According to the Kaiser Family Foundation, the average annual premium for employer-sponsored family health insurance coverage has risen over 50% in the last 10 years. And in the same time frame, the average employee contribution to that annual premium has increased over 70%.
As health insurance costs continue to rise, employers are seeking out ways to provide high-quality care while also reining in cost for employees. Many are turning to HSA-qualified health plans — plans that allow eligible employees to open health savings accounts (HSAs) and save money by paying for medical expenses tax-free. HSAs have more tax advantages than a 401(k) and don’t have use-it-or-lose-it limits like a flexible spending account, making them the best way to save for health care costs.
In addition, HSA-qualified plans typically have lower monthly premiums than traditional plans. Rather than paying more each month for coverage they may not utilize, HSA-qualified plans allow employees to own their health and take a more active role in their medical consumption. And employees are taking advantage; the 2019 Consumer Engagement in Health Care Survey found that employees covered under HSA-qualified plans were more likely to check medical prices, ask for generic drugs instead of brand names, and use online cost-tracking tools.
For these reasons, employers are increasingly encouraging their employees to enroll in HSA-qualified plans, open HSAs, and be engaged health care consumers.
If you are already setting up employer-sponsored HSA programs, you probably know all about strategies for maximizing employee engagement.
If not, here are three things to tell employer clients about how they can nudge employees onto HSA-qualified health plans:
1. Make sure the health plan is HSA-qualified.
This might seem like a no-brainer, but it’s worth mentioning. While the terms “high-deductible health plan” (HDHP) and “HSA-qualified health plan” are often used interchangeably, not all HDHPs are HSA-qualified plans. In fact, according to 2018 data from the National Center for Health Statistics, over 25% of individuals with private health insurance were enrolled in HDHPs without an HSA option.
Agents, don’t let this be your clients. Offering employees an HDHP that isn’t HSA-qualified is like having a PB&J without the bread: It’s messy and far less palatable. Your clients’ employees will find it much easier to own their health if they can take advantage of the unparalleled tax savings HSAs provide.
Once that’s covered, the next step is choosing an HSA provider to partner with.
Clients will want their employees to make their HSA contributions via pre-tax payroll withholding, so they’ll need to have your HSA offering set up seamlessly, to make things easy.
2. Contribute to employees’ HSAs
Not only do employers typically save money when their employees enroll in HSA-qualified coverage, they can also save when their employees make contributions. If your client sets an HSA offering up as a Section 125 plan, both your client and the client’s employees will save 7.65% on FICA taxes every time they contribute via pre-tax payroll withholding.
By contributing into employees’ HSAs, your client can prompt additional contributions from the employees. Everyone wins! Both the client and the client’s employees get the FICA savings, and they build tax-free funds to pay for their medical expenses.
Recommend that your employer client consider separating the employee HSA contribution into tiers to prompt higher contributions. For instance, your client could make an initial contribution into all employees’ HSAs, then add a second contribution for employees who contribute a certain amount. Or, your client can tie HSA contributions to the employees completing wellness initiatives, giving the employees an incentive towards healthy behaviors and potentially lower health insurance usage.
3. Empower employees to be savvy health care consumers
We’ve already seen how employees on HSA-qualified plans are more likely to shop for medical care and save money on health care expenses. By providing them with simple price comparison and cost-saving tools, your clients can make the employees’ lives easier and give them the resources they need.
Companies like mine offer services that can help the employees quickly compare medical prices and shave dollars off their health care expenses. Tools like those can help the employees stay aware of the basics of being a more engaged health care consumer.
The more money your employer clients’ employees can save on their medical expenses, the less they’ll have to pull out of their HSAs to pay for them. This means more of their HSA funds can stay growing for the future; the employees can even invest unused funds for retirement the same way they do with a 401(k). By building a medical nest egg, employees can give themselves peace of mind that they’re prepared for whatever health care issues come their way in retirement.
HSA-qualified plans are a true win-win; they save employers and employees money on monthly premiums and allow employees to open HSAs and save on medical costs. By encouraging their employees towards HSA-qualified plans, employers take a step in building a happy, healthy future for themselves and their employees.
Craig Keohan is chief revenue office at HealthSavings, a health savings account (HSA) provider. He is also the chairman emeritus of the HSA Council at the American Bankers Association. He has given in-person advice regarding HSA improvement to former President George W. Bush and former presidential candidate Newt Gingrich.