HSAs are an important tool for covering out-of-pocket health care expenses, especially at a time when four in 10 people say they can't cover a $400 emergency expense. (Photo: Getty)

Health care costs are a major concern for employees of any age, but their mindset toward managing these expenses varies by generation.

Millennials are more likely to ask for cost estimates prior to service than baby boomers—and they are a lot less likely to budget for health care expenses or pay their medical bills in full. Meanwhile, the majority of Gen Xers want to live past the age of 90, yet nearly half skip care when they are sick or injured so they can avoid the cost of care.

For employee benefits managers, these differences point to the need for tailored messaging by generation around the value of health savings accounts (HSAs).

HSAs are an important tool for covering out-of-pocket health care expenses, especially at a time when four in 10 people say they can't cover a $400 emergency expense and six in 10 worry about their ability to pay for an unexpected medical expense. HSAs are also a powerful vehicle for retirement planning or saving for a “someday” expense, like a house or a vehicle. Participants pay no taxes on the funds they contribute to the account, no taxes when funds are deducted for qualified medical expenses, and no federal taxes on the interest they earn.

Unfortunately, 40 percent of employees who have access to an HSA through their employer don't take advantage of this benefit, often because they don't see the benefit or understand its purpose.

How can employee benefits administrators more effectively engage employees across generations in HSAs—from Gen Zers just beginning their career paths to Boomers looking toward retirement? Consider these strategies in designing a generation-specific approach.

Generation Z: A generation of savers.

Gen Zers lead the way when it comes to saving money for future expenses, from smartphones to cars to college. About half of Gen Zers have goals of saving $2,500 or more, and 83 percent are tracking their savings goals8. Most are also thinking about retirement, with one in three planning to start retirement savings accounts in their 20s. These factors increase the odds that Gen Zers will break the mold when it comes to leveraging HSAs as a health care-spending and wealth-building tool. But first, they need to know the benefits.

Gen Zers desire intimacy in communication, a factor sets them apart from their Millennial counterparts. To convince Gen Zers to leverage HSAs, look for ways to provide personalized communications that:

Include education and tips based on the individual's goals. New technologies such as machine learning and artificial intelligence (AI) can analyze participants' spending habits based on data from their financial accounts and use this insight to provide financial literacy education and savings tips. For example, AI-powered technologies can set savings targets that align with the user's past behavior, such as saving $100 a month. These technologies also can encourage Gen Zers to increase their monthly savings amounts as their earning power improves.

Help Gen Zers visualize how the balance will grow over time. Monthly snapshots fueled by predictive analytics can help Gen Zers see how their savings will increase with interest over time. These analyses also can show Gen Zers how small adjustments in contributions could make a big difference.

Offer strategies for meeting long-term goals. By asking Gen Zers to share their “dream savings goals” for the future, such as the purchase of a home by age 30, AI-driven applications can show Gen Zers how they can achieve their goals more quickly through small changes in behavior. For example, by paying out of pocket for health care expenses and choosing to reimburse themselves later from their HSA in one lump sum, Gen Zers could put this payment toward a down payment on a home. It's an easy way to save money, pre-tax, on a regular basis, and it requires little effort beyond enrollment.

Millennials: Attracted to convenience.

Whether consuming food or information, these digital natives are all about ease and convenience. Millennials are increasingly choosing HSAs, with 76 percent of those eligible for an HSA joining one in 2018, up from 40 percent in 2017. Even though this reflects the biggest jump in HSA participation of any generation, the total number of millennial enrollees is still lower than Gen X and Boomer participants. millennials also have boosted their contribution levels in the past year, another sign that HSAs are catching on among this employee group.

To drive higher rates of participation among millennials, consider the following approaches:

Increase the ease of enrollment. Couple enrollment in a high-deductible health plan (HDHP) with enrollment in an HSA, and make HDHPs the default option for enrollment. While plan participants will still be able to opt out of an HDHP plan, they must exert more effort to do so when this choice is the default option.

