In the first post in our three-part series, Broker Breakthroughs, benefits brokers and consultants will learn how to get employers to realize the full potential of High Deductible Health Plans and expand their HSA program.
Modern brokers and consultants are expected to present clients with benefits programs that meets employees’ needs, help HR with recruiting and retaining top talent, and still save the company’s bottom line.
That’s a big job. But there’s a tool in your benefits toolbox that – when used the right way – is perfectly suited for getting it done: the Health Savings Accounts (HSA).
The best practices—“broker breakthroughs”—presented in this blog series will help you further refine your approach to becoming indispensable in the eyes of your clients as you guide them to smart, cost-saving decisions through High Deductible Health Plans (HDHPs), HSAs, and beyond.
Broker Challenge: Employers Don’t See the Full Potential of HDHPs
Going back 10 years, an employee’s share of premiums was fairly close to matching the health insurance premium allocation; however, heath care premiums are rising at a faster pace than both worker earnings and inflation, creating a “pain” gap, which has caused employers to implement more cost-sharing measures to help offset the higher cost of health care.
The challenges being presented to employers and their employees have shined a spotlight on the HDHP as an attractive plan offering, with premiums typically lower than traditional plans by about 10%.
Broker Breakthrough: Use Saving Scenarios to Frame HDHP Conversations
They say they have, but have your clients really explored the benefits of driving enrollment in lower cost plan designs?
There are conversations to be had—along with supporting data to share—around this topic of shifting costs in a manner that can be win-win for employer and employee alike.
Let’s revisit the stat illustrating that HDHP premiums can be 10% lower than traditional plans.
Research shows that, in a cost-sharing model, the HDHP savings on premiums alone could be about $1,000 for each individual participant.
That’s a powerful figure to sew into your narrative, if your clients were to do the math across their entire employee base. Let’s say for example a 150-life group—that’s a savings of approximately $150,000 a year.
Moreover, HDHP premium savings average out to almost $2,000 per family, compared to a family PPO offering. Again, easy math—$300,000 annually on a 150-life group.
And in the form of conversation, you can tee up your storytelling with influential content around the premium savings zones when comparing HDHPs to traditional plans.
It’s also worth noting that the HDHP is the only plan type that has grown in terms of enrollment rates across the last decade, proving its worth as a meaningful vehicle to help control rising costs.
All other plans have either remained static or have contracted over the same time period.
In the same breath, you can also remind employers about the additional savings on payroll taxes if they were to offer an HSA with their HDHP.
Broker Challenge: Clients Could be Doing More with Their HSAs
While the number of employers offering an HDHP coupled with an HSA plan is on the uptick, there is room for growth—especially among the small and mid-size employers you are servicing.
Smaller employers may be shy in making the shift to HSA, as its HDHP counterpart, the Health Reimbursement Arrangement (HRA), has been their cost-controlling tool of choice for years.
While employers control the purse strings of the HRA and can define these plans in a variety of ways to accommodate their population, we’re seeing on a national level that the HRA plan offering is tapering off, as is enrollment by default, while the HSA plan and its enrollment levels are showing more promise.
There are numerous reasons why we are seeing this steady shift to HSA-based plans.
We’ve talked about overall cost share being a focal point, but expanding upon that, we’re really witnessing the emergence of the whole “health to wealth” mentality, as employers are looking to empower their employees with choices and savings opportunities, as opposed to pre-determining funds for care.
But how does this tie back to the bottom line?
Broker Breakthrough: Emphasize Room for HSA Growth in Your Messaging
Build your story around the shifting market and room for growth. More employers are adopting HSA plan options, yet we are only scratching the surface with plan potential.
While your clients are looking out for their bottom line, they also want to help their employees truly understand the health care options available to them, so that the employees can make more informed decisions for themselves and their families.
As a matter of fact, ConnectYourCare’s recent Consumer-Driven Health Plan Enrollment & Usage Trends survey found that employers are much more focused on the employee experience over costs and even their own experience.
