Designed to cover consumers’ out-of-pocket health care costs,HSAs are offered in tandem with qualified high-deductibleplans. The Employee Benefits ResearchInstitute estimates that in 2014, there were about 13.8million HSA accounts holding more than $24 billion in assets.Nearly four out of five of those accounts were opened in 2011 orlater.

Most health care economists expect the brisk adoption of HSAs tocontinue. Benefits consultancy Mercer predicts that 36 percent ofemployers with 10 to 499 employees will offer HSA-eligible plans by 2017; 66percent of employers with more than 500 workers are expected to dothe same. Moreover, the consultancy estimates that by 2017, 18percent of larger employers will offer high-deductible plans astheir only option.

This is good news for benefits brokers looking for a way to addvalue to voluntary benefits – using an approach that that employersand employees may not have considered. To better understand howvoluntary policies can benefit HSA account holders, though, we mustlook at how savers are using their HSAs.

Few contributing maximum to HSAs

A study by HelloWallet, which provides financialwellness tools and benefits platforms to employers, showed thatonly 5 percent of HSA account holders contributed the annualmaximum allowed by the IRS in 2013.

In 2016, annual contribution limits to HSAs are$3,350 for an individual and $6,750 for a family (limits haveincreased marginally since 2013).

Among account holders who contributed in 2013, the mean deferralwas $700, according to HelloWallet’s study, which called the lowcontribution rates “potentially dangerous” for account holdersfacing large medical bills.

Because HSA assets do not have to be spent,they can be rolled over year to year, allowing tax-deferred assetsto accrue over time. EBRI data shows the average account balance atthe end of 2014 was $1,933. Levels varied significantly by age: Forparticipants under age 25, the average balance was $655; forparticipants over age 65, the average balance was just over$5,000.

Out-of-pocket expenses

The significance of this balance shortfall is that consumerssimply aren’t saving as much as they need to offset the higherdeductibles on their health plans. EBRI’s data shows that theaverage account balance for HSAs isactually lower than the average deductible for HSA-qualifiedconsumer-driven plans, which for single coverage was $2,196 in2015, and $4,347 for family plans, according to the Kaiser FamilyFoundation’s 2015 Employer Benefits Survey.

And therein rests the argument for strategic voluntaryofferings, says one advocate for voluntary products.

“It takes a while for people to build up HSA account values,especially for younger workers,” said Jeff Oldham, vice presidentof Benefitfocus, a provider of cloud-based benefits platforms forlarge employers.

“For a lot of people with HSAs, the money simply isn’t there tocover out-of-pocket costs,” he added.

For consumers, affordable voluntary products can provideprotection that many HSA accounts can’t, said Oldham. As such,employers can offer voluntary benefits as a way to help employeesgrow their HSAs.

By using voluntary benefits to pay for uncovered expenses ratherthan exhausting balances for out-of-pocket costs, those accountscan grow over time and cover more expensive medical conditions thatmay arise later in life. But many employers are unaware of thisstrategy, creating a significant opportunity for benefits brokersto educate their clients and clients’ employees.

HSA investment options

The vast majority of HSA assets sit in bank CDs and otherlow-yielding accounts. But about 6 percent of accounts are investedmore aggressively in accounts that function like 401(k)s. Thisallows employees to invest and grow account contributions more thanever before.

Not surprisingly, such accounts grow far more quickly thantraditional HSAs, according to EBRI data. At the end of 2014, 37percent of HSAs associated with investments held more than $10,000,compared with only 4 percent of HSAs in traditionally designedaccounts. Among HSAs with investments opened in 2005, the averageaccount balance was more than $19,000 by the end of 2014.

By pairing voluntary benefits with investment-based HSAs, then,Gen Xers and pre-retirees can more effectively save and build onaccount contributions. For workers leaving the workforce in 2016,retirement providers project medical expenses in the hundreds ofthousands of dollars over the course of retirement.

Brokers, then, stand at the forefront of an evolution inconsumer-driven plan design. The broker’s ability to communicatehow younger workers can use voluntary benefits to grow theirbalances and older employers can use them with an eye on retirementis key to this turning of the tides.

As Oldham suggested, pairing voluntary benefits with HSAs is aninnovative strategy that could better protect employees’ interests,and better serve the employers that want to deliver the mostcost-efficient protection for workers.

“The average American doesn’t have thousands of dollars to payfor a catastrophic medical event,” said Oldham. “That’s wherevoluntary benefits can step in to do what HSAs can’t for so manyemployees, especially newer entrants in consumer-driven plans.”

But too many employers have yet to “connect the dots,” he added.That’s now up to brokers.