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The perception of health savings accounts (HSAs) has evolved for some benefits professionals. Once considered to have only limited value for a minority of workers, more now view HSAs as a "health and wealth" rewards strategy. However, this evolution has not prompted broad coverage, widespread enrollment or a change in savings habits. Impediments to enrollment remain. Few plan sponsors have embraced 401(k) precedents and deployed automatic features. The author explains how HSAs are capable of quadruple duty and more-that HSAs offer superior utility that plan sponsors and employees cannot afford to forgo.
More than ten years ago, most plan sponsors tended to agree with then-President Obama that health savings accounts (HSAs) offered limited value to only a minority of people in the United States.
During a February 2010 health reform summit, Obama said: " . . . health savings accounts, I think, can be a useful tool, but every study has shown that the people who use them are folks who've got a lot of disposable income. And the people that we're talking about don't."
More recently, HSA thinking has evolved to become part of a "health and wealth" rewards strategy.1 Because medical costs may be the largest expense in retirement, some now view HSAs as a vehicle for retirement preparation. In my last plan sponsor role, we first adopted HSA-capable coverage in 2005. An initial objective was to provide a tax-favored opportunity to fund retiree medical costs for those who enrolled, met all the eligibility conditions and contributed to an HSA.
However, the last 16 years have mostly been a missed savings opportunity.2 Most employers don't offer HSA-capable coverage. Most employees don't enroll in HSA-capable coverage when it is offered as a choice-even when it is the better option. Many enrolled in HSA-capable coverage fail to open the HSA account. Few maximize their HSA contributions. Only a minuscule minority invest HSA assets beyond capital preservation.3
So, if an employer's goals include maximizing the utility that HSAs offer, it is well past time for revolutionary (not evolutionary) thinking.
HSA Utility-The Swiss Army Knife™ or Leatherman® of Employee Benefits
The HSA reminds me of a Swiss Army Knife or a Leatherman tool.4
HSAs offer tax-preferred utility capable of quadruple duty:
1. Now (before retirement)-Fund current...