Few Employees Get the Most out of Their Health Savings Accounts

While many health benefits advisers have been recommending that employees with health savings accounts use them as savings vehicles that can be tapped for future medical care, a new study finds that most people are spending the bulk of the funds.

The study by Willis Towers Watson found that 65% of workers were using their HSAs to pay for current medical expenses, and only 8% of them used them as savings vehicles for future medical expenses. The rest used their accounts only when necessary, and saved the remainder.

In short, many people are not taking full advantage of these plans. But all is not lost, with our help you can educate your staff who have HSAs on how to get the most out of them and also secure a more secure future for themselves when they will at some point need the money for medical procedures.

The study found that only 45% of employees surveyed had more than $5,000 stashed away in their HSA. So, in essence they are mostly being used as spending accounts.

Additionally, the study found that 45% of employees had chosen not to participate in their employer’s HSA plan.

One issue that’s confronting employees with HSA and 401(k) plans is deciding how much to allocate for each one. The study found that:

  • 22% of financially adept employees followed the recommended strategy of maximizing their 401(k) contributions up to their company’s match before contributing to their HSA.
  • 25% contributed to their HSA before their 401(k) if the 401(k) didn’t have a matching employer contribution, a strategy also recommended by financial experts.

 

FSAs also not optimized
Another area where a majority of employees fail to optimize their savings vehicles is flexible spending accounts. FSAs have a “use it or lose it” feature, meaning that most of the funds set aside have to be spent on medical expenses during the year, although a portion can be carried over to the next year.

Still, 32% said they had difficulties in spending all of the money in their FSA in any given year. On the flip side, 48% said they wished they had put more money into the account.

Both FSAs and HSAs are funded with pre-tax dollars from the employees’ salaries.

The takeaway
Willis Towers Watson recommends that employers educate their staff on how to get the most mileage out of their HSAs and provide online tools to help them decide if they should use their HSAs to pay for medical expenses or pay them out of pocket.

These online tools for making “save versus spend” decisions will often be on the HSA account’s portal or website. The tools may include retirement savings calculators and health care price transparency services.

The tools are most valuable as they can quickly help employees make sound and educated decisions. It’s been found in previous studies that one-third of employees access their HSA portals on a regular basis:

  • 38% view their account information on a monthly basis
  • 33% view their account information on a quarterly basis.

Getting a Head Start on Open Enrollment

As open enrollment is right around the corner, now is the time to gear up to maximize employee enrollment, help them make the best selections for their own personal circumstances, and stay compliant with relevant laws and regulations.

It’s a lot to take in as uncertainty has been a constant during the last many years with the onset of the Affordable Care Act, and now that its future is hazy at best.

Still, since health coverage and other employee benefits are an important part of your compensation package – and your competitive edge for talent – it’s important that you get it right.

Here are some pointers to make open enrollment fruitful for your staff and your organization.

Review what you did last year

Review the results of the previous year’s open enrollment efforts to make sure the process and the perks remain relevant and useful to workers. How effective were various approaches and communication channels, and did people give any feedback about the process itself?

Start early with notifications

You should give your employees notice at least a month before open enrollment to let them know it’s coming, as well as provide them with information on the various plans you are offering. Encourage them to read the information and come to your human resources point person with questions.

Help them sort through plans

You should be able to help them figure out which plan features fit their needs, and how much the plans will cost them out of their paycheck. Use technology to your advantage, particularly any registration portal that your plan provider offers. Provide a single landing page for all enrollment applications.

That said, you should hold meetings on the plans and also put notices in your employees’ paycheck envelopes.

Plan materials

Communicate to your staff any changes to a health plan’s benefits for the 2019 plan year through an updated summary plan description or a summary of material modifications.

Confirm that their open enrollment materials contain certain required participant notices, when applicable – such as the summary of benefits and coverage.

Check grandfathered status

A grandfathered plan is one that was in existence when the ACA was enacted on March 23, 2010 and is thus exempt from some of the law’s requirements. If you make certain changes to your plan that go beyond permitted guidelines, the plan is no longer grandfathered.

If you have a grandfathered plan, talk to us to confirm whether it will maintain its grandfathered status for the 2019 plan year. If it is, you must notify your employees of the plan status. If it’s not, you need to confirm with us that your plan comports with the ACA in terms of benefits offered.

ACA affordability standard

Under the ACA’s employer shared responsibility rules, applicable large employers must offer “affordable” plans, based on a percentage of the employee’s household income. For plan years that begin on or after Jan. 1, 2019, the affordability percentage is 9.86% of household income. At least one of your plans must meet this threshold.

Out-of-pocket maximum

The ACA’s out-of-pocket maximum applies to all non-grandfathered group health plans. The limit for 2019 plans is $7,900 for self-only coverage and $15,800 for family coverage.

Make sure your plan is in line with these figures.

Other notices

Consider also including the following notices:

  • Initial COBRA notice.
  • HIPAA notice. This may be included in the plan’s summary plan description.
  • Notice of HIPAA special enrollment rights.
  • HIPAA privacy notice.
  • Summary plan description.
  • Medicare Part D notices.

 

Get spouses involved

Benefits enrollment is a family affair, so getting spouses involved is critical. You should encourage your employees to share the health plan information with their spouses so they can make informed decisions on their health insurance together.

Also encourage any spouses who have questions to schedule an appointment to get questions answered.

Bill Would Make 40 Hours a Week Full Time for ACA Purposes

House Republicans are taking another stab and cutting around the edges of the Affordable Care Act with new legislation that would change the definition of “full-time” workers to individuals who work 40 hours a week, instead of the current 30 hours under the law.

The effort addresses one of the biggest points of contention among employers concerning the ACA, since employers with 50 or more full-time workers must offer them health plans that comply with the law. The legislation, HR 3798, is currently in play in the House of Representatives, although it has yet to be debated in committee.

The bill comes as another measure that would completely eliminate the mandate that all applicable large employers (those with 50 or more full-time employees or the equivalent in part-time workers’ hours) provide health coverage that is affordable and covers the minimum essential benefits as prescribed by the ACA.

 

What would it do?

Specifically, the bill would:

  • Establish that full-time employee means someone who works 40 hours or more a week.
  • Eliminate penalties for organizations that don’t offer health insurance to staff who work less than 40 hours a week, but more than 30. This would greatly ease the reporting requirements on employers.
  • Suspend the employer mandate for the years 2015 to 2018, in order to suspend any penalties that may have been imposed on employers during that period.
  • Halt the IRS’s current attempts to enforce the mandate and open the door for employers to obtain refunds from the IRS for any penalties already paid.
  • Further delay implementation of the “Cadillac tax.” This is a 40% excise levy that would be applied to premiums over and above a certain maximum premium threshold. The tax has already been delayed a number of times and is scheduled to take effect in 2022.
  • Change ACA reporting requirements. Employers currently must provide IRS Form 1095-B for fully insured group plans to employees who receive ACA-compliant coverage. The bill would only require employers to provide the form to workers that ask for it. That said, employers would still be required to report to the IRS every year.

 

The outlook

For now, the bill has yet to be debated in committee and with the legislative session drawing to a close in the coming months, it’s unclear if this measure could be passed out of committee and then the House floor in time for it to be debated in the Senate.

It joins the ranks of a few measures that are once taking aim at the ACA.

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