Though the popularity of health savings accounts (HSAs) is growing, even the savviest benefits managers sometimes struggle to communicate how employees can get the most out of this valuable benefit.
HSAs are savings accounts available to anyone with a high-deductible health plan (HDHP) and can be used to pay for qualified medical expenses.
HSAs offer a great way for employees to save for their future health needs. Employees contribute pre-tax dollars from each paycheck to their HSA. Withdrawals for qualified medical expenses (deductible, co-pays and coinsurance, up to out-of-pocket maximums) are tax-free. Most importantly, unused amounts in an HSA roll over every year, earn interest and convert to a retirement plan at age 65.
Here are three ways to help your employees better understand the value of HSAs, manager their health costs more successfully and build a retirement nest egg.
1. Educate Your Employees'
The number of people enrolled in HSA/HDHPs has grown from fewer than 1 million people in 2005 to more than 20 million people last year, with the highest growth for HSA/HDHPs coming in larger companies (more than 50 employees), according to the Kaiser Family Foundation. Still, many employees don’t understand how their HDHP or HSA works. Employers can make it easier for employees to understand the essentials:
- Help employees understand their insurance.It’s a good idea to review basic concepts like premiums, deductibles, coinsurance and out-of-pocket maximums. A r ecent study found that while 97% of people believed they understood the meaning of a health plan deductible, only 78% answered correctly when tested.
- Help employees understand health savings accounts.Many employees don’t understand that HSAs are available or the difference between an HSA and a health reimbursement account (HRA). While HSAs and HRAs both provide tax-free ways for people to save for medical expenses, HSAs earn interest over time, serve as a long-term savings vehicle and can even be used for retirement.
2. Provide Employees with the Tools to Make Better Healthcare Choices
As companies transition to HSAs, higher deductibles and higher out-of-pocket maximums are the new norm. Employees need tools to help them find high quality, fair prices and the right doctor. Benefits managers can help employees by providing price and quality transparency tools that solve the three major consumer challenges:
- Find cost-effective care. Local in-network prices for the same service can vary by five to ten times depending on where you go for care. When employees can see prices, they can save hundreds, even thousands of dollars.
- Find high quality facilities.Most hospitals offer most services, but very few hospitals perform all services equally well. One hospital may specialize in cardiac care but perform poorly on orthopedic procedures when compared to other nearby hospitals. Consumers with HDHPs can use Bluebook to find care at the highest quality facilities, reducing complications, cost and recovery time.
- Find the best doctor. The prices that doctors charge don’t vary much, but where they send you for a test or schedule your surgery can cost you thousands. Use Bluebook to find doctors who make cost-effective referrals for their patients or choose high quality, cost effective facilities for their procedures.
By providing transparency tools to help employees make more informed healthcare choices, they’ll save on out-of pocket costs and maximize the rollover amount in their HSA, which will develop into a healthy nest egg over time.
3. Show the Power of Transparency Solutions Plus Compound Interest
Consumers who use Healthcare Bluebook to shop for care save on out of pocket costs and get more from their HSA. When those savings are multiplied by compounding interest over time, they really add up. Here’s an example that shows the difference Bluebook can make.
For our illustration let’s compare two 25-year-old individuals: Full-Price Fred and Bluebook Bob.
Both deposit $2,093 (the national average) into their HSA each year. Both have identical healthcare expenses that mirror the national average. In most years, Bob and Fred need things like doctors’ visits, prescription drugs and labs. Less frequently—say, every 5-10 years—they may need an MRI, x-ray, biopsy or outpatient surgery.
Assuming both earned 5% APR on their HSA balance, at age 65, Full-Price Fred’s account would have a balance of $106,061.45—unspent funds from his HSA—to supplement his retirement savings. But, because Bluebook Bob used Healthcare Bluebook to save 50% or more on his healthcare costs during that same time, his balance at age 65 would be a whopping $193,135.88! The money Bob saved on care by using Bluebook, provided him and his family with an additional $87,074.44 – almost twice as much at retirement! That’s the power of combining a health savings account with Healthcare Bluebook.