HSAs & open enrollment: 3 ways to demonstrate value 

Health savings accounts (HSAs) support employee wellness and offer important tax breaks. Yet many employees miss out on saving hundreds or even thousands of dollars each year for three reasons that you can easily resolve during open enrollment. First, employees simply may not understand HSA accounts. Second, they may not know how or when to use their HSA funds. And third, many employees may not feel like they have extra cash flow to fund the account at all. 

Benefits advisors and HR professionals can use these communication and education tips to boost HSA participation during open enrollment and ensure that employees understand the value of these accounts and that – even if they aren’t able to fund the account up front – they can realize value by simply opening the account and contributing the bare minimum. In addition to this strategic funding strategy, which can eliminate one of the most common roadblocks to HSA participation, you should consider these open enrollment communications tips. 

Keep it simple and straightforward

There’s a lot to know about health benefits — and the temptation to give employees all the information they will ever need up front is real. However, it’s wise to balance the flow of information so you don’t overwhelm employees with details that they don’t immediately need. 

For example, the ability to invest a portion of unused HSA funds is important for long-term HSA ownership and should be highlighted in communications, but it’s not necessary to go in-depth about investment options during open enrollment, since new account holders will not be able to exercise this option until they have built up their account balance. Start by focusing on the basics, such as explaining the high-deductible health plan requirement, options for funding and using the account, and what’s eligible.

High deductible plans may be new and confusing to employees, so start slowly.  Talk about how these plans often feature significantly lower premiums, which makes them a good value for employees and families with low monthly healthy costs. And be sure to illustrate different account funding strategies and how employees can contribute to their accounts over time, rather than fully funding the account up front. As an extra bonus, if the organization provides a contribution to the employee HSA, be sure to clearly communicate this and explain how the organization is helping employees save more money. 

Online educational content and savings calculators can also help employees better understand the financial pros and cons of enrolling in an HSA, so they can make informed decisions based on their personal needs.

Make it fun and personal

Employees may not be aware of all the ways they can use HSA funds to pay for many common products and services. From unexpected surprises like fun, high-tech health devices to day-to-day items like bandaids and pain medication, the HSA eligibility list offers something for everyone. According to insights from Health-E Commerce, the average household currently spends more than $1,600 each year on HSA-eligible products. With an HSA, employees could see $480 in tax savings from these purchases. (Note: This assumes a 30% effective tax rate, which will vary by individual.) 

Introduce employees to websites with a comprehensive eligibility list and search functions so they can find the products and services that meet their personal needs. And be sure employees understand that even if they do not have enough money in their HSA to pay for an eligible health care expense, as long as they save their receipts, they can fund the account and reimburse themselves at a later date to realize the tax savings. 

Start small, grow with time

Finding extra money to fund an HSA need not be daunting. Once an employee enrolls in the HDHP, encourage them to open their HSA to take full advantage of the tax savings and investment opportunities. Any amount is a start, even if it’s just $5 to establish the account. Make sure to clearly communicate the triple tax advantages of the HSA: 1) Employee contributions reduce their taxable income. 2) Any investment growth within the HSA is tax-free. 3) Qualified withdrawals (those used to cover medical expenses) are also tax-free. 

Help employees understand that the HDHP/HSA combination supports both health care and long-term savings strategies. Make sure employees understand that HSA savings grow year over year and the funds always belong to the employee – even in retirement. 

Small, pre-tax contributions grow over time and can reduce an employee’s annual tax burden. You might even suggest dividing the total annual deductible into monthly paycheck contributions. Or, if employees are moving from a more expensive plan to a HDHP, you can recommend they invest the monthly difference into their HSA. And if the company offers wellbeing rewards in the form of HSA contributions, make sure employees know how and when to participate. 

If you’re feeling overwhelmed by benefits communications and open enrollment, take advantage of existing online tools to make open enrollment a breeze and to help employees organize and optimize their savings accounts. And for those more experienced savers, you might recommend investment advice and tools for optimizing account growth.  

As with any employee benefit, providing education in small but frequent doses is ideal. Share reminders and communications across a range of channels to make sure every employee can learn about the health and wellness benefits and tax advantages offered by HDHPs and HSA funding. 

Itamar Romanini is vice president and general manager of HSA Store and a long-time leader and innovator in consumer-directed health care and HSAs.