Zach: “I think as a foundation for our listeners, can you explain some of the differences between an HSA and an FSA and HRA and sort of what those letters mean?”
Alicia: “Yeah, so most people are familiar with at least one of those types of accounts. They’ve been offered that type of account through their employer in the past, but if you’re like my friends and family it’s an alphabet soup and it all runs together. It’s hard to remember what these accounts do and how they’re different.
So real quick, all of these accounts fall under the umbrella of consumer-directed health care (CDH), which means they are designed to give consumers more power and control over how they pay for healthcare. The beauty of these accounts are that they all allow you to pay for health care with pre-tax money, which allows you to save on your health care expenses and put more money back in your own pockets.
The three different types of accounts we focus on the most are Health Savings Accounts, Flexible Spending Accounts, and Health Reimbursement Arrangements.
There are different rules that vary slightly around how they’re regulated and how you’re able to use them — and I won’t get into all the details — but I do want to touch on the fact that the Health Savings Account is the most consumer-friendly account because it allows you to save and grow for the future.
You can even grow and use these funds in retirement to cover out of pocket health care expenses that can really, really add up.”
Marti: “Fantastic and I know in your report you mention HSA investing; would you like to touch upon that and what opportunity that entails?”
A: “Yes, so HSAs have been compared to a 401(k) because you can take your account funds and you can invest them in mutual fund investment options; and you can really grow them for the future.
So, especially in this hot stock market economy we’re seeing right now, you can see significant growth.
Let’s look at a Millennial who’s starting in their 20s. They’re not going to retire until their 60s.
They have all that time to invest and grow their HSA for the future. Especially now when they’re a young worker and they might not be using those account funds for their family, or for maternity leave, or some of those expenses that will happen later on in life. That’s the time to really grow and build that account.”
M: “It sounds like you’re trying to tell me that I need to start worrying a little more about this than in that case.”
A: “You know what, I was reading a study recently about the best place to put your next retirement dollar; a lot of advisors are advising the HSA over a 401(k). And I immediately — even though I’m in the industry — once I saw that article, I went and upped my own HSA contributions because the amplified affect down the road can be quite significant.”
M: “Wow that’s impressive because obviously any financier would advise you to take full advantage of your 401(k) but, you know a responsible financier would say take advantage of both your HSA and 401(k) to the fullest, right?”
A: “You got it.”
M: “Alright, Zach you want to go?”
Z: “Yeah. So, the report indicated that many individuals that have an HSA are very knowledgeable about what their HSA account can do, and how to manage it. But that seemed to be in contrast with how many people were unaware that it could be used as an investment tool. How do you go about addressing this education issue and misconception that exists about HSA accounts?”
A: “Yeah so that’s a really interesting point that we were fascinated with as well.
So, we’re finding that employees’ overall health care IQ is on the rise, so they’re thinking more about health care costs, they’re trying to be smarter about how to manage their costs. And their education level is growing around health care in general, the benefits that their employers are offering, and just how to maximize the benefits for themselves and how to be smarter about it.
But, while employees understand the long-term savings advantage of an HSA, they might just not quite be there when it comes to leveraging those mutual fund investments that are additional benefits with their account.
So, there are a few reasons why they might not be leveraging those investment options.
They may be depleting their account each year for health care expenses, meaning they have to cover their health care expenses and that is exactly what the Healthcare Savings Account is designed to do — to make sure that you are able to pay for your health care, either now or in the future.
They might not quite be ready to take the investment plunge; or — as the 401(k) industry found out years ago — they really want to begin investing and they know that they should, but they just haven’t gotten around to doing it.
I think of it kind of like exercise, we all know we should go to the gym and do it but sometimes it’s just a little bit easier to lay on the couch just a little bit longer.”
Z: “It’s always easier to lay on the couch, right?”
M: “So I guess with that, knowing what you know from this report and the data you gathered, how can you — as a marketer, but also more holistically as a consumer-directed health care administrator — address this disconnect from perceptions versus reality?”