When evaluating health account administration decisions, “employee customer service” and “overall employee experience” were prioritized as “very important” by 92% of the 150 participating employers.
Clients have struggled with the rising costs of care and employee education for years. That is no secret, and that is why they look to you.
Now let’s discuss how you can help them strike a best-of-both-worlds balance to improve both bottom line and education.
Employer HSA Contributions
Going back to those HDHP premium savings realized in Challenge #1…are your clients allocating any of those savings toward funding an employer contribution to participants’ HSAs, to help offset the high deductible?
Employers that offer a contribution towards their employees’ HSAs are not only providing financial assistance, but are making a very smart commitment to their workforce.
An employer contribution model serves as an excellent recruitment and retention tool, as employees on the receiving end of employer HSA funding are appreciative of the gesture and therefore more prone to demonstrate their commitment to their employer, in return.
(Case in point: eight in 10 employees who ranked their benefits satisfaction as extremely or very high also ranked job satisfaction as extremely or very high.)
In conveying this message, you, as the trusted advisor, can help your client become the reputable employer in the eyes of their workers.
Employee HSA Contributions
Furthering employee education is critical here, too, in terms of employee contribution options and maximizing account potential.
(It’s important to note that employees’ HSA contributions are exempt from income taxation, which currently saves the employer their 7.65% portion of FICA taxes.)
But while more participants are opening HSA accounts year over year, one in five accounts remained unfunded at the close of 2017, and only 13% of account holders contributed the full allowable annual amount.
…Did we mention room for growth?
HSA Education Improvements
When HDHPs with HSAs are in play, help your clients formulate messaging that knocks it out of the park, so that they can help employees maximize account opportunities to make up these gaps, while driving further enrollment.
Give your clients proper guidance in articulating the fundamental values of the HSA to their populations:
Triple Tax Savings: Contributions, interest and investment growth, and qualified medical expenses/withdrawals are all tax free. Simply put: money in, money earned, money out—all on a pre-tax basis.
HSA Portability: The fact that the participant truly owns the account and can take it with them as they go, should they switch employers or health plans. Funds roll over; no “use it or lose it” stipulations as compared to a Flexible Spending Account.
Investments: The opportunity to earn money through interest and investments. Employers too often convey investment information in a dry manner that does not resonate (“there is a broad portfolio of mutual funds in various asset classes made available to participants…” Yawn.); further, many employers are worried about giving investment advice.
In light of any apprehension, there are friendly ways to convey the value without compromising an employer’s position. So, let’s help your clients sell it, not tell it. Here’s a data point that may make an employee think twice before walking away from enrolling in an HSA: A 28-year-old who begins investing $50 a month today could have nearly $81,000 saved by age 65.
Retirement and Lifestyle: Speaking of 65, that’s the age when HSA funds can be withdrawn and spent on things other than qualified medical expenses, like vacations and other well-deserved items to enjoy in retirement, subject only to normal income taxes. (Prior to age 65, non-qualified expenses are subject to taxes as well as a 20% tax penalty.)
The IRS also allows an extra “catch-up” contribution for HSA account holders 55 and older, which amounts to $1,000 per year of tax-free contributions that can really help to round out that nest egg.
If your clients were to poll their employees, how many would know the difference between an FSA and an HSA?
Better yet, how many current HSA participants could rattle off the triple tax savings opportunities or define a catch-up contribution?
Utilization and re-enrollment rates are at their highest when employers are taking the time to help their employees understand how they can control their HSA to manage care now, and further leverage ongoing pre-tax contributions and investments to build a nest egg for the future and plan for care in retirement.
The simple step of effectively communicating the fundamentals is so often overlooked on the front end of open enrollment. (We’ll cover that topic in our next post in this series.)
If employees don’t understand the basics of an HDHP/HSA or the savings opportunities available to them, they could opt for a more traditional plan merely out of comfort or fear of trying something new—even if at a higher cost to them…and, ultimately, to your clients.