Educating employees is key to maximizing HSAs: A Q&A with UMB Bank's Brian Hutchin
New laws seek to expand Americans’ access to health savings accounts, such as those who have previously been held back from establishing one, however, employer contributions are fundamental to adoption success.
As we celebrate 20 years of health savings accounts (HSAs) this year, we caught up with Brian Hutchin, director of UMB Healthcare Services. He discusses everything employers need to know about HSAs, from how to educate your workforce about these accounts to key trends to current legislation and how it could affect the HSA landscape.
Q. How can employers educate their workforce about HSAs?
A. With health savings accounts (HSAs) becoming increasingly popular as more companies offer high-deductible health plans (HDHPs), it’s important for employers to provide up-to-date
information on how you can pair the two and how new and existing employees can best use their accounts. This education should be continuous, going beyond the open enrollment period. Employees have more options than ever when it comes to their health care, so take the time to explain to them how HSAs are one of the best long-term savings options for a few reasons:
- Ownership: The money stays with the employee, regardless of the employer. Unspent funds in HSAs have the ability to roll over year after year and calculate compound and credit interest monthly.
- Triple tax advantage: HSAs can be tax advantaged up to three ways: contributions, earnings and withdrawals may be tax-free for qualified medical expenses when needed, offering the opportunity for growth over time.
- Saving for the future: With couples estimated to need around $300,000 just to cover their health care costs in retirement, it is a must for everyone to understand how to maximize their HSA benefits. HSAs can help to build savings over time and be a real game-changer in funding your employees’ retirement.
Reminder: Accountholders age 55 or older can make annual $1,000 “catch-up” contributions.
Be sure to discuss employer contributions, as these can often be key to encouraging future HSA adoption among employees. Employers should also remind employees who might not have opened an HSA at enrollment that they can do so at any time throughout the year as long as they continue to be covered by an HSA qualified HDHP. By taking the time to educate employees about their HSA options, employers help ensure that their teams get the most out of their accounts and feel satisfied with their benefit offerings.
Q. What are some key HSA trends you’ve seen?
A. One of the main trends we are seeing with HSAs is that their use and prevalence among Americans continues to grow, as well as the number of employers who provide an annual employer contribution to their employee’s HSAs. The 2022 Devenir & HSA Council Demographic Survey noted that one in five Americans in their 30s had a health savings account (HSA) at the end of 2022. Additionally, according to the 2023 Midyear Devenir HSA Research Report, there are approximately 36 million HSAs nationally and $116 billion in HSA assets held. This report also projected that the HSA market will surpass 40 million accounts by the end of 2025, with assets held sitting at a whopping $150 billion. Furthermore, this report noted that HSA investment assets soared during the first half of 2023 with a 20% growth, resulting in a total of $40 billion at the end of June (a 10% jump from the previous year). However, still only 7% of accountholders have a portion of their HSA funds invested so there is still room for growth and education.
Q. How can employers ensure their employees have a successful HSA adoption?
A. Employers can first remind their employees that each one of them can benefit from opening an HSA, regardless of their income level. In addition, employers can let their employees know that HDHPs paired with HSAs allow them to help better plan for their own health care costs now and in the future, since each accountholder can decide how much money to set aside. Employers should also evaluate the competitiveness of their benefits offerings, including their own spending account contributions to make sure they are meeting the needs of their employees.
Additionally, employer contributions are fundamental to adoption success, as it reduces some of the stressors associated with making the switch to a HDHP paired with an HSA. Finally, employers should bear in mind that the time and energy spent on educating both existing and new employees about the benefits of an HSA improves not only employees’ overall financial wellness and deepens their engagement in the workplace, but also ensures employers have a successful HSA adoption.
Q. Can you tell us about the HSA Improvement Act and the HSA Modernization Act and how these could affect HSAs?
A. The HSA Improvement Act seeks to expand Americans’ access to HSAs, such as those who have previously been held back from establishing an HSA due to their spouse having a flexible spending arrangement. This piece of legislation would also increase the services eligible for payment with HSA dollars, allowing more accountholders to maximize their health coverage.
Related: 7 insights from 20 years of HSAs
In addition, the HSA Modernization Act looks to expand eligibility for veterans, seniors on Medicare, Native Americans and those enrolled in other health benefit exchange plans to participate in HSAs. Also, under this legislation, contribution limits for HSAs would be increased, spouses would now be able to contribute “catch-up” funds into the same HSA and accountholders would have increased access to home health care and mental health services.
We support efforts that provide more flexibility for using HSA dollars and make it easier for individuals to maximize the effectiveness of their HSAs. We are excited by the prospect of more Americans having access to HSAs and looking forward to seeing what comes from this legislation.