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What if you threw an HSA party and nobody came? That might be the feeling among employers that have adopted a high-deductible health plan (HDHP) and paired it with a health savings account (HSA).
According to the 2011 Employee Benefit Research Institute (EBRI)/Mathew Greenwald & Associates (MGA) Consumer Engagement in Health Care Survey, among the 19.3 million Americans with an HDHP, 38 percent are eligible for an HSA but do not have such an account. “There are 7.3 million people who are eligible for an HSA but are not using it,” says Paul Fronstin, EBRI’s director of health research and education program in Washington, D.C. “It raises the question as to why they are not using it.”
Barriers to Participation
There are several potential answers to that question. Some who have individual high-deductible plans rather than employer-provided coverage have not opened individual HSAs. And some employers might provide a high-deductible health plan but not contract with an HSA provider to accept pretax employee contributions via payroll deferral.
But even when employers make an HSA available along with an HDHP, employees still reeling from the recession might be reluctant to tie up money in the account because that money can't be withdrawn before retirement for anything other than health care expenses without incurring a penalty. Moreover, employees simply might not have money to devote to an HSA contribution.
Also, inertia and lack of understanding of the role of the HSA in managing health care expenses can undermine employer efforts to increase HSA participation. Over the years, employers have offered an alphabet soup of spending accounts, including HSAs, health reimbursement arrangements (HRAs), health care flexible spending accounts (FSAs) and Archer medical savings accounts (MSAs), an HSA precursor. It's no wonder some employees are confused about these accounts.
“The federal government could make all of this easier by allowing a single health account instead of the three different types we have,” said Helen Darling, CEO of the National Business Group on Health in Washington, D.C., referring to HSAs, HRAs and FSAs. “Each of these accounts covers different things and has different requirements and terms. It is difficult enough to communicate one type of account without having the others available to cloud the situation.” (To learn more about the differences, see the SHRM Online article Consumer-Driven Decision: Weighing HSAs vs. HRAs).
Often, increasing HSA participation is a matter of educating employees, offering an employer contribution to get the account started (and perhaps continuing employer contributions) and regular communication about the benefits of the account. “The employer can play a role in educating people,” Fronstin said. “They can show what the account is for, how you use it and what the employer is trying to accomplish by adopting it.”
An employer’s willingness to invest in HSA contributions might be tied to its strategy for offering the HDHP in the first place. “A lot depends on whether the company combines an HDHP with an HSA because it wants people to use the high-deductible plan or because it just wants to give employees a choice,” Darling said. In the latter case, “the employer may not be pushing these plans or the HSA at all.”
If the employer is not pushing HSA participation or communicating how HSAs work, employees are less likely to use the HSA. This is particularly true if the employer does not contribute to the account on the employee’s behalf. According to the 2011 Kaiser Family Foundation/Health Research & Educational Trust Health Benefits Survey, 40 percent of employers that offer single coverage and 43 percent that offer family coverage through an HSA-qualified HDHP make no contribution to employees’ HSAs. When you look at employer contributions among all of the workers with an HSA-qualified HDHP, only 31 percent of those workers receive an employer contribution to their HSA. Of those employers that do make a contribution, the average contribution is $886 for single coverage and $1,559 for family coverage.
Dennis Triplett, CEO of UMB Healthcare Services in Kansas City, Mo., suggests that employers use some of the savings realized from the lower premiums of the HDHP to contribute to employees’ HSAs. Another way to push the HSA and reinforce a focus on wellness is to tie HSA contributions to wellness-related activities. For example, employers could offer an HSA contribution as an incentive to fill out a health risk assessment or to sign up for smoking cessation or weight loss classes. The EBRI/MGA study found that two-thirds of employees would participate in wellness activities in exchange for an HSA contribution.
The Importance of HSAs
As in many areas of employee benefits, overcoming employee inertia in order to get employees to take action is a major issue for employers. If employers do nothing, they could undermine their goals for offering the HDHP. “People who never sign up for a health savings account or never contribute to it are not really getting the benefits of those plans,” said Jennifer Benz, chief strategist of Benz Communications in San Francisco. “Over time, this can certainly lower employee satisfaction with these plans and prevent employees from being engaged in the health care decisions that those plans are designed to support.”
Benz suggests an aggressive education effort focused on how HSAs work and what employees need to do to set one up. “Low participation could be traced to the accounts being difficult or perceived to be difficult to set up,” she said. “Or employees may not know how to set up an HSA or even that they have to take action at all to set one up.”
The good news is that, because HDHPs and consumer-directed health plans are relatively new to many employees, employers still have a chance to mold these programs and influence how employees perceive them. The EBRI/MGA survey found that the vast majority of HSA and HRA account holders have had those accounts for two years or less.
As employees get used to a more consumer-directed approach to health care and the role of HSAs in their benefits, employers have a good opportunity to educate employees. “It is a good idea to start the education effort as early as possible and keep it going beyond the open enrollment period,” Triplett advised.
Joanne Sammer is a New Jersey-based freelance writer.
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