Employees a take closer look at consumer-driven plans as high inflation persists
Even though tax-advantaged health care accounts are widely offered, only $95 billion of those expenses were paid for with pre-tax dollars, with the remaining $396 billion paid for with post-tax dollars.
Employers and workers are missing out on billions in potential savings from health care accounts that offer tax advantages.
U.S. consumers spent $491 billion on out-of-pocket health care costs in 2021, according to Kalorama Information. However, even though tax-advantaged health care accounts are widely offered, only $95 billion of those expenses were paid for with pre-tax dollars, with the remaining $396 billion paid for with post-tax dollars, Aite-Novarica reports.
“In a year in which wallets have been pinched and consumers are potentially contributing less to their accounts, employers have a big opportunity to step up and reinforce the tax-saving value of these programs, which can help consumers get better value on the dollars they are already spending,” according to a report on a new survey from Alegeus.
Increasing financial and job insecurity are forcing employees to consider their employer-sponsored benefits choices, especially their personal strategies around consumer-driven health options such as health savings accounts and flexible spending accounts. One-fourth of survey respondents have a consumer-driven account, and nearly half of this group say economic uncertainly is having an impact on how much they plan to contribute. Three-fourths of those with consumer-driven accounts say they have maintained the same investment choices since before the pandemic.
Meanwhile, respondents are prioritizing costs elsewhere, ranking grocery (42%) and gas/transportation (32%) prices as areas where they are cutting back because of inflation. These findings point to an increasingly prevalent trend that consumers are more focused on short-term expenses than on long-term investments.
With the workplace becoming more involved in employees’ financial wellbeing, employers are in a position to provide guidance and solutions. Of respondents who receive their health care benefits through their job, 65% say their employer was somewhat or very helpful with providing resources to help them make informed decisions about their health care plan.
Read more: Recession resistant benefits: How HSAs can help
“However, for employers, it shouldn’t stop there,” the survey report concludes. “As cost-saving priorities for employees are focused on everyday expenses rather than long-term investments, employers should look toward increasingly popular lifestyle benefits that can support employees with flexible and personalized options like healthy food and travel funds. Then employers can use important times, such as open enrollment, to direct employees’ attention to long-term investments like HSAs, which can support them in ways they may not realize.”