Contributions and matches used to get more to join up
Trying to spur greater use of health savings accounts, employers are offering direct payments or other financial incentives to participants so they will open HSAs or increase account balances.
A common approach is for employers to contribute a fixed payment or a percentage of participants' annual deductibles for high-deductible health plans, the only type of plan for which HSAs can be used. The Internal Revenue Service defines a high-deductible plan as one with a deductible of at least $1,350 for an individual or $2,700 for a family.
Less common strategies borrow from consumer behavior research by providing a corporate match to participants' contributions or by adding money to accounts when participants complete certain financial wellness/medical tasks.
"The goal is to make people better stewards of their money and better stewards of their health," said W.P. "Pat" Jarrett, co-founder and interim chief executive of Health Savings Administrators, Richmond, Va., an HSA administrator with $800 million in assets under administration serving 70,000 participants.
Mr. Jarrett practices what he preaches. His company's HSA provides a two-pronged approach of corporate encouragement. It makes an annual contribution of $1,000 for each single employee and $2,000 for those employees with family coverage. A share of the money is contributed every two weeks coinciding with each pay period.
The company also provides a corporate match of up to $500 based on the single employee's contribution and up to $1,000 for those with family coverage.
Corporate contributions are backed up by efforts to explain the medical, investing and tax benefits of HSAs. "The short answer is education," said Mr. Jarrett, who also is a member of the HSA committee of the Plan Sponsor Council of America, Chicago. "You need to educate and simplify the message."
HSAs offer participants a triple tax advantage. Contributions are made with pretax dollars; investment gains within HSAs are tax free; and withdrawals from HSAs are tax free for qualified medical expenses.
For 2018, the IRS allows participants to contribute up to $3,450 for single coverage and up to $6,900 for family coverage; those age 55 and older are eligible for a $1,000 catch-up contribution. Unspent HSA funds roll over year to year.
A survey of PSCA members last year found that 81.2% of plans that had HSAs also provided some financial aid. Contributions based on a single participant or a family plan is the most common form of corporate support, said a report on the survey findings. Of the employers that offered HSAs, 67.4% used this approach while 22.2% made a set amount regardless of family status. Only 4.4% used a wellness incentive, 1.5% offered a corporate match and 4.4% cited "other," said the survey of 255 PSCA members.
"If I were in a plan sponsor role, when a worker enrolls in a qualifying health plan, I would not wait for her/him to make a contribution to the health savings account," John M. "Jack" Towarnicky, the PSCA executive director, said in an email, adding the various strategies depend on the comfort level of benefits executives .
"Instead, I would make a modest, non-elective employer contribution on the first day of qualifying coverage — so as to start the clock with regard to qualifying medical expenses," he said.
Employer contributions to HSAs are important sources of encouragement, said Eric Remjeske, president and co-founder of Devenir Group, a Minneapolis-based investment adviser and consultant that tracks the growth of HSAs.
In Devenir's latest survey, HSAs received $27.6 billion in contributions last year, of which 21% came from employers. "That's a pretty solid category," Mr. Remjeske said. The survey didn't describe the types of employer contributions.
Devenir's survey is based on responses from the 100 largest HSA providers handling more than 16 million participant accounts.
The survey shows a steady growth in HSA assets, reaching $45.2 billion last year — including $8.3 billion in investments. In 2016, total assets were $37 billion, including $5.5 billion in investments. For this year, Devenir predicts a total of $54.5 billion in HSA assets, including $10.5 billion in investments.
Companies that contribute to participants' HSAs have different strategies about timing the payment, according to HSA experts. Some prefer paying all upfront while others prefer to spread the payments throughout the year.
Dimensional Fund Advisors, Austin, Texas, makes monthly payments to cover half of the yearly deductibles for HSA enrollees, said Aaron Marcus, head of global human resources. The company contributes $1,350 for an individual and $2,700 for a family.
Dimensional began offering an HSA in 2011, providing the 50% contribution from the start. It also offers a preferred provider organization health plan. Among eligible employees, 87% now choose the HSA.
Since starting the HSA, the company has communicated extensively about the health care and tax advantages of HSAs. "When you launch something that's new, a lot of education is necessary," Mr. Marcus said.
Alexion Pharmaceuticals Inc., New Haven, Conn., contributes 50% of the HSA deductibles for its participants — a $1,000 contribution for a single participant and a $2,000 contribution for a family plan."It helps motivate people to enroll," said Lindsey Gomer, senior manager, North American benefits, human resources.
The payment is made in January. "We want to make sure people aren't deterred from joining the high-deductible plan," she said.
Alexion also offers a PPO health plan. The HSA has been available since 2012, and 41% are now enrolled in it — up from 28% in 2016 and 7% in 2013.
At Weyerhaeuser Co., Seattle, the high-deductible health plan is the only choice. Since Jan. 1, the company has offered to contribute $300 for individuals and $600 for families to the HSA as long as an employee contributes $2 per pay period, said J.R. Jacobsen, health and welfare plans manager. The contributions used to be $200 and $400, respectively.
"We want to make sure employees have a balance to meet the deductibles," he said. For an individual, the deductible is $1,350. The family deductible is $2,700 for two people and $3,350 for three or more.
Noting that 40% of employees have HSA balances of $500 or less, Mr. Jacobsen said the company's contribution and education efforts are designed to "raise balances and encourage investing" through the HSA.
Pitney Bowes Inc., Stamford, Conn., uses a corporate match and a wellness reward approach to encourage employees' contributions to its HSA, representing 25% of employees. Forty percent of employees are enrolled in a PPO and 35% are enrolled in a health reimbursement account.
The company provides a match of half of an employee's HSA contribution, up to $500 for single coverage and up to $1,000 for family coverage. The company deposits 50% of the match in January to help first-time enrollees establish a financial cushion for their account, said Yash Kandelwal, manager of data analysis-health care planning. The rest of the match is contributed every two weeks from February through June. All employees are eligible for the match except the most highly compensated.
The company also will contribute to HSA accounts based on achieving certain health and wellness goals.
The employee and spouse each can receive a $400 contribution if they "complete a physical exam (and) a biometric screening, and have results in normal ranges or participate in activities to move toward the range," Carol Wallace, director of global media relations, wrote in an email.
The contribution also is contingent on completing cancer screenings "appropriate for their age and gender," Ms. Wallace added.
The employee and spouse can receive an additional $100 each "by participating in an emotional well-being program centered around identifying — and participating in — positive activities to boost one's mood to lead toward a healthier perspective and more positive results," she added.