A: “Right. So, because there is that resistance-to-overcome when it comes to HSA investments, we found that creative messaging and positioning can help motivate the HSA accountholder to make this change.
One of the interesting things that we’ve done recently is we’ve segmented our messages to speak directly to different generations. So, for example, a Millennial would get a different message from a Boomer than from a Gen X.
We’ve done a lot of research on how these different generations approach health care, and making decisions, and so we tried to massage the messaging and imagery to speak directly to that type of employee and motivate them in that way.
Another way that we overcome any sort of resistance or obstacles is just to make it easier. So, when you’re setting up an investment account with us, it’s really just a couple clicks and you’re done.
And then we have a mobile app that allows you to manage your investments anywhere. We want to make sure it’s as easy as possible for anybody to get saving and really make sure that they have that financial advantage in the future.”
M: “So, switching back to HSAs — your report shows that HSA participation is on the rise. Do you see this trend continuing and why is it that HSAs are on the rise versus their counterparts?”
A: “Right, so HSAs are the most attractive out of that alphabet soup, that we went through before, to the consumer. It’s an account that’s owned by the employee, owned by the worker, to save and grow for retirement or for whenever you may need those funds.
It’s also the only account out there that offers triple tax savings. When I say “triple tax savings” I mean money in is not taxed, money out that is used for eligible expenses is not taxed, and that investment growth we talk about is not taxed.
So that makes it even more attractive than a 401(k) or other retirement options that are out there.
We’re seeing more and more employers turning to that option and offering that to employees and we’re seeing more and more employees seeking that out.
And specifically, when we look at employers, we’re seeing jumbo employers — the country’s largest companies — they’re more and more likely to restructure their entire benefits offering to only offer HSA plan options.
And this helps their workforce build those funds for the future. It also shows a partnership in their health care. It helps all workers, but especially Millennials workers, begin building that nest egg right when they start working.”
Z: “So, talking a little bit about how HSA is more attractive: one of the things I thought was really interesting that came out of the report was a major complaint about the FSA account. And that’s the IRS required documentation. Can you speak a little bit to that, about why that is a requirement, say as opposed to HSA and how that problem could potentially be dealt with, or if it even can be dealt with?”
A: “Yeah sure. I think it’s no surprise that that’s the number one pain point when it comes to Flexible Spending Accounts: that documentation that you have to submit to substantiate your expense and that’s in keeping with IRS guidelines.
They want to make sure when you’re using those tax-advantaged funds that they are for an eligible expense and within those tax guidelines.
With Health Savings Accounts on the other hand, because they are an employee-owned account, the employee is actually assuming that risk,the accountholder is assuming the risk, and they are essentially saying ”Hey, I’m going to kind of self-audit myself. I’m going to make sure that all of my expenses are eligible. I’m going to hang on to those receipts in case they’re ever asked for during tax time”.
But the HSA accountholder is not going to have to submit receipts to their administrator as they’re submitting claims.
So back to Flexible Spending Accounts, you know we’ve heard this throughout the years; FSAs have been around for a long time, and that common complaint about submitting documentation has hung over people’s heads. And sometimes they won’t even enroll in an FSA because they dread having to submit receipts.
So we’ve created some innovative solutions. We’ve created deep links within the health care system, as well as the solution we call ClaimsAlly, which automatically substantiates as many claims as possible. And we’ve been able to bring that number of receipts that we have to ask for down to a minimal amount.
And then those few claims that still require receipts, we also make that easy by giving tools that allow the participant to quickly and easily submit the receipts. We have a mobile app where the user can just take a picture of their receipt with their phone and upload it directly to us and it’s quick and easy that way.”
Z: “Well I was just going to say, having been on the pharmacy end of that and dealing with prescription claims and having to get the documentation for that, I have seen that patients who have FSA accounts in most cases are very literate about what is expected and what’s required of them. It is mostly just the slight hassle, the inconvenience, of having to run out and either collect a receipt if you failed to keep yours or figure out what specific charge goes where. It is an interesting and unique issue.”