Posted: September 20, 2011
Making the most of HSAs
Putting the "savings" into Health Savings AccountsDennis Triplett
As more companies look to better manage rising employee benefit costs while simultaneously promoting a healthy workforce, many employers have turned to consumer-directed health care, specifically adopting a health savings account (HSA) strategy.
One of the primary challenges for these employers is educating employees about all the benefits of an HSA. Most focus their efforts on enrollment procedures and the mechanics of depositing and spending funds from the account. But to truly realize the benefits of this strategy, employers need to focus more energy on educating employees and their families on the long-term benefits of HSAs.
Moving past the "use it or lose it"
HSAs have a distinct advantage over flexible spending accounts (FSAs)-they allow for year-over-year rollover for funds deposited. During open enrollment, HSA education tends to be lumped in with FSAs and other benefits so employees often miss that critical difference. What makes an HSA such a powerful savings tool is that employees can use the funds to pay for health care expenses now and in the future by letting the account grow over time. Open enrollment and ongoing communication efforts should include more detailed HSA education, along with examples of how the account can be used to save for future expenses.
Taking a long-term view
In addition to the tax advantages realized on contributions, since deposits grow tax-deferred and distributions are potentially tax-free, the long term investment opportunity with an HSA is tremendous - likely better than any other tax-advantaged financial instrument. Today, many HSAs offer investment options, ranging from money market accounts to mutual funds to individual equities. While many factors will determine the actual returns these investments make, the bottom line is that regardless the level of risk, investment options are currently underutilized.
Open enrollment season is an ideal opportunity to take HSA education to the next level, but it must be simple and personalized. A great first step to helping employees better understand the power of their HSA dollars is showing sample scenarios that are tailored to the employee population. "People like me" scenarios have been very successful in helping employees choose the right medical plan based on their needs and budget. This same approach can help employees understand how an HSA can serve them now and in the future with funds covering health care expenses in retirement.
Investing in year-round communication is a critical step to helping employees maximize their HSA benefit since messages need to be repeated and reinforced across multiple channels before they sink in. Start with a strategy-identify objectives, audience needs, key messages, available channels and success measures. Take advantage of the strategies, online tools and educational opportunities provided by the HSA administrator, customizing them for employees' needs.
HSAs should not be treated as pseudo checking accounts for medical expenses. Rather, as unique and powerful savings tools that can provide current tax deductibility, tax deferred growth and (potentially) tax-free distributions - something not found in any other financial vehicle. Now is the time to let employees know how to get the most from their HSAs.
Dennis Triplett is CEO of UMB Healthcare Services, one of the country’s top providers of HSAs, FSAs and HRAs. He is also chairman of the board of the Employers Council on Flexible Compensation (ECFC) and Chairman of the HSA Leadership Council of America’s Health Insurance Plan (AHIP). Dennis may be contacted via email at Dennis.Triplett@umb.com or by phone at (816) 860-8230.