Make it personal. Use interactive technology to recommend contribution amounts based on age, budget and general health. This simplifies decision making by presenting an option tailored to the employee's unique circumstances.

Give them easy-to-use tools. Increase engagement by leveraging mobile apps and digital tools that deliver health savings information when, where and how they want it.

Generation X: Low confidence in financial preparedness.

About half of Gen Xers say they have saved three months' salary, compared with 58 percent of millennials and 60 percent of boomers. For many, their preparations for retirement have taken a backseat to helping their Millennial and Generation Z children gain solid financial footing and taking care of aging Boomer parents. As a result, 47 percent of Gen Xers say they haven't saved any money for retirement, and among those that have, 48 percent have saved less than $50,000.

Gen Xers may require education and even a bit of a push to view HSAs as a wealth-building tool. Consider the following strategies:

Establish incentives for Gen Xers to fund their account. Often, Gen Xers are familiar with the use of HSAs to pay out-of-pocket health care expenses, but they aren't aware of their potential as a retirement savings vehicle. Take the time to bring Gen Xers up to speed on how HSAs work and the value they provide. Then, offer to make not just the initial contribution to the plan, but also a contribution in the future when employees show they are committed to funding the account. This helps Gen Xers see the immediate benefit and long-term gain from their participation in an HSA.

Share how HSAs can help Gen Xers meet today's financial needs—not just in retirement. Financially, many Gen Xers are stretched thin given that they may still be carrying thousands of dollars in debt from the recession, as well as caring for both their children and aging parents. Many have put their children's college education ahead of their retirement goals. As a result, their 401ks are lackluster, at best. By sharing how HSAs can be used not just for out-of-pocket health care costs, but also unexpected expenses—without the hassle (and cost) of making a withdrawal from a 401k—Gen Xers will be more likely to view HSAs as a vital tool for financial health.

Boomers: Anxiety about life after retirement is growing.

Eight in 10 Boomers have made plans for what will happen after they die; who will receive their assets; and what their funeral service should look like. But just one in five know how they will pay for long-term care, if they need it, and fewer than 30 percent have an emergency savings fund for health care expenses.

For this generation, investment in an HSA provides the flexibility to save money pre-tax for health care or retirement. It also offers peace of mind, helping to ensure that care decisions are based on the individual's wishes.

Consider these strategies for encouraging boomers to adopt HSAs:

Talk with boomer employees one-on-one about their options. Just 32 percent of boomers have a plan for their care after retirement. Among these individuals, one in three say they need advice, but they don't know who to trust. Investing in an advisor who can share the ways in which an HSA protects long-term decision making encourages HSA adoption while providing a critical financial resource for Boomers when they need it most.

Offer detailed guidance on how much to contribute. One study shows the average American couple will need $285,000 for medical care during retirement, not including long-term care. Boomers who aggressively contribute to an HSA at the maximum or near-maximum level will be better prepared for these expenses because their balances will grow exponentially over time with interest. Help boomers avoid feeling overwhelmed with the HSA enrollment process by calculating how much they should contribute based on their current needs and long-term goals.

An action plan for adoption

Encouraging employees to invest in HSAs has traditionally been met with resistance from employees who don't understand what an HSA is or the value it provides beyond planning for health care expenses. But some generations' interest in HSAs is increasing, and for millennials in particular, higher contribution levels are signs of progress. Developing targeted, generation-specific strategies to propel HSA adoption could increase adoption rates while helping employees strengthen their financial health.

Innovative technologies, such as artificial intelligence, can support these efforts by delivering timely advice based on employees' own unique needs and behaviors, making it easy to personalize communications and strengthen HSA adoption.

Itamar Romanini is chief revenue officer at Bend Financial, an HSA technology and services company focused on long-term financial wellness solutions.

Read more:

• HSA education top concern of plan sponsors
• How health literacy boosts HSA engagement: 5 steps to guide clients
• 10 HSA questions employers & employees ask