It’s one of a bazillion healthcare acronyms that often gets lost in translation and thus largely ignored by those who need it most. We’re talking about the HSA, otherwise known as the health savings account.
While employees may be vaguely familiar, what they may not realize is that this nifty little savings account can actually help them pay for healthcare services using pre-tax dollars. That means they don’t need to delay or forgo care simply because they can’t afford it. The money is already there waiting for them, because they set it aside in advance—without having to pay Uncle Sam any taxes.
By promoting the HSA, employers can help employees afford care when they need it. And ultimately, HSAs are an employer’s secret weapon for tax and healthcare savings, because it teaches employees to be smarter healthcare consumers. And we all know that smarter consumers translate to one big benefit for employers: lower healthcare costs. That’s why every employer needs to make HSA education a priority in 2021.
Let’s dig into some recent Jellyvision research to reveal the biggest HSA trends and statistics for the year ahead:
Employers are still struggling with HSA education
Employers are still struggling to get the word out and promote HSAs effectively, which means employees may not even remember to use it. It’s a common problem, with 56% of employers saying HSA education is their primary concern:
Only 11% of employees say they fully understand their HSAs, and 1 in 5 say they want more benefits education. So employers still have a lot of work to do to make sure their employees are not only enrolling in an HSA, but actually using it—and saving money in the process.
But HSA contributions are on the rise
We’re seeing some positive HSA trends when it comes to enrollment and contributions. Today, HSAs account for $66 billion in assets, a 23% increase year-over-year. And with the help of a benefits guidance tool like ALEX, employees are getting smarter about their health savings accounts. In fact, we found that in the last two years, ALEX users’ HSA contributions have gone up 25%:
Alex users’ median HSA contributions
And to add a bit of color to the graph above, the average individual HSA contribution per year is $1,166, and 47% of employees contribute less than $1000 per year. So employees who use a personalized benefits guidance tool like ALEX are currently contributing significantly more to their HSAs than the national average, and saved their employers a whopping $79 million in payroll taxes last year alone.
Why are ALEX users’ HSA contributions on the rise?
There are many factors at play here, but a few main reasons for the increase in HSA contributions are:
1. What’s happening in the United States at large.
With COVID-19 stimulus payments comes an increased risk for price inflation, some experts say. This includes price inflation related to healthcare services and medical care that was already cause for concern prior to the pandemic. At the same time, decreasing insurance coverage has led employees to consider alternative ways to save for rising healthcare expenses. They want solutions that guide them toward better choices so they can make more informed savings decisions during a time when every dollar matters.
2. Access to an efficient benefits guidance tool.
Employees no longer need to decode a bunch of acronyms and healthcare jargon to decide which healthcare choices are right for them. A virtual benefits counselor like ALEX turns complicated topics into human and helpful conversations, by offering personalized, 1:1 guidance that HR teams simply don’t have time for. ALEX collects information about each employee’s family needs, chronic conditions, prescription drugs, and more to deliver tailored advice, and breaks down HSA math in a tangible, easy-to-understand way.
3. A combination of HSA administration and education
We can’t expect employees to make all of their benefits decisions during open enrollment and call it a day. We need to be engaging and intercepting them year-round, in moments that matter—like when they use their HSA to pay for something, or when they file a claim. When they’re already paying attention, we can nudge them towards smarter HSA decisions that will help them save more throughout the year. By combining administration with education, employees are more likely to boost their contributions and usage.
What’s next?
While the rise in HSA contributions is encouraging, there’s still a lot of education that needs to happen. Employers must find ways to communicate the power of HSAs—while also providing clear guidance on how to use these accounts effectively, contribute the full HSA limit, and make smart healthcare choices. The more we can get employees to contribute to their HSAs, the better coverage they’ll have—and the more their employees will save on payroll taxes and healthcare expenses.
| HSAs | FSAs |
|---|---|
| Best paired with an HDHP | Best paired with a low deductible plan, like a PPO or HMO |
| Used like a debit card (can only spend what you’ve already saved, and reimburse yourself for out-of-pocket expenses later) | Used like a credit card (employees can spend money they haven’t saved yet, as long as they expect to save that amount by the end of the year) |
| Save over time: Funds roll over year after year without penalty | Use it or lose it: if employees have money left over at the end of the year, they have to spend it or it will be wasted |
