Quick look: HSAs are a hidden gem that have the potential to benefit clients and their employees, while combatting many of today’s financial and medical inequalities. In this blog, brush up on your knowledge of the latest HSA guidelines as well as how these accounts can better a client’s business and become an integral part of their DEI plan.
Ideally, a diversity, equity, and inclusion (DEI) strategy should be multi-pronged and aim to build an inclusive workplace in several ways. With almost 60% of private sector employees with single coverage enrolled in an HSA-eligible health plan, these accounts hold ample opportunity for clients to strengthen their DEI plans and slash costs for themselves and their staff.
Let’s review current employee HSA guidelines and how brokers can enable clients to leverage these accounts to save money and reduce workplace inequities.
The ins and outs of an HSA
HSAs are an effective way for people enrolled in eligible high-deductible health plans (HDHPs) to save for medical costs by setting aside pre-tax dollars to pay for qualified medical expenses. Because untaxed dollars are deposited into the HSA, account holders can reduce their overall costs.
What can you pay for with an HSA?
Your client’s employees may use their HSA funds to pay for various expenses, including deductibles, copayments, dental and vision care, prescription drugs, and more, as well as qualified medical expenses not covered by their health insurance plan. The Coronavirus Aid, Relief, and Economic Security (CARES) Act added new qualified expenses to the list, like a range of over-the-counter medications and products.
How much can be deposited into an HSA?
HSA contribution limits can change each year. In 2022, those enrolled in an HDHP can contribute up to $3,650 for self-only coverage and up to $7,300 for family coverage. It’s important to note that unlike flexible savings accounts (FSAs), which generally don’t allow participants to rollover funds into the following year, HSA balances are retained even if the account holder changes health insurance plans, switches employers, or retires.
How do HSAs save clients and workers money?
On the employee front, in addition to providing permanent access to funds, HSAs offer a triple tax advantage. This means that an account holder can contribute money on a pre-tax basis, the balance can grow tax-free over time, and all withdrawals are tax-free if used for qualified medical expenses. Additionally, many employee HSA plans allow workers to invest their contributions in mutual funds, providing the opportunity for greater long-term growth.
The savings may extend to your employer clients, too, in the form of reduced insurance premiums and increased employee satisfaction (which can lead to greater retention rates). Turnover is costly; it can cost one-half to two times an employee’s salary to replace them.
HSAs can also contribute to reducing overall national healthcare spending. Because employee HSAs are offered with HDHPs, which don’t cover many expenses until the deductible is reached, people with these plans tend to prioritize reducing their cost of care.
How HSAs can strengthen a DEI plan
HSAs offer many advantages, but not everyone takes full advantage of their account. Research from the Employee Benefit Research Institute (EBRI) found that:
- Lower-income, female, and Black and Hispanic account holders have lower contributions and smaller balances than higher-income, male, white, or Asian account holders. More specifically, in 2020, white account holders contributed an average of $1,806 and had an average balance of $5,005, compared to $1,312 and $3,439, respectively, for Black account holders.
- Account holders living in disproportionately white ZIP codes had larger average HSA balances ($5,004) than those living in disproportionately Black or Hispanic ZIP codes ($3,438 and $3,737, respectively). Meanwhile, those living in disproportionately Asian ZIP codes had the highest average balance ($6,039).
- On average, male account holders had significantly larger HSA balances than females ($6,517 versus $1,981, respectively), despite men and women having similar account ownership tenure. The gender pay gap and the fact that it’s more common for families to receive health insurance coverage through a male worker than a female may contribute to this disparity.
- Even after controlling for socioeconomic variables, women and Black, Hispanic, and lower-income people disproportionately suffer from obesity, diabetes, lower life expectancies, and more.
With that being said, how can your clients encourage their employees to fully utilize their HSAs, something that can help individuals make the most of their healthcare dollars and reduce these overarching inequities?
The first and potentially most impactful way clients can bridge the gap is by contributing funds to their employees’ HSAs. The above research from EBRI confirmed that these contributions help account holders build larger HSA balances and become better equipped to handle any unexpected medical expenses that may arise. The study found that those who received an employer contribution had an average total contribution of $2,834 (compared to those who didn’t receive an employer contribution, who had an average total contribution of $2,320).
Another interesting finding from the research is that those who received an employer contribution invested less in their HSA than those who did not collect employer contributions ($1,970 versus $2,320, respectively). While this may sound negative, it could signal that the individuals who received an employer contribution put more of their income toward retirement savings, emergency savings, or another goal like buying a house (something that’s especially important when you consider that the hot housing market is especially challenging for homebuyers of color).
A focus on education
Education is a prerequisite to your clients’ employees taking full advantage of their HSAs. Brokers can encourage their clients to inform their staff of HSA guidelines and benefits thoroughly and regularly. In some workplaces, this education is much-needed—MetLife’s Employee Benefit Trends Study 2022 study found that only two-thirds of employees believe their company’s benefits communications are easy to understand.
This process can be simplified by offering clients a professional employer organization (PEO) partnership, as a PEO’s benefits experts keep a pulse on HSA rules and trends and can provide consultations and trainings on behalf of the client.
Lean on your network to make a difference
Brokers are in a unique position to make an impact on clients and their employees by offering access to HSAs. When workers are fully educated on their HSA and receive contributions from their employers, these accounts can allow them to afford medical expenses more easily and allocate more of their income to their retirement or life goals. This effect is both granular (helping one family purchase a home) and overarching (over time, contributing to reducing medical and financial inequalities).
A simple way for brokers to provide HSAs to their clients is by partnering with a PEO. A PEO, like ExtensisHR, offers a variety of Fortune 500-level benefits, including HDHPs with HSA options. And to further a client’s DEI plan, ExtensisHR provides access to a DEI Dashboard that features real-time data on pay equity, salary trends across both gender and race demographics, turnover, promotions, and more.
Are you interested in helping your clients unlock the benefits that HSAs can offer? Contact the benefits experts at ExtensisHR today to get started.