Now a decade after the initial offering of health savings accounts, we thought the time had come to dust off our proverbial crystal ball and take a look at what we can expect, hope and anticipate for HSAs in the next decade. Over the next several months we will touch on the emerging trends, tools and offerings in the HSA space and how those impact employers and employees, as well as brokers and agents.
The first two parts of our series focused on reporting. Now that we have covered the importance of understanding reporting data and taking action with those analytics, we would like to discuss another critical topic for the future success of these plans — shifting the mindset of accountholders from spending to saving.
Today, many accountholders continue to use their HSA the same way they use their flexible spending account — using available funds for current expenses, leaving little to rollover from year-to-year. While that is an option with HSAs, it is not a requirement and employees could be missing out on the benefit of growing their balances over the long-term. It is easy to understand where the confusion comes from as HSAs are still new to many consumers and are often overlooked in benefits education and communication.
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We believe that for HSAs to continue to grow and succeed in the next decade there's a great need for employers to help shift employee mindset beyond simply paying for the current year's medical expenses to saving for the future. HSAs can serve as a powerful tool for long-term savings and as a key part of an overall retirement strategy to build wealth for both medical and other general retirement expenses, including tax-free Medicare premiums.
Time to save
Even though HSAs are designed to pay current and future medical costs, only a handful of people are taking advantage of the option to save for the future.
A recent study of 440,142 UMB HSA accountholders showed an average deposit balance of just $1,874. A little more than half (56 percent) of UMB accountholders have increased their balances and are saving more than the previous year, however they are not coming close to the allowed annual maximum contribution.
Less than 7 percent of the HSA holders we studied "maxed out" their allowable contributions.
In 2014, the IRS allows a maximum annual HSA contribution of $3,300 for individuals or $6,550 for family coverage (plus a catch-up amount of $1,000 more for people over 55 years old). In 2015, those figures will rise modestly to $3,350 for individuals and $6,650 for family coverage.
Shifting the mindset
Today, most act as if the "S" in HSA stands for spending rather than savings. We have the opportunity to educate employees about the benefits of saving with an HSA, including preparing for future health care expenses during retirement or later in life.
Employers, as well as brokers and agents, have an important role to play in educating employees about the advantages of saving now for future health care expenses. This requires a commitment to a year-round communication plan and taking the necessary steps to educate employees on all their saving options with an HSA. With a shift in the current mindset, HSAs have an even brighter future as an economical option for both employers and employees.
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