Lindsay Barnard (LB): It may be a cliché answer, but the top challenge I still hear from employers is employee education. There is still a significant portion of employees who say they do not fully understand their options, or who mistake their HSA for an FSA, or who – even after enrolling in an HSA-eligible health plan – don't decide to open an HSA at all. I think an important place for employers to start is understanding what the primary objections or points of confusion are for employees, and then crafting a strategy to address those pain points.

Some employees are delaying medical procedures and services due to the high cost of health care. What are the most high-value uses of an HSA, and how can employees ensure they aren't missing their opportunity throughout the year?

LB: Regarding high-value uses of the HSA in general, there are many medical, dental and vision expenses that are eligible for HSA use that employees miss. These include: annual exams, copays, prescriptions, lab fees, hospital visits, surgery, dental and orthodontic expenses, prescription glasses, over-the-counter medicines, vaccines, and physical therapy, as well as a whole host of medical products like hearing aids, masks, hand sanitizers, orthotic inserts, feminine hygiene products and more. The high cost of health care is a real challenge, and I understand employees may be in varying states of preparedness to afford and cover these costs, but by paying out of the HSA with tax-free dollars, they can take some of the sting out of those expenses.

One of the keys to making sure employees aren't missing opportunities throughout the year is to ensure that the HSA experience consistently helps enrollees navigate their expenses and plan their spending. Transparency and exposure are critical. A great HSA solution will do more than just provide a standard "savings account" experience; it will provide other tools within the HSA to guide employees to spend smarter. This includes tools like being able to search for and find care, see real-time medical prices at various locations to compare costs, receive proactive alerts when lower-cost options for recent purchases are found at different providers, and access personalized planning tools that take into consideration the lifetime cost of preexisting conditions. All of these better assist employees in contributing and saving at a level that is right for them. In order to ensure that opportunities aren't missed, it's critical to have this level of transparency and personalization in the same ecosystem as the HSA itself.

During open enrollment, what are some strategies that HR teams and plan administrators can use to increase HSA engagement for their teams?

LB: First, it's important to consider that great consumer engagement really starts with plan design. Adoption and engagement in the HSA can be meaningfully impacted if the right incentive is applied to the plan. For example, things like employer seeding, where the employer deposits a sum of money at the start of the year, can help remove obstacles around enrollment and get new participants into the plan. The same could be said for employer matching, where the employer matches contributions made by employees up to a certain amount, which can encourage ongoing contributions and building up balances. Another version of this might be incentive deposits and rewards, where employers deposit money into the HSA based on the completion of desired tasks or milestones (wellness activities, opening an investment account, reaching a certain balance tier, etc.), which can bring higher engagement and learning about the HSA in order to reach new achievements. Seeding is typically the most popular – about 32% of all HSA plans are seeded by an employer – and plans that do offer employer seeding typically see higher adoption rates – 33% average adoption for plans that offer seeding versus 22% average adoption for plans that do not. [source: Alegeus platform data]

That said, during open enrollment specifically, there are a few strategies that can help drive better employee engagement:

First, any communications that are sent need to be written with the average employee in mind. Employers that see high engagement with their open enrollment communications typically focus on the following:

• Keeping the message simple by using clear and jargon-free language to maximize comprehension.
• Keeping messages short and digestible, understanding that these can be complex benefits and the average employee won't have time or energy to grasp all aspects of the plan while enrolling.
• Using real-world examples that help employees understand benefits in a way that resonates with their situation. Adding tools like quizzes can help.
• Using diverse types of media like interactive tools, videos and graphics, which can help get messages across.

Second, how employers position the HSA is important, making sure to emphasize both the short- and long-term benefits of the account. Forty-nine percent of employers say they talk about the HSA mainly as a short-term health savings tool, and an additional 10% say they talk about it exclusively as a short-term savings tool. The other 40% talk at least in part about the long-term retirement and investment aspects of the HSA, but this really should be a key part of every conversation about HSAs, especially during open enrollment [source: Devenir Research, 2021 YE HSA Market Statistics and Trends & 2022 Midyear HSA Research Report]. Educating about HSAs as part of a retirement strategy, not just health care spending, can go a long way in driving additional adoption from broader segments of the employee population.

Third, making sure employers scope messaging to target the key items employees need to know. As an example, segment communications into bite-size topics like 1) account features and benefits (how does an HSA work and why should you care?), 2) eligibility and spending (what can you use your HSA for, how to find care, and how to compare costs), and 3) contribution planning (how much makes sense for you to contribute based on your finances and health care expenses?).

Last, remember that engagement is a year-round practice, not a once-a-year activity. Consider multi-media communication campaigns and interactive opportunities throughout the year to engage and educate so that when open enrollment comes, employees are ready to take action.

The next answers are attributed to Duke Janssen.

LSA programs can sometimes get lumped into a "perks" category for employees, leading to missed value for employees' financial and physical wellness. How can employers ensure that they are delivering targeted, valuable LSA programs?

Duke Janssen is vice president of Reimbursement Accounts at Alegeus.

Duke Janssen (DJ): It has to start with goals – more specifically, an understanding of employer/employee needs, HR/benefits alignment, hiring goals, talent development goals and retention goals, etc. And these have to be targeted toward demographic employee needs (i.e., lifestyle benefits aligning specifically to the needs of each individual – social needs, geographic needs, company culture, etc.). Simply put, you can't spread LSAs like peanut butter.

They also have to adhere to the macro-economic environment and meet the challenges employees are experiencing because of downturns in the market.

Employee flexibility and usage granularity can help guide the success of certain LSAs over others, and consequently help employers trim the underused offerings and boost the more valuable ones.

Rather than focus on having categorial variety of LSA programs, employers should focus on targeting the spending needs of their employees and make that the priority. Having too many options can lead to leaving gross-ups and gift cards behind. LSAs should be consolidated into single programs with multiple eligibility benefits, purses, digital experiences, etc., to best target the needs of users.

How have employers seen LSA programs evolve over time, especially as employee needs shift?

DJ: They've seen them change due to changing macro-economic conditions and in particular, pandemic-related shifts. LSAs have been around for 10 years, but didn't get thrust into the spotlight until there was a global shutdown. Then it became about the war for talent and retention, then about dealing with mass inflation, then keeping people in offices and now mass layoffs. There are companies presently that are thinking about LSAs in terms of off-boarding, not on-boarding. Throughout it all, employers need to be in tune with employee needs.

Because LSAs are self-serving, employers look to their benefit delivery stakeholders to bundle lifestyle alongside other programs; for example, FSA/HRA/HSA, payroll, other pre- and post-tax benefit providers, occasionally even health insurance providers. The overall goal for LSA programs is being a single experience for all targeted spend and benefit programs, empowering the employee from a spend, eligibility and digital experience perspective.

Related: 

• 7 insights from 20 years of HSAs
• HSAs: An important tool to combat economic uncertainty
• Lifestyle spending accounts: What employers need to know
• 3 benefit trends to watch in 2023 (and beyond)