Prescription Drug, Improvement and Modernization Act of 2003, HSAs are savings accounts linked to high-deductible health plans as a means to save and pay for medical expenses today as well as in retirement. Unlike other savings vehicles, HSA dollars do not expire at the end of the year. HSAs are known for their triple tax benefit: money goes in tax free, it grows tax-free and can be withdrawn tax-free to pay for qualified health care costs.
Seventy-six percent of plan sponsors only offer HSA education during open enrollment.
Each year, the Internal Revenue Service sets limits on HSA contributions. For 2019, individuals can contribute a maximum of $3,500 where families have a $7,000 cap. Account holders who are 55 or older are allowed a $1,000 annual catch-up contribution. Like 401(k)s, employers can help out employees by contributing to the accounts as well.
The PSCA survey of 216 employers showed that 189 offered HSAs in 2018. HSA consulting firm Devenir’s 2018 “Year-End HSA Market Survey” reported a 13 percent growth in HSA accounts from 2017-18, to 25 million.
Mercedes Ikard, director of retirement planning at Atrium Health, said the company uses as many communication channels as possible and positions the HSA alongside its 401(k).
Atrium uses a branded campaign called “Plan. Partner. Participate.” It also uses a dedicated microsite, weekly emails, posts on a company-only Yammer site, and printed materials to explain that the HSAs are linked to the consumer-directed health plan and the 401(k) plan.
“The HSA sits in both worlds,” Ikard said. “The key is to communicate often and as simply as you can.”
As a result, the number of employees investing assets (past the $1,000 threshold) grew to 1,000 in December 2018, from 117 in May 2016. Meanwhile, HSA investments grew to $6.4 million in December 2018 from $42,000 in May 2016.
Despite the confusion surrounding HSAs, Kvadus said he felt good about how the investment portion is evolving. Devenir’s report showed HSA investable assets have grown to $10.2 billion in 2018 from $100,000 in 2006. That amount is expected to grow to $16.7 billion by 2020. Overall, HSAs held $53.8 billion in 2018, compared to $1.7 billion in 2006, Devenir data showed.
“Ten years ago, the focus was on getting employees to open an HSA account,” Kvadus said. “Now it is about maximizing investment opportunities.”