Originally published 9/30/20, updated 5/4/23.
You’ve made it. We’re nearly halfway through 2023, and while you’ve already had to navigate a lot of new hurdles these last few months, you’re on the cusp of a new open enrollment season. A fresh start if you will.
If you’re like a lot of employers right now, you’re facing some tough financial challenges, and you’re looking for any possible way to manage budgets and save money. And your employees are just as concerned about their finances as you are.
That’s why benefits pros should be especially focused on HSAs as we head into open enrollment for 2024. Why? Let’s break it down:
HSA benefits for employers
Drive smarter healthcare spending and saving
There’s no end in sight for rising healthcare costs. So teaching your employees to be smarter healthcare consumers year-round is key—and HSAs are the way to make it happen. They’re an MVP when it comes to healthcare saving and spending:
- Employees aren’t taxed on anything they save in their HSAs
- HSA dollars can be invested for future medical expenses or retirement
- HSA contributions roll over to the next year, so there’s no scramble to spend in December
Plus, an employer-sponsored HSA is a great partner for a high-deductible health plan. HDHPs, with their low monthly premiums, can be really cost-effective for young, healthy employees. But they could also mean hefty out-of-pocket expenses before employees meet their deductible. So HSAs are a great way to fill in those gaps.
And this year, HSA contribution limits increased to account for inflation. For self-only coverage, the contribution limit is $3,850 (up from $3,650 in 2022). The HSA contribution limit for family coverage is up to $7,750 (up from $7,300 in 2022).
That means you should be encouraging them to contribute even more to their HSAs each year—and perhaps even max out their contributions—so that they can cover those substantial out-of-pocket expenses.
Employees are missing out on HSA tax benefits
The fact that employees aren’t saving enough to cover their out-of-pocket expenses should be reason enough to up their contributions.
But they’re also getting hit with a double whammy: HSA contributions aren’t subject to taxes. So if they’re paying for healthcare without the help of their HSA, they’re missing out on tax advantages too:
And if you offer an HSA with investment options, even better! HSAs are a great way to save for retirement, but employees aren’t taking full advantage of that option. In fact, of the 2.6 million open Health Savings Accounts at the end of 2022, only 7% of all accounts have a portion of their HSA dollars invested.
So it’s necessary to find clearer, simpler ways to explain HSA tax benefits, and how they’re crucial to help employees save on taxes now—and save for the future.
Leading employers know how important HSAs are
Today’s top companies are working hard to drive higher HSA enrollment because they know just how valuable HSA tax benefits for employers can be—and that HSAs offer strong financial advantages for their employees, too. And they’ve been fairly successful!
In fact, at the end of 2022, there were 35.5 million HSA accounts totaling $104 billion in assets which was a 6% increase in assets and a 9% increase in the number of accounts from the previous year.
Support employee’s financial well-being
With rising healthcare costs and an economic downturn, employers have been looking for ways to improve their employee’s financial well-being. And for good reason, 57% of all American workers report suffering high levels of anxiety about health care costs beyond what their insurance covers. And 55% of all employees feel they cannot cover out-of-pocket expenses of more than $1,000.
To further support employees’ financial well-being and incentivize them to contribute to an HSA, consider offering an employer-funded HSA.
The answer? Better benefits education and engagement
We know that when employees save more in their HSA, it’s good for their wallets and yours. And we know employees are starting to catch on, with more and more people opening a Health Savings Account.
But there’s still money being left on the table. While employees have better understood what HSAs are, there’s still room to improve HSA education, especially as HSA investing slows.
The answer is to pair HSA enrollment with smart, personalized benefits guidance—not just during open enrollment, but to help your employees reduce their healthcare spending year-round. These five tips for improving your HSA communication are a great place to start:
5 Tips for Boosting HSA Adoption and Contributions
And while there’s a lot you can do manually to help employees understand and use their HSA, a financial guidance tool like ALEX is the key to driving real results.
How can ALEX help?
Powered by behavioral science and data-driven predictive analytics, ALEX helps employees make informed connections between complex health benefits and the people who need them, enabling HR teams and their benefits partners to keep employees—and the business—healthy.
ALEX:
- Saves time and money by offering one-on-one benefits decision support without the administrative burden for HR teams.
- Drives meaningful financial outcomes. Because ALEX is unusually good at explaining the value of your benefits, employees make smarter decisions about which plans to choose, and how much to save in their HSAs.
- Boosts benefits understanding and engagement with straightforward, human language and personalization to help employees better make smarter choices–something even the best PowerPoint presentation on earth can’t do.
