Eight ways to make HSAs work better for more of your people 

There’s a lot to like about Health Savings Accounts, one of the most – if not the most – tax-efficient ways to save money. The benefit to employees and their families? Short-term, it’s tax-free money to spend on medical expenses not covered by a health plan; long-term, it’s money that can be used to pay for healthcare after retirement. The benefit to employers? It makes it possible to offer a lower-cost medical plan with the option of providing employees with tax-free money to help cover the higher out-of-pocket expenses – which most employers do.  HSA-based plans are still about 18% less expensive than traditional PPO plans, even after including any employer contribution to the account.

The catch is that HSAs can only be offered to employees enrolled in a qualified High-Deductible Health Plan, although many employers are hoping that rule can be changed. Employers have steadily added HSA-eligible HDHP offerings since HSAs were first introduced in 2004; today they are offered by 64% of all employers (84% of those with 500 or more employees) and 37% of all covered employees are enrolled in one. However, enrollment growth has leveled off over the past three years (36% of covered employees were enrolled in an HSA plan in 2021), suggesting that many employees are wary of high-deductible plans despite the generally lower premium contributions and the savings opportunity.

Most employees that are offered an HSA plan have a choice of other medical plan options. Just 8% of all employers offer an HSA plan as the only option for employees at their largest worksite, and among employers with 20,000 or more employees, just 2% offer an HSA plan as a “full replacement,” down from 4% five years ago.  That trend has reversed as employees voiced a desire for more variety of plan choices and some plan sponsors felt high-deductible plans could create affordability challenges for lower-paid employees, especially those with ongoing medical issues. 

While offering a range of medical plan options allows employees to choose a plan that best fits their financial and medical needs, it’s worth considering what you can do to make the HSA-eligible plan work better for more people – so that more people can benefit from the best savings vehicle out there. Here’s food for thought.

Eight questions that could make your HSA plan better

To help you determine if and how your health plan offerings could be strengthened, consider the following questions about the value, positioning and suitability of your current HSA-eligible health plans and support structure:

1. Are you providing education and tools (such as medical plan cost comparison calculators) to help employees understand the value and risks of enrolling in an HSA-eligible plan, to avoid surprises?
2. Are the deductibles and out-of-pocket maximums in the HSA-eligible plans compliant and set at reasonable, approachable levels for most participants?
3. Is the company’s HSA contribution, if any, sufficient to cover common, basic medical expenses ensuring that participants feel supported in getting the medical care they need?
4. Are participants incentivized to contribute and save more of their own money to their HSA, such as through employer matching contributions and/or education?
5. Are affordability challenges for lower-paid participants being addressed, for example, by providing larger HSA contributions to groups that may find it difficult to set aside their own HSA contributions?
6. Do you offer HSA-preserving benefits, such as HSA-compatible limited-purpose flexible spending arrangements that enable individuals to pay for dental and vision expenses without having to withdraw from their HSA, thereby maintaining tax efficiency.
7. Are preventive drugs for chronic conditions covered to the extent allowable while still preserving the HSA compatibility of the plan?
8. Are additional resources and tools available to assist participants in HSA-eligible plans year-round as they select and utilize services? This includes cost and quality transparency information; and advocacy and navigation services to help ensure participants don’t have to “go it alone” when seeking the best providers at the best price. Offering expert medical opinion services free of charge outside of the medical plan allows members to review critical medical decisions without incurring out-of-pocket expense or drawing down the HSA.

As mentioned above, many employers are seeking additional flexibility in laws and regulations concerning HSAs and HDHPs so that this valuable health savings vehicle can be made available to more employees. Still, there is often much that an employer can do to improve the usefulness, value and positive outcome of HSA-based plans within the existing framework.