PIggy bank with coins Mostemployees don't understand that they can increase or decrease theirown HSA payroll contribution during the plan year. (Photo:Shutterstock)

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Health savings accounts (HSAs) continue to increase inpopularity, but not without issues for both employees andemployers. From 2008 to 2018, the total amount deposited in HSAsrose from $5.3 billion to $43.5 billion. Thatnumber is projected to keep growing as more employers offerhigh-deductible health plans (HDHPs) with HSAs.

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Despite this, HSAs don't appear to have accomplished their original intent.

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The federal government created HSAs in 2003 to provideindividuals covered by high-deductible plans the opportunity tosave money tax-free for healthcare expenses. The intention was thatHSA enrollees would build up savings and draw on these funds laterin life when medical expenses typically balloon. By and large, thatis not happening for a variety of reasons.

Problems for employees

One contributing factor is that employees are financially stressed out. Health care expensesand insurance deductibles continue to rise, meaning that a lot ofemployees simply can't build up their HSA balances; individualsstill spend more than 75 percent of the funds they contribute totheir HSA each year on health care expenses. Retained HSA assetshave increased modestly from 18 percent to 24 percent between 2017to 2018, but the average HSA balance was just $2,144 in 2018, andthe average HSA balance grew by just $110 from 2017 to 2018.

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Related: More than rent, taxes or groceries, consumers worryabout health care costs

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Rising health care and prescription drug costs, along withhigher insurance deductibles, are cutting into employees' abilityto save money in their HSAs over the long term. The minimuminsurance deductible for an HDHP with HSA in 2004 was $1,000 for anindividual and $2,000 for a family. Since then it's risen to $1,350 and $2,700, respectively.

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What also plays a role in use is a gap in education about HSAs.Employees don't understand the full power of these accounts. Thereare a growing number of options for HSA banks that couldpotentially make it easier for employees to use. But many don'tknow that the federal law allows them to use whichever bank theyplease to house their accounts. Instead, most carriers dictatetheir preferred HSA vendor and employees follow along.

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This can become problematic when a carrier changes its preferredHSA vendor. Unfortunately for employees, not all HSA banks arecreated equal and some are far easier to work with than others.Switching to a new HSA bank can leave employees facing blackoutperiods during the transition or problems paying bills using theirHSA funds. If HSAs are difficult to use, employees will simply stopusing them.

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Additionally, most employees don't understand that they canincrease or decrease their own HSA payroll contribution during theplan year. This is different from the FSA rules and not alwaysclear to the employee.

Problems for employers

When employees aren't using HSAs to their full advantage, itbecomes a problem for employers. Typically, when an employer beginsoffering high-deductible health plans with an HSA, it willcontribute to employees' accounts to soften the burden of payingfor prescription drugs and medical care out of pocket until thedeductible is met. This gives employees time to build up their HSAsavings.

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But many employers get stuck contributing to employee HSAs yearsafter they've switched to the plan—which negates any savings theymay have realized by switching to an HDHP with HSA in the firstplace. We recommend that the employer draw down their contributionover time as a strategy to contain the cost of the plan.

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Because employees have their HSAs propped up by their employer,they often don't bother to become more informed consumersmaking better decisions about their care. This poor consumerismmeans employers aren't seeing the full impact on their benefitplans.

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Employers are also seeing problems with the carrier-HSA bankrelationship. Relying on a carrier to dictate an HSA bank means thecarrier can move accounts from one bank to the next on awhim—regardless of the effects on your employees. The contractualrelationship between the carrier and their HSA bank is not madepublic, so the reasons for the switch are hard to determine.However, you can bet that they are benefiting in some way and oftenat the expense of the account holder.

Solutions for employers and employees

There are a number of solutions to make HSAs work a littlebetter for everyone. Education is one; your employees need multipleopportunities to learn about how best to use HSAs for everyone'sbenefit.

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In order to have more of an opportunity to save in an HSA, Ialso believe that wellness and consumerism need to be a focus ofevery employer. Put programs into place that move the wellnessneedle and provide employees with education and resources to makebetter decisions about their healthcare.

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Finally, employers should take control of their HSA bankingrelationship and carve it out from carriers. This enables you tochoose a bank that puts you and your employees first.

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Tim Hayden is regional vice presidentat Corporate Synergies. He has more than25 years of sales and marketing experience in all phases of theemployee benefits industry. He has earned an industry-widereputation as a creative developer of benefits solutions.

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