Mitigating Healthcare Costs With HDHPs and HSAs: What Plan Sponsors Need to Know
It’s no secret that healthcare is expensive-and costs are likely to continue going up. While preferred provider organizations (PPOs) are still the most popular plan type, many companies are turning to consumer-directed,
high-deductible health plans (HDHP) to help manage costs and are adding reimbursement accounts like health savings accounts (HSA) to help employees pay for expenses.
Still, employees have many misconceptions about HDHPs and HSAs. In fact, just a little more than half of Americans say they understand HSAs, according to a March report
by the LIMRA Secure Retirement Institute and Insured Retirement Institute. Employers have difficulty understanding these savings vehicles as well.
With more companies using and integrating consumer-driven benefits like 401(k)s and HDHP/HSAs, there’s an opportunity for plan sponsors to learn more about ways to help employees optimize their funding for health and retirement wealth.
First, why are companies moving to HDHPs?
What kind of out-of-pocket reimbursement accounts are out there?
Are companies required to contribute to an HSA?
What kind of administrative work is required with an HSA?
Can employers deduct the HSA contribution as a business expense? And are there any fiduciary responsibilities in offering an HSA?
Will an HSA help employees become better healthcare consumers?
What is the benefit of having an HSA?
If I don’t spend the money in my HSA, do I forfeit it?
What can I use the money for?
Can I use the money for non-health expenses?
Can HSA dollars be invested in the stock market?
And I can use this money in retirement?
Insight: Addressing the Need for HSA and HDPH Education
Funding rising healthcare expenses should be a central part of employees’ retirement planning, and HSAs paired with HDHPs can be an effective part of this planning. But given the misconceptions and confusion surrounding these vehicles, plan sponsors need to first fully understand the nuances of these vehicles to determine whether they will be a good fit for their workforce. Companies that do decide to offer HSAs and HDPHs need to then develop an effective communication strategy to educate their employees on how to take full advantage of these benefits.
FINANCIAL WELLBEING PROGRAMS: Today’s Tools for a Healthy, Productive Workforce
The American workforce is stressed out-and finances play a major role. Many workers say they’re living paycheck-to-paycheck, and the routine is stressing them out so much that it’s taking a toll on their health. Often, people bring their personal financial problems to work, resulting in absences, distractions, or other unproductive behaviors.
Where Health Meets Wealth: Defining Financial Wellbeing
Financial wellbeing is a broad term that employers are trying to define for the particular needs of their employees. And with four generations in today’s workforce, it isn’t an easy task.
Each generation has unique issues related to financial health beyond just saving for retirement and paying for health care. Studies have shown that employees want a trusted source, like their employers, to help them address this diverse set of issues.
Insight: Developing a Plan Tailored to Your Employees’ Needs
One of the biggest challenges employers face is figuring out how to develop a financial wellbeing plan that is tailored to the needs of their employees. Given the range of financial needs-both across generations and within them-a one-size-fits-all financial wellbeing plan likely won’t be sufficient.
Developing an effective financial wellbeing program starts with getting to know your workforce. Fortunately, recent advancements in data analytics have resulted in powerful tools that employers can use to gain valuable insights into the characteristics and behaviors of their workforces.
Specific data that can be helpful in determining the aspects of a financial wellbeing plan that would be most beneficial for your workforce include:
- 401(k) and HSA investment allocation
- Number of 401(k) loans and average loan amounts
- Number of 401(k) hardship loans
- HSA usage (if applicable)
- Contribution rates to 401(k) and HSA
- Age and gender
- Absentee rates
- Social media intranet usage/hits
Technology is also playing a significant role in the adoption of wellbeing best practices by employees. Mobile applications, sophisticated algorithms, and online programs that empower the user to make smart financial decisions are turning these people from sideline watchers into active players.
Determining where a wellbeing program fits into the company priority scale is another important consideration. Just like their employees, employers have budgets to follow, and making the most out of what is available from all resources is critical. Create preliminary, attainable objectives to focus on the needs of your population and help measure the success of a financial wellbeing program. Then, leverage the power of data analytics to tailor your program to your employees’ needs.