Health savings accounts — benefits worth fighting for

Voya Financial's 2022 midyear survey highlighted an increased utilization of HSAs around the country. In the first half of 2022, the number of HSA accounts grew from 32.5 million to 33.9 million, propelled by factors such as employer consolidation to a single medical plan, employees' growing awareness of the financial benefits of HSAs, and workers' increased focus in a post-pandemic world on their personal finances. 

Currently, the attitude towards HSAs is reminiscent of that towards 401(k)s 30 years ago; meaning, the potential of HSAs is enormous, once it gains momentum — and it's starting to. As the trends above accelerate, more employers are turning to HSAs, but because HSAs are still relatively young, it can be difficult to implement them effectively to make the most of what they have to offer.

Read more: 3 myths preventing employers from embracing HSA-qualified plans 

Thinking about introducing HSAs as an employee benefit? Here's what you need to know.

Choose a provider that appeals to your diverse audience
Employees typically fall into three pockets when it comes to finances: spenders, savers, and those in between. The HSA provider you choose must appeal to all three types of employees. 

Spenders don't have enough discretionary income to use HSAs as an investment or retirement vehicle. For spenders, it's important to consider the provider's debit card technology and the ease with which one can link up medical claims. Savers fully believe in the long-term aspect of HSAs or have enough income that their HSAs become an additional retirement account. Flexibility regarding investments is key for savers. Consider whether people can choose their own funds and how fees are structured. Those in between have enough discretionary income to use it as a savings account but also may need to dip in to pay for things. 

Read more: 7 tips to help employers and employees optimize HSAs 

In general, when selecting a provider for diverse employees, technology should be at the forefront of your decision, particularly the interface and support model. The limitations of their app, such as the ability to make changes or select your investment lineup within the app, can make or break its use amongst employees.

Educating employees is essential
Choosing the perfect plan is fruitless if employees are unsure how to use it. Voya's survey found that the average HSA has a balance of about $3,000, but about half of all HSAs have a balance of $500 or less, including almost 20% of accounts with no balance. HSAs are usually driven by employers looking to reduce the costs of their medical plan or who are shifting to a higher deductible, but ineffective education negates all potential benefits: if an employee does not understand the benefit, under enrollment or lack of use will occur, and the employer loses the benefits of offering an HSA. Consider referring to a consultant or HSA provider who can prevent translational misunderstandings by educating employees before they enroll and be available during the process.

Implement strategies to combat under enrollment
Introducing the HSA benefit outside of your annual enrollment period can boost enrollment by preventing employees from becoming overwhelmed. Make sure that lower income earners understand that they can save money in the long run even if they need to use the money regularly and aren't saving it for retirement. The key is to make your information clear and digestible. 

Read more: Open enrollment cheat sheet: The pros and cons of FSA, HSA, and HRA pre-tax benefits 

Alternatively, auto-enrollment boosts engagement without employees having to sign up themselves. Auto-enrollment is widely used in 401(k) plans but not as much with HSAs due to higher risk of financial consequence should a mistake be made. For example, if someone gets auto enrolled in an HSA simultaneously with Medicare, the employee will face a tricky tax situation. 

Use the benefit to your advantage
Despite a reported one million fewer jobs in August than July and increasing interest rates pointing to a recession, many industries are still experiencing a tight labor market, meaning attracting and retaining talent is still a challenge for many. In a post-pandemic world where employees are prioritizing healthcare more than ever, going the extra mile to offer employer-sponsored HSAs could be the difference between filling a position or not.

Be prepared to pivot as new legislation is introduced
What's true this year may not be true next year. Be prepared to pivot as legislation regarding HSAs moves through Congress. Legislation has already been introduced regarding who can fund, open and contribute to an HSA as well as the amount you can put in. Legislation has also been proposed to remove the Medicare preclusion of HSAs and to completely cut the necessity of being enrolled in a specific type of medical plan, which would open up this financial vehicle to many more people. 

Read more: Ask an Adviser: How can we reframe our HSAs to support DEI efforts? 

Today, most retired couples need at least an extra $300,000 in the bank to cover unforeseen medical expenses as they age. For this reason, retirement and health plans should be looked at collectively rather than separately. HSAs, unique and customizable, are an ideal vehicle for breaking down barriers to health and wealth as funds can be used now, later, or anytime in between. As HSAs become as respected and valued as 401(k)s, so too will your employees eventually recognize and appreciate the real value of this misunderstood yet highly attractive benefit.