Maximizing Benefits and Savings: The Power of Health Savings Accounts and High Deductible Health Plans

In the ever-evolving landscape of employee benefits, finding the right healthcare options for your population can be a complex task. Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs) have gained significant attention for their potential to revolutionize the way both employees and employers approach healthcare coverage. HSA contribution and withdrawal activity remains strong, according to Devenir’s 2022 HSA Research Report. It’s estimated that almost 37 million Americans now have access to an HSA.  

Making the leap to a cost-effective plan 

Pairing HSAs with an HDHP can create a cost-effective solution for both employers and employees. HDHPs are characterized by lower premiums and higher deductibles compared to traditional health insurance plans. Here’s a look at the benefits of a HDHP: 

1. Lower premiums: HDHPs generally come with lower monthly premiums, providing cost relief for both employees and employers. These lower premiums free up funds that can be directed towards HSAs or other benefits programs. 
2. Consumer-centric approach: HDHPs encourage employees to become more proactive healthcare consumers. With higher deductibles, employees are motivated to shop around for quality, cost-effective medical services, compare costs, and make informed decisions about their care. 
3. Supporting financial wellbeing: Employees can manage their healthcare expenses more effectively by leveraging their HSAs to cover deductibles and other out-of-pocket costs. This allows them to budget for healthcare without facing surprise bills or having to worry about a “use it or lose it” with an FSA. 
4. Employer savings: For employers, offering HDHPs can result in substantial cost savings over traditional insurance plans. This can create an opportunity to allocate those savings towards other employee benefits or resources. 

Empowering Employees Through HSAs 

It can feel daunting for many employers to do a “full replacement” strategy, phasing out PPO plans and moving employees to a high deductible plan. Employees sometimes react to the “sticker shock” of the amount required for out-of-pocket expenses without understanding the built-in safety net of the HSA. There are a few things employers can do to help ease employee anxiety when phasing out or fully replacing their PPO plan: 

1. Present the HDHP option with the HSA. These benefits really go together like “salt and pepper.” You don’t want to present one without the other. Use phrasing like “out-of-pocket costs” in tandem with “deductible” to make sure employees understand; then follow up with “your HSA will help you cover those out-of-pocket costs if you have them…or you can save your funds for years.” 
2. Help employees understand the unique benefits of the HSA.  
   • Triple tax advantage: HSAs offer a unique triple tax advantage. Contributions are tax-deductible, earnings within the account are tax-free, and withdrawals for qualified medical expenses are also tax-free. This triple tax benefit not only benefits employees but also presents an opportunity for significant tax savings for employers. 
   • Ownership and portability: Unlike other benefit options, HSAs are individually owned by employees. They can contribute to the account and take it with them even if they change jobs or retire. Plus, unlike the healthcare FSA, the HSA never “expires.” 
   • Long-term savings: HSAs aren’t just for immediate medical expenses. They can serve as a powerful tool for saving and investing for future healthcare needs. Over time, employees can accumulate substantial funds that can help cover medical costs in retirement. 
3. Consider an employer contribution to the HSA. About 26% of all HSA dollars came from an employer in 2022. These contributions are highly flexible. Employers can fund at any frequency—per paycheck, quarterly, annually, etc. Periodic contributions can provide peace of mind for both employee and employer – the employer helps the employee build their funds and mitigates loss from an employee who departs from the company mid-year. 
    
4. Consider building the employer contribution as a wellness incentive. Many employers tie a wellness incentive to their HSA contributions—asking employees to complete a physical, survey, or other activity in order to earn their employer contribution to the HSA.  

But wait…there’s more! 

Finally, we’ve seen many employers realize substantial savings when they pair their HDHP strategy with our recommendation tool, the MyChoice Recommendation Engine. The tool provides context for employees during the enrollment process, to help them understand the value of enrolling in these plans together to save money on their premium expenses and create a long-term savings option. 

Across our book of business, 60% of employees who used the MCRE decision support tool elected a high-deductible health plan (HDHP) and a health savings account (HSA). When MCRE is not available or not used, only 20% enrolled in an HDHP and an HSA.  

Here are two examples of true dollar savings when providing personalized decision support 

Client A: Manufacturing Company 

When they moved to Benefitsolver and deployed the MyChoice Recommendation Engine, they realized a 27% increase in their HDHP enrollment and overall realized a $2M savings to their budgeted healthcare spend, despite a recent acquisition that even increased their eligible enrollees. 

Client B: National Hospitality Company 

When they moved to Benefitsolver and deployed the MyChoice Recommendation Engine, they increased their HDHP participation from 29% to 60% and saw a 50% increase in HSA enrollment. 

Pairing Health Savings Accounts with High Deductible Health Plans offers a powerful solution for HR professionals seeking to provide cost-effective, flexible, and empowering healthcare benefits to their employees. To really see the cost savings, employers can create a path to educating and engaging their employees by providing education and coaching within their benefits administration system to allay any anxiety around the higher deductibles. 

 To learn how to effectively communicate the benefits of an HSA, check out our e-book, The Four S’s of HSAs.