American health care took a step towards consumerism when health savings accounts (HSAs) went into effect in January 2004. Now, more than a decade later, the monumental shift towards consumer-driven health care is well underway, creating a long runway of opportunity for HSAs.
General plan design was already trending in the direction of consumerism. Now, coupled with the political appetite for it, this may be the new reality of health care.
With Republican leadership at the helm of both the White House and Congress, there’s a broad exercise of reform taking place that includes a sharp focus on the expansion of HSAs.
What might the future of HSAs look like? Three proposals have been getting their share of attention:
- Most notably, Speaker of the House, Paul Ryan, has been promoting a plan that would raise HSA contribution limits.
- A second proposal removes the requirement to have a high-deductible health plan (HDHP) before someone can contribute to an HSA (although other caveats to this legislation make it contentious).
- A different bid creates a new spin with Roth HSAs, where grants or tax credits would land directly in individual accounts, and people would use the money to purchase insurance.
As health care reform swirls at the political level, employers are trying to figure out ways to shift financial responsibility to combat rising health care costs - largely through the delivery of an HDHP option, but also within traditional plans.
Our 2017 State of Employee Benefits report found that the majority of large employers are now offering an HDHP in addition to traditional copay-based plans. But regardless of plan type, employees are taking on more financial responsibility than they’ve ever had for their employer-sponsored health care. HDHP premiums are up by more than 12 percent, while PPO deductibles rose 9 percent year over year.
As employees take on a larger portion of the cost of care, it’s up to employers to make sure their workers are equipped for the burden. Currently, indications are that they aren’t prepared.
An analysis of individuals participating in Fidelity’s financial wellness program showed that the vast majority (88 percent) are insecure about their financial future and only about one-third (38 percent) have more than three months’ salary in an emergency fund.
This all may sound gloomy, but there is a bright light shining through.
The top three topics those same individuals said they are most interested in are HSAs, simple rules for saving and spending, and saving for an emergency fund. Even better news is that HSAs are gaining more traction. The number of accounts has grown to an estimated 20 million as of the end of 2016, representing a 20 percent year-over-year increase. And Benefitfocus data shows that employee contributions are up as well, with millennials making particularly strong gains - contributing up to nearly 20 percent more on average to family-coverage accounts for 2017.
A well-funded HSA means triple tax advantages – no tax on contributions to or distributions (as long as it’s a qualified medical expense) from the account, and earnings are tax-free. Plus, there’s the benefit of employees’ financial future in retirement, building a stockpile of funds that can be used at the time they're most likely to have their highest medical costs.
But in the immediate sense, HSAs are opening the door to good budgetary practices like saving, budgeting and forecasting expenses. While unforeseen medical expenses do arise, one of the goals of consumer-driven health care is to get the consumer (i.e., your employees) to think about health care in the same way they think about every other expense in their life. HSAs are a vehicle to get them moving in that direction by connecting just how much they're putting away with each paycheck to looking ahead at known medical expenses like doctor office visits, procedures, etc., shopping around for cost and quality, and then budgeting for those expenses.
That’s the ideal, and it’s possible. As we mentioned, there are gains being made and those are in no small part due to the support of benefit leaders like you. But as we move closer to the new health care reality, it’s imperative that HSA enrollment be as convenient as possible for employees and employees are armed with the tools to be successful. It needn't rest solely on your shoulders, though. Your benefits technology can and should help you make it easier.
Here are a few considerations:
- Do your employees have convenient online access to educational resources? It can be frustrating for employees when they have questions, but can’t find answers. Access to the resources they need to understand, manage and use HSAs effectively is not just necessary, it’s crucial. Blogs, FAQ sheets or videos that easily explain the who (to reach out to), what (are the advantages, qualified medical expenses, etc.) and where (to go to access their account) can make all the difference in empowering employees to be good consumers of their health care.
- Do your employees have the ability to manage their HSA accounts on the go? Making enrollment and management of HSAs easy today means making it mobile. Employees are always on the go, and they need (and increasingly expect) to have access to their coverage and contribution information in the palm of their hand.
- Do you have the tools you need to send better, more targeted communication? Personalizing communications can mean greater employee satisfaction with benefits. Making sure employees understand not only what they’re being offered, but also how those benefits will work, results in them getting the full value from the benefit. A modern benefits management technology provider should offer the tools to make tailored messaging easy.
As consumer-driven health care marches on, make sure you have the tools needed to help employees navigate this new reality. Find out if you have what you need with this Buyer’s Guide to Effective Benefits Management Technology.